Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Jul. 18, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | SITESTAR CORP | ||
Entity Central Index Key | 1,096,934 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
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? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 3,767,054 | ||
Entity Common Stock, Shares Outstanding | 282,730,163 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 2,607,370 | $ 184,731 |
Accounts receivable, net | 212,751 | 14,428 |
Investments, at fair value | 599,500 | |
Other current assets | 2,554,861 | 1,081 |
Total current assets | 5,974,482 | 200,240 |
Real estate - held for resale | 1,399,280 | 2,671,311 |
Real estate - held for investment, net | 506,011 | 911,162 |
Property and equipment, net | 143,464 | |
Goodwill | 1,553,745 | 212,445 |
Other intangible assets | 264,250 | 200,055 |
Total Assets | 9,841,232 | 4,195,213 |
Current Liabilities: | ||
Deferred revenue | 214,898 | 246,262 |
Notes payable, current | 240,000 | 90,000 |
Accounts payable | 77,918 | 58,094 |
Accrued bonus | 51,855 | |
Other accrued expenses | 71,532 | 49,812 |
Total current liabilities | 656,203 | 444,168 |
Notes payable | 25,000 | |
Total Liabilities | 681,203 | 444,168 |
Stockholders' equity | ||
Preferred stock, $0.001 par value, 30,000,000 shares authorized; none issued or outstanding | ||
Common stock, $0.001 par value, 300,000,000 shares authorized; 204,152,616 and 91,326,463 shares issued; 190,230,163 and 77,404,010 shares outstanding. | 204,152 | 91,327 |
Additional paid-in capital | 19,096,858 | 13,728,989 |
Treasury stock, at cost, 13,922,453 common shares | (637,561) | (637,561) |
Accumulated other comprehensive income | 39,343 | 3,415 |
Accumulated deficit | (9,542,763) | (9,435,125) |
Total stockholders’ equity attributable to Sitestar Corporation stockholders | 9,160,029 | 3,751,045 |
Noncontrolling interest in consolidated subsidiaries | ||
Total stockholders' equity | 9,160,029 | 3,751,045 |
Total Liabilities and Stockholders' Equity | $ 9,841,232 | $ 4,195,213 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred Stock Par Value | $ 0.001 | $ 0.001 |
Preferred Stock Shares Authorized | 30,000,000 | 30,000,000 |
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 | 204,152,616 | 91,326,463 |
Common Stock Shares Outstanding | 190,230,163 | 77,404,010 |
Common Shares Treasury Stock | 13,922,453 | 13,922,453 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues: | ||
Internet operations | $ 1,415,289 | $ 1,602,523 |
HVAC operations | 1,477,961 | |
Real estate operations | 2,081,996 | 132,680 |
Total revenue | 4,975,246 | 1,735,203 |
Cost of Revenues: | ||
Internet operations | 369,514 | 539,934 |
HVAC operations | 987,221 | |
Real estate operations | 2,165,020 | 346,998 |
Total cost of revenues | 3,521,755 | 886,932 |
Gross Profit (Loss): | ||
Internet operations | 1,045,775 | 1,062,588 |
HVAC operations | 490,740 | |
Real estate operations | (83,024) | (214,317) |
Total gross profit | 1,453,491 | 848,271 |
Selling, general and administrative expenses | 1,708,414 | 760,760 |
Total operating expenses | (254,923) | 87,511 |
Income (loss) from operations | 147,285 | (52,784) |
Other income (expense), net | ||
Goodwill impairment | (954,049) | |
Loss before income taxes | (107,638) | (919,321) |
Income tax benefit | ||
Net loss | (107,638) | (919,321) |
Less: net loss attributable to noncontrolling interest | ||
Net loss attributable to Sitestar Corporation Stockholders | $ (107,638) | $ (919,321) |
Earnings per share, basic and diluted | $ 0 | $ (0.01) |
Weighted average number of shares, basic and diluted | 113,886,879 | 77,404,010 |
Statements of Comprehensive Los
Statements of Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Statements Of Comprehensive Loss | ||
Net loss | $ (107,638) | $ (919,321) |
Other comprehensive income: | ||
Foreign exchange translation | (361) | 4,183 |
Unrealized gains (losses) related to available-for-sale securities | 36,289 | |
Other comprehensive income (loss), net | 35,928 | (915,138) |
Comprehensive loss attributable to noncontrolling interest | ||
Comprehensive loss attributable to Sitestar Corporation Stockholders | $ (71,710) | $ (915,138) |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2014 | 77,404,010 | |||||
Beginning Balance, Amount at Dec. 31, 2014 | $ 91,327 | $ 13,728,989 | $ (637,561) | $ (768) | $ (8,515,804) | $ 4,666,183 |
Net income | (919,321) | (919,321) | ||||
Gain on foreign currency translation adjustments | 4,183 | 4,183 | ||||
Ending Balance, Shares | 77,404,010 | |||||
Ending Balance, Value | $ 91,327 | 13,728,989 | (637,561) | 3,415 | (9,435,125) | 3,751,045 |
Beginning Balance, Shares at Dec. 31, 2015 | 77,404,010 | |||||
Beginning Balance, Amount at Dec. 31, 2015 | $ 91,327 | 13,728,989 | (637,561) | 3,415 | (9,435,125) | 3,751,045 |
Net income | (107,638) | (107,638) | ||||
Contributed capital, Shares | 112,826,153 | |||||
Contributed capital, Amount | $ 112,825 | 5,367,869 | 5,480,694 | |||
Gain on foreign currency translation adjustments | (361) | (361) | ||||
Unrealized gain on investments | 36,289 | 36,289 | ||||
Ending Balance, Shares | 190,230,163 | |||||
Ending Balance, Value | $ 204,152 | $ 19,096,858 | $ (637,561) | $ 39,343 | $ (9,542,763) | $ 9,160,029 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (107,638) | $ (919,321) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Amortization | 55 | |
Depreciation | 38,715 | 50,179 |
Gain on sale of real estate | (47,055) | |
Gain on sale of securities | (47,610) | |
Bad debt | 2,537 | 27,163 |
Real estate valuation adjustment | 152,411 | 228,352 |
Goodwill impairment | 954,049 | |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (201,221) | (19,780) |
Other current assets | (28,780) | 6,940 |
Deferred revenue, net | (31,364) | (22,995) |
Accounts payable | 19,824 | 36,450 |
Accrued expenses | 73,575 | (29,847) |
Net cash flows from operating activities | (176,551) | 311,190 |
Cash flows from investing activities: | ||
Proceeds from sale of real estate held for resale | 1,488,324 | |
Purchases of real estate held for resale | (5,467) | (106,096) |
Improvements to real estate held for resale | (232,591) | (295,655) |
Proceeds from sale of real estate held for investment | 311,353 | |
Purchases of real estate held for investment | (41,588) | |
Improvements to real estate held for investment | (18,337) | (22,814) |
Purchase of marketable securities, net of sales | (515,601) | |
Purchase of domain names | (64,250) | |
Purchase of property and equipment | (39,935) | |
Investment in subsidiaries | (3,715,000) | |
Net cash provided by investing activities | (2,791,504) | (466,153) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Principal payments on note payable | (90,000) | |
Proceeds from issuing common stock | 5,480,694 | |
Net cash used in financing activities | 5,390,694 | |
Net increase (decrease) in cash | 2,422,639 | (154,963) |
Cash and cash equivalents at beginning of the year | 184,731 | 339,694 |
Cash and cash equivalents at end of the year | 2,607,370 | 184,731 |
Non-cash supplemental information: | ||
Transfer of real estate held for investment to held for resale | 152,003 | 316,680 |
Transfer of property and equipment to real estate held for resale | 100,000 | |
Unrealized gain on marketable securities reported as other comprehensive income | 36,289 | |
HVAC acquisitions through notes payable | $ 265,000 |
1. ORGANIZATION AND SIGNIFICANT
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and Lines of Business Sitestar Corporation (formerly White Dove Systems, Inc., and then Interfoods Consolidated, Inc.) was incorporated in Nevada on December 17, 1992. On July 26, 1999, the Company restated its Articles of Incorporation to change the name of the Company to Sitestar Corporation. Unless the context otherwise requires, and when used in this Report, the Company, Sitestar, we, our or us refers to Sitestar Corporation and its subsidiaries. The Company operates through five reportable segments: Corporate, Internet Operations, HVAC Operations, Real Estate Operations, and Asset Management Operations. The management of the Company is also currently reviewing investment opportunities in the private markets, including in other lines of business. Corporate The corporate segment includes any revenue or expenses derived from corporate office operations as well as expenses related to public company reporting, the oversight of subsidiaries, and other items that affect the overall Company. Internet Operations The Company operates its internet operations through Sitestar.net, a wholly-owned subsidiary that offers consumer and business-grade internet access, wholesale managed modem services, web hosting, and various ancillary services. Sitestar.net provides services to customers in the United States and Canada. HVAC Operations The Company operates its HVAC operations through HVAC Value Fund, LLC. HVAC Value Fund is focused on the acquisition and management of HVAC companies in Arizona and throughout the Southwest. As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, the Company, along with JNJ Investments, LLC, an unaffiliated third party and member of HVAC Value Fund, LLC, organized and launched this subsidiary on June 13, 2016. Sitestar has a 100% voting interest in HVAC Value Fund and JNJ Investments has the ability to earn profits interests. Per the signed operating agreement, the Company has first claim to a portion of net income, with the remainder being allocated between the Company and JNJ Investments. JNJ Investments shall also be subject to a Loss Carryforward limitation in the event of a net loss. As of December 31, 2016, HVAC Value Fund had closed on five acquisitions for an aggregate purchase price of $1.46 million, As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, the purpose of HVAC Value Fund is to acquire HVAC businesses. Accordingly, these five acquisitions were made in the ordinary course of business and consistent with the customs and practices (including with respect to nature, scope, magnitude, quantity, frequency and contemplated purpose) of HVAC Value Fund, and, in turn, the Company. Real Estate Operations Sitestar owns a real estate investment portfolio that includes 19 residential properties, vacant land, and one commercial property. Our real estate portfolio is primarily focused in the Roanoke and Lynchburg areas of Virginia. The portfolio includes single family homes that are currently rented and managed through a third-party property manager, as well as vacant properties being prepared or currently listed for sale. Asset Management Operations Sitestar created a wholly-owned asset management subsidiary on October 10, 2016 named Willow Oak Asset Management. As previously reported in our Current Reports on Form 8-K filed with the SEC on September 19, 2016 and December 30, 2016, respectively, the Company agreed to make a seed investment totaling $10 million through Willow Oak Asset Management in Alluvial Fund, LP, an unrelated private partnership that was launched on January 1, 2017. The asset management segment did not produce revenue in 2016. Any expenses incurred in 2016 were allocated to the corporate segment. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries including: Sitestar.net, Inc., HVAC Value Fund, LLC, and Willow Oak Asset Management, LLC. All intercompany accounts and transactions have been eliminated. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates In accordance with Accounting Principles Generally Accepted in the United State of America (GAAP), 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 fair value of investments, revenue recognition, accrued expenses, financing operations, goodwill valuation, other assets, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. These accounting policies are described at relevant sections in the notes to the consolidated financial statements. Cash and Cash Equivalents For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid instruments purchased with a maturity of three months or less. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and accounts receivable. The Company places its cash with high quality financial institutions and, at times, may exceed the FDIC and CDIC insurance limit. As of December 31, 2016, some of the Companys cash balances exceeded the FDIC and CDIC limit. The Company extends credit based on an evaluation of customers financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customers financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. Investments The Company currently holds and makes investments in marketable securities through its corporate operations. Marketable securities held are classified as available-for-sale based on managements intent. The classification of the investments in these marketable securities is assessed upon purchase and reassessed at each reporting period. These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets. Unrealized gains (losses) are categorized as Other Comprehensive Income. Realized gains (losses) on marketable securities are determined by specific identification. Interest is recognized on an accrual basis; dividends are recorded as earned on the ex-dividend date. Accounts Receivable The Company grants credit in the form of unsecured accounts receivable to its customers. The estimate of the allowance for doubtful accounts, which is charged off to bad debt expense, is based on managements assessment of current economic conditions and historical collection experience with each customer. Specific customer receivables are considered past due when they are outstanding beyond their contractual terms and are charged off to the allowance for doubtful accounts when account is individually determined to be uncollectible or account is more than 180 days past due. Sales of internet services, which are not automatically processed via credit card or bank account drafts, have been the Companys highest exposure to collection risk. The Company attempts to reduce this risk by including a late payment fee and a manual processing payment fee to customer accounts. Receivables more than ninety days past due are no longer included in accounts receivable and are turned over to a collection agency. Accounts more than 30 days are considered past due. Sales of HVAC services are typically paid via credit card or check upon completion of service. Sales that are not collected upon completion are generally to existing and repeat customers who have established a track record of timely payments. Historically, HVAC has not encountered issues with collectability of customer accounts. Accounts more than 30 days are considered past due. Impairment of Long-Lived Assets In accordance with GAAP, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed are reported at the lower of carrying amount or fair value of the asset less cost to sell. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method based on estimated useful lives from three to seven years for equipment and vehicles, fifteen years for building improvements, and thirty-nine years for buildings. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. Goodwill and Other Intangible Assets Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under the acquisition method of accounting. The Company does not amortize goodwill. The Company tests its goodwill annually during the fourth quarter of its fiscal year or when events and circumstances indicate that those assets might not be recoverable. Impairment testing of goodwill is required at the reporting unit level (operating segment or one level below operating segment) and involves a two-step process. Prior to performing the two-step impairment test, the Company may make a qualitative assessment of the likelihood of goodwill impairment in order to determine whether a detailed quantitative analysis is required. The first step of the impairment test involves comparing the estimated fair values of the Companys reporting units with the reporting units carrying amounts, including goodwill. The Company estimates the fair value of its reporting units using discounted expected future cash flows. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to compare the carrying amount of goodwill to the implied fair value of that goodwill. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The Company completed an analysis of its goodwill as of December 31, 2016 and 2015. For the year ended December 31, 2015 the Company recorded a goodwill impairment of $954,049. No impairment was recorded in 2016. This non-cash expense was the result of revenue and cash flow declines in the internet segment. Additionally, new management implemented changes to the annual goodwill impairment analysis to more accurately reflect the value of the Companys goodwill in 2015. The Company performs an analysis of its goodwill as of December 31 annually, or whenever events or changes in circumstances indicate that the assigned values may no longer be appropriate. Other intangible assets consist of customer relationships, developed technology and software, trade names, and other assets acquired in conjunction with the purchases of businesses or purchases of assets from other companies. As of December 31, 2016, these intangible assets have been fully amortized. The remaining intangible assets consist of Domain Names attributed to the internet segment. When management determines material intangible assets are acquired in conjunction with the purchase of a business, the Company determines the fair values of the identifiable intangible assets by taking into account managements own analysis and an independent third party valuation specialists appraisal. Intangible assets determined to have definite lives are amortized over their estimated useful lives. The Company owns 637 domain names, of which 110 are available for sale. These domains are valued at historical cost. Real Estate Real estate properties held for resale are carried at the lower of cost or fair market value. All costs directly related to the improvement and carrying of real estate are capitalized, including renovations and property taxes, to the extent the capitalized costs of the property do not exceed the estimated fair value of the property. If the cost of the real estate exceeds the estimated fair value, the excess is charged to expense. Fair value is estimated based on comparable sales in the geographic area the real estate is located and tax assessed values. Fair value is evaluated annually by management, or when events or changes in circumstances indicate the carrying value of the real estate may not be recoverable. Real estate properties held for investment are carried at the cost basis plus additional expenses where the expense extended the life or added value to the property. Otherwise, the expense is not capitalized and is charged to expense. Properties categorized as real estate held for investment are not expected by management to be sold in the next 12 months. This determination is periodically reviewed by management. Accrued Bonus Accrued bonuses represent performance based incentives that have not yet been paid. These bonus amounts are paid annually after financial records are finalized. Other Accrued Expenses Accrued expenses represent incurred but not yet paid expenses from Sales and Use taxes for ISP services, vacation accruals, and other payroll accruals. Deferred Revenue Deferred revenue represents collections from customers in advance of internet services to be performed. Revenue is recognized in the period service is provided. Revenue Recognition Internet Operations 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. The Company generates revenue in its internet segment from consumer and business-grade internet access, wholesale managed modem services for downstream ISPs, web hosting, and various ancillary services in the United States and Canada. Services include narrow-band (dial-up and ISDN) and broadband services (DSL, fiber-optic and wireless), web hosting, and additional related services to consumers and businesses. Customers may downgrade from internet access to web hosting plans to include email access and storage. In some years, this shift can be significant. Internet revenue is affected by the changing composition of revenue sources. HVAC Operations The Company performs HVAC service repairs and installs HVAC units for its customers. Revenue is recognized at the time of the install or service call. Sales are adjusted for any returns or allowances. A return or allowance situation would arise based on the two year workmanship warranty that typically conveys with the installation of a new unit. There is also a two year warranty on newly installed parts and equipment that is honored by the manufacturer. If an install is performed over multiple days, it is accounted for using work in process (WIP) accounting in accordance with GAAP. If payment is not provided in advance or at the time of service or installation, the amount due is designated as an account receivable. Real Estate Operations Revenue from real estate held for resale 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. Rental revenue from real estate held for investment is recognized when it is due, generally on the first of each month or at another regular period agreed upon between the Company and the tenant. If payments are not provided in a timely manner, the amount due is designated as an account receivable. Accounts receivable from rental revenue are generally considered unrecoverable after 90 days unless the Company reasonably believes that recovery is probable. Tenants generally provide a security deposit at the time of possession. This deposit is held separate from revenue and only applied to revenue when rental payment comparable to the security deposit amount is not provided in a timely manner and considered unlikely to be recovered. Otherwise, the security deposit is returned in a timely manner after the property is surrendered back to the Company. Income Taxes Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The most recent three tax years are open to potential IRS examination. Income Per Share The basic income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is computed similar to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company has no potentially dilutive securities. Other Comprehensive Income Other comprehensive income is the result of two items: the impact of foreign currency translations related to the Companys operations in Canada, and the unrealized gains (losses) from marketable securities classified as available-for-sale. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 842, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is required to adopt this standard in the first quarter of 2019. The Company is currently evaluating the effect this standard will have on its Consolidated Financial Statements. In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) by one year. As a result, the ASU is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU No. 2014-09 provides comprehensive guidance on the recognition of revenue from customers arising from the transfer of goods and services. The ASU also provides guidance on accounting for certain contract costs, and requires new disclosures. Early adoption is not permitted. The Company is required to adopt this standard in the first quarter of 2018. The initial application of the standard is not expected to significantly impact the Company. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740). The ASU provides guidance related to the classifications of deferred income tax assets and liabilities into current and noncurrent amounts in a classified statement of financial position. Deferred tax assets and liabilities are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax assets and liabilities that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. The Company is required to adopt this standard in the first quarter of 2018. The initial application of the standard is not expected to significantly impact the Company. In January 2016, the FASB issued ASU No. 2016-01 "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." Although the ASU retains many of the current requirements for financial instruments, it significantly revises an entitys accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017; earlier adoption is permitted under certain criteria. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations, and cash flows. |
3. HVAC PRO FORMA INFORMATION
3. HVAC PRO FORMA INFORMATION | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
3. HVAC PRO FORMA INFORMATION | NOTE 3. HVAC PRO FORMA INFORMATION As of June 17, 2016 and June 30, 2016, HVAC Value Fund, LLC completed the 100% acquisition of two HVAC subsidiaries. As of July 8, 2016, HVAC Value Fund, LLC completed the 100% acquisition of a third subsidiary. As of July 15, 2016, HVAC Value Fund, LLC completed the 100% acquisition of a fourth subsidiary. As of October 1, 2016, HVAC Value Fund, LLC completed the 100% acquisition of a fifth subsidiary. These subsidiaries engage in providing heating, ventilation, plumbing, and air conditioning services, installation, and repairs to residential and commercial customers. As a result of the acquisitions, HVAC Value Fund, LLC will offer heating, ventilation, plumbing, and air conditioning services to customers in Arizona and the surrounding southwestern states. As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, the purpose of HVAC Value Fund is to acquire HVAC businesses. Accordingly, these five acquisitions were made in the ordinary course of business and consistent with the customs and practices (including with respect to nature, scope, magnitude, quantity, frequency, and contemplated purpose) of HVAC Value Fund, and, in turn, the Company. The acquired businesses contributed revenues of $1,477,961 and net income of $116,328 to HVAC Value Fund, LLC during the year ended December 31, 2016. The following unaudited pro forma summaries present consolidated information of HVAC Value Fund, LLC as if the current year business combinations had occurred on January 1, 2015. Management notes that the pro forma information for the year ended December 31, 2016 was calculated using annualized, unaudited 2015 financial information, as information for the period from January 1, 2016 through the applicable subsidiary closing date is unavailable. As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, Sitestar has a 100% voting interest in HVAC Value Fund and JNJ Investments has the ability to earn profits interests. Pro forma earnings for the year ended December 31, 2016 and for the year ended December 31, 2015 are reported as gross without deducting the profits share that otherwise would be attributable to JNJ Investments in accordance with the operating agreement between Sitestar Corporation and JNJ Investments. Pro forma year ended December 31, 2016 (unaudited) Consolidated pro forma year ended December 31, 2016 (unaudited) June 2016 acquisitions (in aggregate) July 8, 2016 acquisition July 15, 2016 acquisition October 1, 2016 acquisition Revenue $ 534,997 $ 1,293,380 $ 1,052,186 $ 900,605 $ 3,781,167 Earnings $ 71,314 $ 192,922 $ 217,609 $ 35,650 $ 517,495 Pro forma year ended December 31, 2015 (unaudited) Consolidated pro forma year ended December 31, 2015 (unaudited) June 2016 acquisitions (in aggregate) July 8, 2016 acquisition July 15, 2016 acquisition October 1, 2016 acquisition Revenue $ 674,212 $ 1,338,305 $ 1,034,926 $ 977,613 $ 4,025,056 Earnings $ 247,328 $ 219,231 $ 313,302 $ 2,759 $ 782,620 HVAC Value Fund, LLC did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The following tables summarize the consideration transferred to acquire each subsidiary and the amounts of identified assets acquired and liabilities assumed at the acquisition dates. Management continues to evaluate the valuation components of each acquisition on an ongoing basis. June 2016 acquisitions (in aggregate) Fair value of consideration transferred: Cash $ 160,000 Notes payable $ 65,000 Preliminary fair value of assets acquired: Vehicles $ 35,000 Equipment $ 13,700 Total identifiable assets $ 48,700 Goodwill $ 176,300 Table Of Contents 33 July 8, 2016 acquisition Fair value of consideration transferred: Cash $ 375,000 Notes payable $ 100,000 Preliminary fair value of assets acquired: Goodwill $ 475,000 July 15, 2016 acquisition Fair value of consideration transferred: Cash $ 340,000 Notes payable $ 100,000 Preliminary fair value of assets acquired: Vehicles $ 40,000 Total identifiable assets $ 40,000 Goodwill $ 400,000 October 1, 2016 acquisition Fair value of consideration transferred: Cash $ 315,000 Preliminary fair value of assets acquired: Vehicles $ 20,000 Equipment $ 5,000 Total identifiable assets $ 25,000 Goodwill $ 290,000 The goodwill amounts noted above are attributable to the workforce of the acquired subsidiaries and the significant synergies expected to arise after acquisition by HVAC Value Fund, LLC. All of the goodwill was assigned to the HVAC segment. Management notes that the purchase price allocations above are deemed preliminary for valuation purposes and management reserves the right to adjust the allocations for the one year period allotted. |
4. INVESTMENTS
4. INVESTMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Schedule of Investments [Abstract] | |
4. INVESTMENTS | NOTE 4. INVESTMENTS The Company may invest excess cash in marketable securities through its corporate segment. The fair values of the Companys marketable securities are determined in accordance with GAAP, with fair value being defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The following available-for-sale securities, which comprise all of the Companys marketable securities, are re-measured to fair value on a recurring basis and are valued using Level 1 inputs, which are quoted prices (unadjusted) for identical assets in active markets: Cost Basis Unrealized Gain Fair Value December 31, 2016 Common Stock available for sale $ 563,211 $ 36,289 $ 599,500 |
5. FAIR VALUE OF ASSETS AND LIA
5. FAIR VALUE OF ASSETS AND LIABILITIES | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
5. FAIR VALUE OF ASSETS AND LIABILITIES | NOTE 5. FAIR VALUE OF ASSETS AND LIABILITIES The Company has adopted FASB ASC 820, Fair Value Measurements ● Level 1 - Inputs are quoted prices in active markets as of the measurement date for identical assets and liabilities that the Company has the ability to access. This category includes exchange-traded mutual funds and equity securities. ● Level 2 - Inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates or yield curves, that are observable at commonly quoted intervals. This category includes mortgage-backed securities, asset-backed securities, corporate debt securities, certificates of deposit, commercial paper, U.S. agency and municipal debt securities, U.S. Treasury securities and derivative contracts. ● Level 3 - Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The measurements are highly subjective. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company valued its marketable securities at fair value at the end of each reporting period. (Level 1) (Level 2) (Level 3) Total at Fair Value December 31, 2016 Marketable securities $ 599,500 $ $ $ 599,500 (Level 1) (Level 2) (Level 3) Total at Fair Value December 31, 2015 Marketable securities $ $ $ $ Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis The Company analyzes goodwill on an annual basis or whenever events or changes in circumstances indicate potential impairments. For the year ended December 31, 2016, goodwill held at year end was determined to be valued appropriately and no impairment existed. During the year ended December 31, 2015, the Company recorded a goodwill impairment of $954,049. Specifically, this was the result of revenue and cash flow declines in the internet segment. The Company values real estate held on the balance sheet on an annual basis or whenever events or changes in circumstances indicate a change in their fair market value. For the year ended December 31, 2016, the Company adjusted the carrying value of properties held downward by $152,411, as repair and improvement expenses for some properties exceeded the current market value of the property. For the year ended December 31, 2015, the Company adjusted the carrying value of properties held downward by $228,352. These adjustments are the result of fluctuating market conditions and write downs of previously capitalized improvements made by prior management. |
6. PROPERTY AND EQUIPMENT
6. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2016 | |
Property And Equipment | |
6. PROPERTY AND EQUIPMENT | NOTE 6. PROPERTY AND EQUIPMENT The cost of property and equipment at December 31, 2016 and December 31, 2015 consisted of the following: 2016 2015 Automobile $ 115,688 $ 9,500 Computers and equipment 36,030 Furniture and fixtures 25,206 13,788 176,924 23,288 Less accumulated depreciation (33,460 ) (23,288 ) Property and equipment, net $ 143,464 $ Depreciation expense was $10,172 for the year ended December 31, 2016 and $5,518 for the year ended December 31, 2015. Increased automobile, equipment, and furniture and fixtures are the result of acquisitions in the HVAC operations. Increased computer assets are the result of new servers purchased related to the internet segment. |
7. REAL ESTATE
7. REAL ESTATE | 12 Months Ended |
Dec. 31, 2016 | |
Real Estate [Abstract] | |
7. REAL ESTATE | NOTE 7. REAL ESTATE As of December 31, 2016, the Company owned 19 residential properties, one commercial property, and interests in several lots. The Company sold 23 residential properties in the year ended December 31, 2016 for gross proceeds of $1,970,009 and net proceeds of $1,799,677. The carrying value of the 23 properties sold was $1,752,622. As of December 31, 2015, the Company owned 42 residential properties, one commercial property, and interests in several lots. The Company acquired three residential real estate properties in 2015 for a total gross purchase amount of $147,684. The Company made no sales of assets in the year ended December 31, 2015. Real Estate Held for Investment As of December 31, 2016, the Company held eight residential properties as held for investment. The leases in effect as of the year ended December 31, 2016 are based on either annual or multi-year time periods and typically include month-to-month provisions after the completion of the initial term. An outside property management company manages these rental properties on behalf of the Company. The property management company has introduced updated and renewed leases for existing rental properties. As of December 31, 2015, the Company held 14 residential properties and several lots as held for investments. Of these, nine properties had tenants and were current with regards to tenant payments as of December 31, 2015. Four other properties that were available to rent were held in real estate for resale. Depreciation expense totaled $28,544 for the year ended December 31, 2016 and $44,770 for the year ended December 31, 2015. Total accumulated depreciation as of December 31, 2016 and 2015 totaled $77,955 and $92,627, respectively. As of December 31, 2016 and 2015, these properties held for investment were carried on the balance sheet at $506,011and $911,162, respectively. The leases in effect as of the year ended December 31, 2016 are based on either annual or multi-year time periods and include month-to-month provisions after the completion of the initial term. The property management company has introduced updated and renewed leases for existing rental properties. The future anticipated minimum rental revenues based on leases in place as of December 31, 2016 are as follows: 2017 $ 68,510 2018 15,795 Total $ 84,305 Real Estate Held for Resale As of December 31, 2016, the Company held 11 residential properties, one commercial property and several lots as held for resale. These properties held for resale were carried on the balance sheet at $1,399,280. As of December 31, 2015, the Company held 28 residential properties and one commercial property as held for resale. These properties held for resale were carried on the balance sheet at $2,671,311. |
8. NOTES PAYABLE
8. NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
8. NOTES PAYABLE | NOTE 8. NOTES PAYABLE Notes payable at December 31, 2016 and 2015 consist of the following: 2016 2015 Non-interest bearing amount due on acquisition of USA Telephone payable in thirty-six monthly installments starting January 2008. $ - $ 90,000 Interest bearing amount due on acquisition through HVAC Value Fund, LLC 250,000 - Non-interest bearing amount due on acquisitions through HVAC Value Fund, LLC 15,000 - Less current portion (240,000 ) - Long-term portion $ 25,000 $ 90,000 On December 8, 2015, Sitestar settled a breach of contract claim with United Systems Access, Inc., et al. in connection with the matter, United Systems Access, Inc., et al. v. Sitestar Corporation, Civil Action, Docket No. CV-13-161, (York County, Maine Superior Court), previously commenced against the Company and whereby the plaintiff had alleged that the Company had failed to pay certain amounts owed on a promissory note. The settlement required Sitestar to pay $90,000 to United Systems Access. This claim by United Systems Access was accrued as a note payable in the amount of $900,615 as of December 31, 2013. Upon settlement of the agreement, the liability was marked to $90,000 as of December 31, 2014. The Company paid the settlement amount in three installments on January 4, 2016, January 15, 2016, and February 11, 2016. No additional payments are due. HVAC Value Fund, LLC typically structures acquisitions where a portion of the purchase price is held back and is subject to certain conditions. These notes payable may or may not bear interest. HVAC Value Fund made five acquisitions in the year ended December 31, 2016. Four of the five acquisitions resulted in a note payable to the seller. The non-interest bearing note payable is due July 1, 2017 in the amount of $15,000, and is contingent on meeting a revenue target and other operational conditions. There are three separate interest bearing notes payable as of the quarter ended September 30, 2016. The first interest bearing note payable accrues interest at 7% annually. $25,000 is payable on June 16, 2017 and $25,000 is payable on June 16, 2018. These payments are contingent on meeting revenue targets and other operational conditions. The second interest bearing note payable is for $100,000 and bears interest at 6% annually. This note is due July 11, 2017 and is contingent on meeting revenue targets and other operational conditions. The third interest bearing note payable is for $100,000 and bears interest at 7% annually. This note is due July 30, 2017 and is contingent on meeting revenue targets and other operational conditions. |
9. ACCOUNTS RECEIVABLE AND BAD
9. ACCOUNTS RECEIVABLE AND BAD DEBT EXPENSE | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
9. ACCOUNTS RECEIVABLE AND BAD DEBT EXPENSE | NOTE 9. ACCOUNTS RECEIVABLE AND BAD DEBT EXPENSE For the years ended December 31, 2016 and 2015, bad debt expense was $2,537 and $27,163, respectively. The increase in accounts receivable is primarily the result of the formation of the HVAC subsidiary. As of December 31, 2016 and 2015, accounts receivable consisted of the following: 2016 2015 Gross accounts receivable $ 213,624 $ 20,692 Less allowance for doubtful accounts (873 ) (6,264 ) Accounts receivable, net $ 212,751 $ 14,428 |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
10. COMMITMENTS AND CONTINGENCIES | NOTE 10. COMMITMENTS AND CONTINGENCIES Leases The Company previously leased certain facilities for its corporate offices and a storage facility from a related party, and beginning on September 1, 2016, rents office and warehouse space for HVAC Value Fund, LLC. The Company also previously rented an office in Chatham, Ontario in Canada. Total rent expense for the years ended December 31, 2016 and 2015 was $12,472 and $56,100, respectively. Total rent expense for the Canadian facility for the years ended December 31, 2016 and 2015 was $3,000 CAD and $18,000 CAD, respectively. Total rent expense for the HVAC office and warehouse space for the year ended December 31, 2016 was $10,251. All leased facilities, with the exception of the HVAC facilities, have been vacated as of the first quarter of 2016. The HVAC facilities leases are in effect until July 31, 2019. The future lease obligations related to the HVAC facilities are as follows: 2017 $ 42,869 2018 31,723 2019 4,200 Total $ 78,792 Litigation On April 12, 2016, Sitestar filed a civil action complaint against Frank Erhartic, Jr. (the Former CEO), the Companys former CEO and director and currently an owner of record or beneficially of more than five percent of the Companys Common Stock, alleging, among other things, that the Former CEO engaged in, and caused the Company to engage in to its detriment, a series of unauthorized and wrongful related party transactions, including causing the Company to borrow certain amounts from the Former CEOs mother unnecessarily and at a commercially unreasonable rate of interest, converting certain funds of the Company for personal rent payments to the Former CEO, commingling in land trusts certain real properties owned by the Company and real properties owned by the Former CEO, causing the Company to pay certain amounts to the Former CEO for lease payments under an unauthorized lease as to a storage facility owned by the Former CEO, causing the Company to pay rent on its corporate headquarters owned by the Former CEOs ex-wife in amounts commercially unreasonable and excessive and to make real estate tax payments thereon for the personal benefit of the Former CEO, converting to the Former CEO and/or absconding with five motor vehicles owned by the Company, causing the Company to pay real property and personal property taxes on numerous properties owned personally by the Former CEO, causing the Company to pay personal credit card debt of the Former CEO, causing the Company to significantly overpay the Former CEOs health and dental insurance for the benefit of the Former CEO, and causing the Company to pay the Former CEOs personal automobile insurance. The Company is seeking, among other relief available, monetary damages in excess of $350,000. This litigation matter is currently pending in the Circuit Court for the City of Lynchburg (Lynchburg, Virginia). |
11. STOCKHOLDERS' EQUITY
11. STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
11. STOCKHOLDERS' EQUITY | NOTE 11. STOCKHOLDERS' EQUITY Classes of Shares The Company's Articles of Incorporation authorize 330,000,000 shares, consisting of 30,000,000 shares of preferred stock, which have a par value of $0.001 per share and 300,000,000 shares of common stock, which have a par value of $0.001. Preferred Stock Preferred stock, any series, shall have the powers, preferences, rights, qualifications, limitations and restrictions as fixed by the Company's Board of Directors in its sole discretion. As of December 31, 2016, the Company's Board of Directors has not issued any Preferred Stock. Common Stock The Company has 300,000,000 authorized shares of Common Stock. As of March 24, 2017, 296,652,616 shares were issued and 282,730,163 shares were outstanding. This compares to the year ended December 31, 2015 when 91,326,463 shares were issued and 77,404,010 shares were outstanding and the year ended December 31, 2016 when 204,152,616 shares were issued and 190,230,163 shares were outstanding. |
12. INCOME TAXES
12. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
12. INCOME TAXES | NOTE 12. INCOME TAXES The provision for federal and state income taxes for the years ended December 31, 2016 and 2015 included the following: 2016 2015 Current benefit (provision): Federal $ $ State Deferred provision: Federal 16,047 (318,594 ) State 30,535 (5,359 ) Valuation allowance (46,582 ) 323,953 Total income tax provision $ $ Deferred tax assets and liabilities reflect the net effect of temporary differences between the carrying amount of assets and liabilities used for income tax purposes. Significant components of the Companys deferred tax assets and liabilities at December 31, 2016 and 2015 are as follows: 2016 2015 Net operating loss carryforward $ 803,637 $ 560,137 Amortizations of intangible assets 1,092,769 1,383,166 Accrued vacation 608 293 Valuation allowance (1,897,014 ) (1,943,596 ) Deferred tax asset, net $ $ ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based on the weight of available evidence, which includes the Companys historical operation performance and the reported cumulative losses in the three year period preceding 2016, the Company has provided a full valuation allowance against its net deferred tax assets. As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $2.4 million, which will expire in various amounts beginning in 2032. Internal Revenue Code Section 382 limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a company. The Company believes that an ownership change did occur in August, 2016. Net operating losses that arose prior to that ownership change will have limited availability to offset taxable income arising in periods following the ownership change. The Companys analysis of this issue is not complete but management believes that the Companys net operating loss carryforwards will not expire unutilized. The Company has limited operations in Canada and the Company is currently evaluating its tax position in that country. Management does not believe that there is any significant tax exposure in Canada. The Company is required to recognize in the financial statements the impact of a tax position, if that position is not more likely than not of being sustained on audit, based on the technical merits of the position. The Companys policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2016, there was no liability for unrecognized tax benefits. |
13. RELATED PARTY TRANSACTIONS
13. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
13. RELATED PARTY TRANSACTIONS | NOTE 13. RELATED PARTY TRANSACTIONS As of the year ended December 31, 2015, the Company previously purported to lease its office building in Lynchburg, Virginia from the former CEO of the Company. Public records indicate that the owner of this property from at least January 1, 2014 through December 31, 2015 was the former CEOs ex-wife. The Company has filed a lawsuit against the former CEO in order to recover, among other amounts, the payments made to the former CEO. Additional information on this lawsuit can be found in Note 10. The Company vacated the building as of January 15, 2016. The Company also leased a storage facility in Salem, Virginia from the former CEO. The Company is attempting to recover the payments made to the former CEO related to this facility. The lease was not approved by the process required by the Companys Code of Ethics. The former CEO has refused to provide access to the storage facility to the management and has not returned Company-owned equipment located at the storage facility. The value of this equipment is also included in the lawsuit. Additional information can be found in Note 10. The Company paid a total of $56,100 in rent to the former CEO related to the office building in Lynchburg, Virginia and the storage facility in Salem, Virginia for the year ended December 31, 2015. The former CEO created several land trusts and designated the Company as the trustee. The former CEO and, the Company believes, the former CFO placed personally owned properties within these land trusts. This activity was not approved by the process required by the Companys Code of Ethics. This activity is the subject of litigation involving the former CEO. Additional information can be found in Note 10. |
14. SEGMENT INFORMATION
14. SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
14. SEGMENT INFORMATION | NOTE 14. SEGMENT INFORMATION As of December 31, 2016, the Company has five reportable segments with separate management and reporting infrastructures that offer different products and services: Corporate, Internet, HVAC, Real Estate, and Asset Management. The corporate segment includes any revenue or expenses derived from corporate office operations as well as expenses related to public company reporting, the oversight of subsidiaries, and other items that affect the overall Company. Sitestar also invests in marketable securities through the corporate segment. The internet segment includes revenue and expenses related to the sale of internet access, hosting, storage, and other ancillary services. The HVAC segment includes revenue and expenses derived from the acquisition and management of HVAC companies in Arizona and throughout the Southwest. The real estate segment includes revenue and expenses related to the management of properties held for investment and revenue and expenses involving the preparation and sale of properties held for resale. The Asset Management segment did not produce revenues in 2016, but will include revenues from various subsidiary investments going forward. All expenses associated with the Asset Management segment were allocated to the Corporate segment for the year ending December 31, 2016. The internet segment includes revenue generated by customers in both the United States and Canada. In the year ended December 31, 2016, the internet segment generated revenue of $1,312,444 in the United States and revenue of $102,845 in Canada. This compares to the year ended December 31, 2015 where the internet segment generated revenue of $1,488,835 in the United States and revenue of $113,687 in Canada. Summarized financial information concerning the Companys reportable segments is shown in the following tables for the years ended December 31, 2016 and 2015. No comparable financial information exists for the HVAC segment for the year ended December 31, 2015 because it commenced operations on June 13, 2016: Corporate Internet HVAC Real Estate Consolidated Year ended December 31, 2016 Revenues $ $ 1,415,289 $ 1,477,961 $ 2,081,996 $ 4,975,246 Cost of revenue $ $ 369,514 $ 987,221 $ 2,165,020 $ 3,521,755 Net income (loss) before income taxes $ (754,708 ) $ 822,224 $ (78,843 ) $ (96,311 ) $ (107,638 ) Goodwill $ $ 212,445 $ 1,341,300 $ $ 1,553,745 Identifiable assets $ 5,004,655 $ 622,431 $ 2,234,564 $ 1,979,582 $ 9,841,232 Corporate Internet HVAC Real Estate Consolidated Year ended December 31, 2015 Revenues $ $ 1,602,523 $ $ 132,680 $ 1,735,203 Cost of revenue $ $ 539,934 $ $ 346,998 $ 886,932 Net income (loss) before income taxes $ (476,845 ) $ (175,897 ) $ $ (262,397 ) $ (915,139 ) Goodwill $ $ 212,445 $ $ $ 212,445 Identifiable assets $ 184,786 $ 427,954 $ $ 3,582,473 $ 4,195,213 |
15. SUBSEQUENT EVENTS
15. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
15. SUBSEQUENT EVENTS | NOTE 15 - SUBSEQUENT EVENTS As previously reported in our Current Report on Form 8-K filed with the SEC on January 26, 2017, on January 20, 2017 the Company entered into an employment agreement with Steven L. Kiel, its Chief Executive Officer, President and Chief Financial Officer. The employment agreement commenced as of January 20, 2017 and continues through December 31, 2018, unless earlier terminated pursuant to its terms. From and after December 31, 2018, the employment agreement will automatically renew for successive one-year periods, unless the Company elects not to extend the term upon 90 days advance notice to Mr. Kiel Pursuant to the terms of the employment agreement, Mr. Kiel will be entitled to a base salary at the annualized rate of $100,000 ($8,333.33 monthly) and will be eligible to receive an annual performance bonus, in cash, upon meeting certain requirements and to participate in employee benefit plans as the Company may maintain from time to time. The annual performance bonus that Mr. Kiel will be eligible to receive is based on the percentage growth in the Companys book value per share during each calendar year, subject to a 5% hurdle. As previously reported in our Current Report on Form 8-K filed with the SEC on January 26, 2017, on January 25, 2017 the Company entered into an employment agreement with Tabitha Keatts, the Companys President of Internet Operations. The employment agreement commenced as of January 25, 2017 and continues through December 31, 2018, unless earlier terminated pursuant to its terms. From and after December 31, 2018, the employment agreement will automatically renew for successive one-year periods, unless the Company elects not to extend the term upon 90 days advance notice to Ms. Keatts Pursuant to the terms of the employment agreement, Ms. Keatts will be entitled to a base salary at the annualized rate of $35,000 ($2,916.67 monthly) and will be eligible to receive an annual performance bonus, in cash, based upon net income from the Companys Internet Operations Division and to participate in employee benefit plans as the Company may maintain from time to time. As previously reported in our Current Report on Form 8-K filed with the SEC on January 30, 2017, on January 24, 2017 our subsidiary, Willow Oak Asset Management entered into a certain Limited Liability Company Operating Agreement of Huckleberry Real Estate Fund II, LLC (Huckleberry Fund) dated as of January 24, 2017 (the Operating Agreement). In connection with entering into the Operating Agreement, Willow Oak Asset Management also entered into a certain Side Letter Agreement dated January 23, 2017 (the Side Letter) with Huckleberry Fund and Huckleberry Capital Management, LLC (Huckleberry Management), an unaffiliated and unrelated New Jersey limited liability company and registered investment adviser. Under the terms of the Operating Agreement and the Side Letter, Willow Oak Asset Management subscribed for a membership interest in Huckleberry Fund, a Delaware limited liability company and private investment fund managed by Huckleberry Management and organized to invest in the Oak Street properties real estate project in Lakewood, New Jersey. In connection with our subscription for a membership interest in Huckleberry Fund, Willow Oak Asset Management committed to make a capital contribution to Huckleberry Fund in an aggregate amount of at least $750,000, which amount was due by January 31, 2017. As of March 24, 2017, our subsidiary, HVAC Value Fund, LLC, has completed six acquisitions in the HVAC (Heating, Ventilation, and Air Conditioning) industry, one of which such acquisitions was completed subsequent to December 31, 2016. This most recent acquisition was completed on January 19, 2017, for a purchase price totaling $560,000. Included in other current assets for the year ended December 31, 2016 is $25,000 for good faith consideration paid related to this subsequent acquisition. As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, the purpose of HVAC Value Fund is to acquire HVAC businesses. Accordingly, these six acquisitions were made in the ordinary course of business and consistent with the customs and practices (including with respect to nature, scope, magnitude, quantity, frequency, and contemplated purpose) of HVAC Value Fund, and, in turn, the Company. |
2. SUMMARY OF SIGNIFICANT ACC23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Organization and Lines of Business | Organization and Lines of Business Sitestar Corporation (formerly White Dove Systems, Inc., and then Interfoods Consolidated, Inc.) was incorporated in Nevada on December 17, 1992. On July 26, 1999, the Company restated its Articles of Incorporation to change the name of the Company to Sitestar Corporation. Unless the context otherwise requires, and when used in this Report, the Company, Sitestar, we, our or us refers to Sitestar Corporation and its subsidiaries. The Company operates through five reportable segments: Corporate, Internet Operations, HVAC Operations, Real Estate Operations, and Asset Management Operations. The management of the Company is also currently reviewing investment opportunities in the private markets, including in other lines of business. Corporate The corporate segment includes any revenue or expenses derived from corporate office operations as well as expenses related to public company reporting, the oversight of subsidiaries, and other items that affect the overall Company. Internet Operations The Company operates its internet operations through Sitestar.net, a wholly-owned subsidiary that offers consumer and business-grade internet access, wholesale managed modem services, web hosting, and various ancillary services. Sitestar.net provides services to customers in the United States and Canada. HVAC Operations The Company operates its HVAC operations through HVAC Value Fund, LLC. HVAC Value Fund is focused on the acquisition and management of HVAC companies in Arizona and throughout the Southwest. As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, the Company, along with JNJ Investments, LLC, an unaffiliated third party and member of HVAC Value Fund, LLC, organized and launched this subsidiary on June 13, 2016. Sitestar has a 100% voting interest in HVAC Value Fund and JNJ Investments has the ability to earn profits interests. Per the signed operating agreement, the Company has first claim to a portion of net income, with the remainder being allocated between the Company and JNJ Investments. JNJ Investments shall also be subject to a Loss Carryforward limitation in the event of a net loss. As of December 31, 2016, HVAC Value Fund had closed on five acquisitions for an aggregate purchase price of $1.46 million, As previously reported in our Current Report on Form 8-K filed with the SEC on June 14, 2016, the purpose of HVAC Value Fund is to acquire HVAC businesses. Accordingly, these five acquisitions were made in the ordinary course of business and consistent with the customs and practices (including with respect to nature, scope, magnitude, quantity, frequency and contemplated purpose) of HVAC Value Fund, and, in turn, the Company. Real Estate Operations Sitestar owns a real estate investment portfolio that includes 19 residential properties, vacant land, and one commercial property. Our real estate portfolio is primarily focused in the Roanoke and Lynchburg areas of Virginia. The portfolio includes single family homes that are currently rented and managed through a third-party property manager, as well as vacant properties being prepared or currently listed for sale. Asset Management Operations Sitestar created a wholly-owned asset management subsidiary on October 10, 2016 named Willow Oak Asset Management. As previously reported in our Current Reports on Form 8-K filed with the SEC on September 19, 2016 and December 30, 2016, respectively, the Company agreed to make a seed investment totaling $10 million through Willow Oak Asset Management in Alluvial Fund, LP, an unrelated private partnership that was launched on January 1, 2017. The asset management segment did not produce revenue in 2016. Any expenses incurred in 2016 were allocated to the corporate segment. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries including: Sitestar.net, Inc., HVAC Value Fund, LLC, and Willow Oak Asset Management, LLC. All intercompany accounts and transactions have been eliminated. |
Use of Estimates | Use of Estimates In accordance with Accounting Principles Generally Accepted in the United State of America (GAAP), 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 fair value of investments, revenue recognition, accrued expenses, financing operations, goodwill valuation, other assets, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. These accounting policies are described at relevant sections in the notes to the consolidated financial statements. |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid instruments purchased with a maturity of three months or less. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and accounts receivable. The Company places its cash with high quality financial institutions and, at times, may exceed the FDIC and CDIC insurance limit. As of December 31, 2016, some of the Companys cash balances exceeded the FDIC and CDIC limit. The Company extends credit based on an evaluation of customers financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customers financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. |
Investments | Investments The Company currently holds and makes investments in marketable securities through its corporate operations. Marketable securities held are classified as available-for-sale based on managements intent. The classification of the investments in these marketable securities is assessed upon purchase and reassessed at each reporting period. These investments are recorded at fair value and are classified as marketable securities in the accompanying consolidated balance sheets. Unrealized gains (losses) are categorized as Other Comprehensive Income. Realized gains (losses) on marketable securities are determined by specific identification. Interest is recognized on an accrual basis; dividends are recorded as earned on the ex-dividend date. |
Accounts Receivable | Accounts Receivable The Company grants credit in the form of unsecured accounts receivable to its customers. The estimate of the allowance for doubtful accounts, which is charged off to bad debt expense, is based on managements assessment of current economic conditions and historical collection experience with each customer. Specific customer receivables are considered past due when they are outstanding beyond their contractual terms and are charged off to the allowance for doubtful accounts when account is individually determined to be uncollectible or account is more than 180 days past due. Sales of internet services, which are not automatically processed via credit card or bank account drafts, have been the Companys highest exposure to collection risk. The Company attempts to reduce this risk by including a late payment fee and a manual processing payment fee to customer accounts. Receivables more than ninety days past due are no longer included in accounts receivable and are turned over to a collection agency. Accounts more than 30 days are considered past due. Sales of HVAC services are typically paid via credit card or check upon completion of service. Sales that are not collected upon completion are generally to existing and repeat customers who have established a track record of timely payments. Historically, HVAC has not encountered issues with collectability of customer accounts. Accounts more than 30 days are considered past due. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets In accordance with GAAP, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed are reported at the lower of carrying amount or fair value of the asset less cost to sell. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method based on estimated useful lives from three to seven years for equipment and vehicles, fifteen years for building improvements, and thirty-nine years for buildings. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under the acquisition method of accounting. The Company does not amortize goodwill. The Company tests its goodwill annually during the fourth quarter of its fiscal year or when events and circumstances indicate that those assets might not be recoverable. Impairment testing of goodwill is required at the reporting unit level (operating segment or one level below operating segment) and involves a two-step process. Prior to performing the two-step impairment test, the Company may make a qualitative assessment of the likelihood of goodwill impairment in order to determine whether a detailed quantitative analysis is required. The first step of the impairment test involves comparing the estimated fair values of the Companys reporting units with the reporting units carrying amounts, including goodwill. The Company estimates the fair value of its reporting units using discounted expected future cash flows. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to compare the carrying amount of goodwill to the implied fair value of that goodwill. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. The Company completed an analysis of its goodwill as of December 31, 2016 and 2015. For the year ended December 31, 2015 the Company recorded a goodwill impairment of $954,049. No impairment was recorded in 2016. This non-cash expense was the result of revenue and cash flow declines in the internet segment. Additionally, new management implemented changes to the annual goodwill impairment analysis to more accurately reflect the value of the Companys goodwill in 2015. The Company performs an analysis of its goodwill as of December 31 annually, or whenever events or changes in circumstances indicate that the assigned values may no longer be appropriate. Other intangible assets consist of customer relationships, developed technology and software, trade names, and other assets acquired in conjunction with the purchases of businesses or purchases of assets from other companies. As of December 31, 2016, these intangible assets have been fully amortized. The remaining intangible assets consist of Domain Names attributed to the internet segment. When management determines material intangible assets are acquired in conjunction with the purchase of a business, the Company determines the fair values of the identifiable intangible assets by taking into account managements own analysis and an independent third party valuation specialists appraisal. Intangible assets determined to have definite lives are amortized over their estimated useful lives. The Company owns 637 domain names, of which 110 are available for sale. These domains are valued at historical cost. |
Real Estate | Real Estate Real estate properties held for resale are carried at the lower of cost or fair market value. All costs directly related to the improvement and carrying of real estate are capitalized, including renovations and property taxes, to the extent the capitalized costs of the property do not exceed the estimated fair value of the property. If the cost of the real estate exceeds the estimated fair value, the excess is charged to expense. Fair value is estimated based on comparable sales in the geographic area the real estate is located and tax assessed values. Fair value is evaluated annually by management, or when events or changes in circumstances indicate the carrying value of the real estate may not be recoverable. Real estate properties held for investment are carried at the cost basis plus additional expenses where the expense extended the life or added value to the property. Otherwise, the expense is not capitalized and is charged to expense. Properties categorized as real estate held for investment are not expected by management to be sold in the next 12 months. This determination is periodically reviewed by management. |
Accrued Bonus | Accrued Bonus Accrued bonuses represent performance based incentives that have not yet been paid. These bonus amounts are paid annually after financial records are finalized. |
Other Accrued Expenses | Other Accrued Expenses Accrued expenses represent incurred but not yet paid expenses from Sales and Use taxes for ISP services, vacation accruals, and other payroll accruals. |
Deferred Revenue | Deferred Revenue Deferred revenue represents collections from customers in advance of internet services to be performed. Revenue is recognized in the period service is provided. |
Revenue Recognition | Revenue Recognition Internet Operations 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. The Company generates revenue in its internet segment from consumer and business-grade internet access, wholesale managed modem services for downstream ISPs, web hosting, and various ancillary services in the United States and Canada. Services include narrow-band (dial-up and ISDN) and broadband services (DSL, fiber-optic and wireless), web hosting, and additional related services to consumers and businesses. Customers may downgrade from internet access to web hosting plans to include email access and storage. In some years, this shift can be significant. Internet revenue is affected by the changing composition of revenue sources. HVAC Operations The Company performs HVAC service repairs and installs HVAC units for its customers. Revenue is recognized at the time of the install or service call. Sales are adjusted for any returns or allowances. A return or allowance situation would arise based on the two year workmanship warranty that typically conveys with the installation of a new unit. There is also a two year warranty on newly installed parts and equipment that is honored by the manufacturer. If an install is performed over multiple days, it is accounted for using work in process (WIP) accounting in accordance with GAAP. If payment is not provided in advance or at the time of service or installation, the amount due is designated as an account receivable. Real Estate Operations Revenue from real estate held for resale 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. Rental revenue from real estate held for investment is recognized when it is due, generally on the first of each month or at another regular period agreed upon between the Company and the tenant. If payments are not provided in a timely manner, the amount due is designated as an account receivable. Accounts receivable from rental revenue are generally considered unrecoverable after 90 days unless the Company reasonably believes that recovery is probable. Tenants generally provide a security deposit at the time of possession. This deposit is held separate from revenue and only applied to revenue when rental payment comparable to the security deposit amount is not provided in a timely manner and considered unlikely to be recovered. Otherwise, the security deposit is returned in a timely manner after the property is surrendered back to the Company. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The most recent three tax years are open to potential IRS examination. |
Income Per Share | Income Per Share The basic income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is computed similar to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company has no potentially dilutive securities. |
Other Comprehensive Income | Other Comprehensive Income Other comprehensive income is the result of two items: the impact of foreign currency translations related to the Companys operations in Canada, and the unrealized gains (losses) from marketable securities classified as available-for-sale. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 842, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is required to adopt this standard in the first quarter of 2019. The Company is currently evaluating the effect this standard will have on its Consolidated Financial Statements. In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) by one year. As a result, the ASU is now effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU No. 2014-09 provides comprehensive guidance on the recognition of revenue from customers arising from the transfer of goods and services. The ASU also provides guidance on accounting for certain contract costs, and requires new disclosures. Early adoption is not permitted. The Company is required to adopt this standard in the first quarter of 2018. The initial application of the standard is not expected to significantly impact the Company. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740). The ASU provides guidance related to the classifications of deferred income tax assets and liabilities into current and noncurrent amounts in a classified statement of financial position. Deferred tax assets and liabilities are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax assets and liabilities that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. The Company is required to adopt this standard in the first quarter of 2018. The initial application of the standard is not expected to significantly impact the Company. In January 2016, the FASB issued ASU No. 2016-01 "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." Although the ASU retains many of the current requirements for financial instruments, it significantly revises an entitys accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. The ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017; earlier adoption is permitted under certain criteria. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial condition, results of operations, and cash flows. |
3. HVAC PRO FORMA INFORMATION (
3. HVAC PRO FORMA INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Hvac Pro Forma Information Tables | |
Schedule of pro forma information | Pro forma year ended December 31, 2016 (unaudited) Consolidated pro forma year ended December 31, 2016 (unaudited) June 2016 acquisitions (in aggregate) July 8, 2016 acquisition July 15, 2016 acquisition October 1, 2016 acquisition Revenue $ 534,997 $ 1,293,380 $ 1,052,186 $ 900,605 $ 3,781,167 Earnings $ 71,314 $ 192,922 $ 217,609 $ 35,650 $ 517,495 Pro forma year ended December 31, 2015 (unaudited) Consolidated pro forma year ended December 31, 2015 (unaudited) June 2016 acquisitions (in aggregate) July 8, 2016 acquisition July 15, 2016 acquisition October 1, 2016 acquisition Revenue $ 674,212 $ 1,338,305 $ 1,034,926 $ 977,613 $ 4,025,056 Earnings $ 247,328 $ 219,231 $ 313,302 $ 2,759 $ 782,620 June 2016 acquisitions (in aggregate) Fair value of consideration transferred: Cash $ 160,000 Notes payable $ 65,000 Preliminary fair value of assets acquired: Vehicles $ 35,000 Equipment $ 13,700 Total identifiable assets $ 48,700 Goodwill $ 176,300 July 8, 2016 acquisition Fair value of consideration transferred: Cash $ 375,000 Notes payable $ 100,000 Preliminary fair value of assets acquired: Goodwill $ 475,000 July 15, 2016 acquisition Fair value of consideration transferred: Cash $ 340,000 Notes payable $ 100,000 Preliminary fair value of assets acquired: Vehicles $ 40,000 Total identifiable assets $ 40,000 Goodwill $ 400,000 October 1, 2016 acquisition Fair value of consideration transferred: Cash $ 315,000 Preliminary fair value of assets acquired: Vehicles $ 20,000 Equipment $ 5,000 Total identifiable assets $ 25,000 Goodwill $ 290,000 |
4. INVESTMENTS (Tables)
4. INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Investments Tables | |
Investments | Cost Basis Unrealized Gain Fair Value December 31, 2016 Common Stock available for sale $ 563,211 $ 36,289 $ 599,500 |
5. FAIR VALUE OF ASSETS AND L26
5. FAIR VALUE OF ASSETS AND LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
5. FAIR VALUE OF ASSETS AND LIABILITIES (Tables) | (Level 1) (Level 2) (Level 3) Total at Fair Value December 31, 2016 Marketable securities $ 599,500 $ $ $ 599,500 (Level 1) (Level 2) (Level 3) Total at Fair Value December 31, 2015 Marketable securities $ $ $ $ |
6. PROPERTY AND EQUIPMENT (Tabl
6. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 2016 2015 Automobile $ 115,688 $ 9,500 Computers and equipment 36,030 Furniture and fixtures 25,206 13,788 176,924 23,288 Less accumulated depreciation (33,460 ) (23,288 ) Property and equipment, net $ 143,464 $ |
7. REAL ESTATE (Tables)
7. REAL ESTATE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Real Estate [Abstract] | |
Real Estate Held for Investment | 2017 $ 68,510 2018 15,795 Total $ 84,305 |
8. NOTES PAYABLE (Tables)
8. NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | 2016 2015 Non-interest bearing amount due on acquisition of USA Telephone payable in thirty-six monthly installments starting January 2008. $ $ 90,000 Interest bearing amount due on acquisition through HVAC Value Fund, LLC 250,000 Non-interest bearing amount due on acquisitions through HVAC Value Fund, LLC 15,000 Less current portion (240,000 ) Long-term portion $ 25,000 $ 90,000 |
9. ACCOUNTS RECEIVABLE AND BA30
9. ACCOUNTS RECEIVABLE AND BAD DEBT EXPENSE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
9. ACCOUNTS RECEIVABLE AND BAD DEBT EXPENSE (Tables) | 2016 2015 Gross accounts receivable $ 213,624 $ 20,692 Less allowance for doubtful accounts (873 ) (6,264 ) Accounts receivable, net $ 212,751 $ 14,428 |
10. COMMITMENTS AND CONTINGEN31
10. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments And Contingencies Tables | |
Schedule of commitments | 2017 $ 42,869 2018 31,723 2019 4,200 Total $ 78,792 |
12. INCOME TAXES (Tables)
12. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Provision for Income Taxes | 2016 2015 Current benefit (provision): Federal $ $ State Deferred provision: Federal 16,047 (318,594 ) State 30,535 (5,359 ) Valuation allowance (46,582 ) 323,953 Total income tax provision $ $ |
Significant Components of Deferred Tax Assets | 2016 2015 Net operating loss carryforward $ 803,637 $ 560,137 Amortizations of intangible assets 1,092,769 1,383,166 Accrued vacation 608 293 Valuation allowance (1,897,014 ) (1,943,596 ) Deferred tax asset, net $ $ |
14. SEGMENT INFORMATION (Tables
14. SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Corporate Internet HVAC Real Estate Consolidated Year ended December 31, 2016 Revenues $ $ 1,415,289 $ 1,477,961 $ 2,081,996 $ 4,975,246 Cost of revenue $ $ 369,514 $ 987,221 $ 2,165,020 $ 3,521,755 Net income (loss) before income taxes $ (754,708 ) $ 822,224 $ (78,843 ) $ (96,311 ) $ (107,638 ) Goodwill $ $ 212,445 $ 1,341,300 $ $ 1,553,745 Identifiable assets $ 5,004,655 $ 622,431 $ 2,234,564 $ 1,979,582 $ 9,841,232 Corporate Internet HVAC Real Estate Consolidated Year ended December 31, 2015 Revenues $ $ 1,602,523 $ $ 132,680 $ 1,735,203 Cost of revenue $ $ 539,934 $ $ 346,998 $ 886,932 Net income (loss) before income taxes $ (476,845 ) $ (175,897 ) $ $ (262,397 ) $ (915,139 ) Goodwill $ $ 212,445 $ $ $ 212,445 Identifiable assets $ 184,786 $ 427,954 $ $ 3,582,473 $ 4,195,213 |
3. HVAC PRO FORMA INFORMATION34
3. HVAC PRO FORMA INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue | $ 4,975,246 | $ 1,735,203 |
June 2016 acquisitions (in aggregate) | ||
Revenue | 534,997 | 674,212 |
Earnings | 71,314 | 247,328 |
July 8, 2016 acquisition | ||
Revenue | 1,293,380 | 1,338,305 |
Earnings | 192,922 | 219,231 |
July 15, 2016 acquisition | ||
Revenue | 1,052,186 | 1,034,926 |
Earnings | 217,609 | 313,302 |
October 1 2016 acquisition | ||
Revenue | 900,605 | 977,613 |
Earnings | 35,650 | 2,759 |
Consolidated pro forma period | ||
Revenue | 3,781,167 | 4,025,056 |
Earnings | $ 517,495 | $ 782,620 |
4. INVESTMENTS (Details)
4. INVESTMENTS (Details) | Dec. 31, 2016USD ($) |
Investments Details | |
Common Stock available for sale - Cost Basis | $ 563,211 |
Common Stock available for sale - Unrealized Gain | 36,289 |
Common Stock available for sale - Fair Value | $ 599,500 |
5. FAIR VALUE OF ASSETS AND L36
5. FAIR VALUE OF ASSETS AND LIABILITIES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Marketable securities | $ 599,500 | |
Fair Value, Inputs, Level 1 | ||
Marketable securities | 599,500 | |
Fair Value, Inputs, Level 3 | ||
Marketable securities | ||
Fair Value, Inputs, Level 2 | ||
Marketable securities |
6. PROPERTY AND EQUIPMENT - Pro
6. PROPERTY AND EQUIPMENT - Property and Equipment (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Property and Equipment, Gross | $ 176,924 | $ 23,288 |
Less accumulated depreciation | (33,460) | (23,288) |
Property and Equipment, Net | 143,464 | |
Automobile | ||
Property and Equipment, Gross | 115,688 | 9,500 |
Computer Equipment | ||
Property and Equipment, Gross | 36,030 | |
Furniture and Fixtures | ||
Property and Equipment, Gross | $ 25,206 | $ 13,788 |
6. PROPERTY AND EQUIPMENT (Deta
6. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation Expense | $ 10,172 | $ 5,518 |
7. REAL ESTATE (Details)
7. REAL ESTATE (Details) | Dec. 31, 2016USD ($) |
Real Estate Details | |
2,017 | $ 68,510 |
2,018 | 15,795 |
Total | $ 84,305 |
8. NOTES PAYABLE - Notes Payabl
8. NOTES PAYABLE - Notes Payable (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
Non-interest bearing amount due on acquisition of USA Telephone payable in thirty six monthly installments starting January 2008. | $ 90,000 | |
Interest bearing amount due on acquisition through HVAC Value Fund, LLC | 250,000 | |
Non-interest bearing amount due on acquisitions through HVAC Value Fund, LLC | 15,000 | |
Less current portion | (240,000) | |
Long term portion | $ 25,000 | $ 90,000 |
9. ACCOUNTS RECEIVABLE AND BA41
9. ACCOUNTS RECEIVABLE AND BAD DEBT EXPENSE (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Accounts Receivable And Bad Debt Expense Details | ||
Gross accounts receivable | $ 213,624 | $ 20,692 |
Less allowance for doubtful accounts | (873) | (6,264) |
Accounts receivable, net | $ 212,751 | $ 14,428 |
10. COMMITMENTS AND CONTINGEN42
10. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2016USD ($) |
Commitments And Contingencies Details | |
2,017 | $ 42,869 |
2,018 | 31,723 |
2,019 | 4,200 |
Total | $ 78,792 |
10. COMMITMENTS AND CONTINGEN43
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent Expense | $ 12,472 | $ 12,472 |
12. INCOME TAXES - Provision fo
12. INCOME TAXES - Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Federal | ||
State | ||
Federal | 16,047 | (318,594) |
State | 30,535 | (5,359) |
Valuation allowance | (46,582) | 323,953 |
Total income tax provision |
12. INCOME TAXES - Significant
12. INCOME TAXES - Significant Components of Deferred Tax Assets (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 803,637 | $ 560,137 |
Amortization of Intangible assets | 1,092,769 | 1,383,166 |
Accrued vacation | 608 | 293 |
Valuation allowance | (1,897,014) | (1,943,596) |
Deferred tax asset |
14. SEGMENT INFORMATION - Segme
14. SEGMENT INFORMATION - Segment Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cost of revenue | $ 3,521,755 | $ 886,932 |
Net income (loss) before income taxes | (107,638) | (919,321) |
Corporate [Member] | ||
Revenue | ||
Cost of revenue | ||
Net income (loss) before income taxes | (754,708) | (476,845) |
Goodwill | ||
Identifiable assets | 5,004,655 | 184,786 |
Internet [Member] | ||
Revenue | 1,415,289 | 1,602,523 |
Cost of revenue | 369,514 | 539,934 |
Net income (loss) before income taxes | 822,224 | (175,897) |
Goodwill | 212,445 | 212,445 |
Identifiable assets | 622,431 | 427,954 |
HVAC | ||
Revenue | 1,477,961 | |
Cost of revenue | 987,221 | |
Net income (loss) before income taxes | (78,843) | |
Goodwill | 1,341,300 | |
Identifiable assets | 2,234,564 | |
Real Estate [Member] | ||
Revenue | 2,081,996 | 132,680 |
Cost of revenue | 2,165,020 | 346,998 |
Net income (loss) before income taxes | (96,311) | (262,397) |
Goodwill | ||
Identifiable assets | 1,979,582 | 3,582,473 |
Consolidated [Member] | ||
Revenue | 4,975,246 | 1,735,203 |
Cost of revenue | 3,521,755 | 886,932 |
Net income (loss) before income taxes | (107,638) | (915,139) |
Goodwill | 1,553,745 | 212,445 |
Identifiable assets | $ 9,841,232 | $ 4,195,213 |