ROANOKE TECHNOLOGY CORP, 10-Q, 2000-09-13

ROANOKE TECHNOLOGY CORP
10-Q, 2000-09-13
BUSINESS SERVICES, NEC

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

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

For the quarterly period ended July 31, 2000

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

For the transition period from to

Commission File No. 0-26715

ROANOKE TECHNOLOGY CORP.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C>
Florida 22-3558993
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

1433 Georgia Avenue, Roanoke Rapids, North Carolina 27870
(Address of Principal Executive Offices) (Zip Code)
</TABLE>

(252) 537-9222
(Issuer's Telephone Number, Including Area Code)

Check whether the issuer: (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past 90 days.

Yes X No

State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date: As of September 12, 2000, the Company
had 12,655,677 shares of Common Stock outstanding,
$0.0001 par value.

<TABLE>
ROANOKE TECHNOLOGY CORP.
Form 10-Q Quarterly Report
For the Period Ended July 31, 2000
<S> <C>
Page
Part I - FINANCIAL INFORMATION

Item 1. Financial Statements 3

Unaudited Balance Sheets at July 31, 2000 6-7
and for the Year Ended October 31, 1999

Unaudited Statements of Operations for the Three 8-9
Months Ended July 31, 2000 and July 31, 1999
and the Nine Months Ended July 31, 2000 and
July 31, 1999

Unaudited Statement of Stockholder's Equity as of 10
July 31, 2000.

Unaudited Cash Flow Statement for the Nine Months 11-12
Ended July 31, 2000 and July 31, 1999

Notes to Condensed Financial Statements 13-21

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21-23

PART II - OTHER INFORMATION 24

Item 1. Legal Proceedings 24

Item 2. Changes in Securities 24

Item 3. Defaults Upon Senior Securities 24

Item 4. Submission of Matters to a Vote of Security Holders 24

Item 5. Other Information 24

Signatures 25

</TABLE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements:

BASIS OF PRESENTATION

The accompanying reviewed financial statements are
presented in accordance with generally accepted
accounting principles for interim financial information
and the instructions to Form 10-Q and item 310 under
subpart A of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. The accompanying statements should
be read in conjunction with the audited financial
statements for the year ended October 31, 2000. In the
opinion of management, all adjustments (consisting only
of normal occurring accruals) considered necessary in
order to make the financial statements not misleading,
have been included. Operating results for the three
months and nine months ended July 31, 2000 are not
necessarily indicative of results that may be expected
for the year ending October 31, 2000. The financial
statements are presented on the accrual basis.

VARMA & ASSOCIATES
Bob A. Varma
James P. Gately
610 Crown Oak Centre Drive
Longwood, Florida 32750
Office (407) 834-7344
Fax: (407) 834-7814

Review Report of Independent
Certified Public Accountant

To the Shareholder and Board of Directors
of Roanoke Technologies Corporation

We have reviewed the accompanying balance sheet of
Roanoke Technology Corporation as of July 31, 2000, and
the related statements of operations, stockholder's
equity, and cash flows for the quarters ending July 31,
2000 and 1999, in accordance with statements on Standards
for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All
information in these statements is the representation of
management.

A review consists principally of inquiries of company
personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on my review, we are not aware of any material
modifications that should be made to the accompanying
financial statements in order for them to be in
conformity with generally accepted accounting principles.

Varma & Associates
September 12, 2000

<TABLE>
ROANOKE TECHNOLOGY CORPORATION
BALANCE SHEETS
As of July 31, 2000 and October 31, 1999
ASSETS
<S> <C> <C>
July 31, October 31,
2000 1999
----------- -----------
CURRENT ASSETS
Cash $ 36,645 $ 77,904
Accounts receivable 24,276 0
Employee advance 990 0
----------- -----------
Total Current Assets 61,911 77,904

PROPERTY AND EQUIPMENT

Equipment and leasehold
improvements 254,900 164,498
Less: accumulated depreciation 51,625 21,490
----------- -----------

Total Property and Equipment 203,275 143,008

OTHER ASSETS

Organization costs 1,000 1,000
Goodwill 19,614 19,614
Software 313,000 313,000
Less: Accumulated amortization 153,628 70,353
----------- ----------
Net intangibles 179,986 263,261
Deposits 1,500 1,500
Stockholder Loan 22,932 0
------------ ---------
Total Other Assets 204,418 264,761

TOTAL ASSETS $ 469,604 $ 485,673
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES

Accounts payable and
accrued expenses $ 90,335 $ 37,415
Current maturity of
long-term debt 7,140 6,760
----------- ------------
Total current liabilities 97,475 44,175

LONG TERM LIABILITIES

Long term debt 15,221 22,548
Less: current portion 7,140 6,760
----------- ------------
Total long term liabilities 8,081 15,788

Deferred Revenue 0 44,025
----------- ------------
TOTAL LIABILITIES 105,556 103,988

STOCKHOLDERS' EQUITY
--------------------

STOCKHOLDERS' EQUITY

Common stock - $.0001 par value;
50,000,000 shares authorized;
11,330,183 issued
and outstanding 1,133 1,133
Additional paid-in capital 3,372,501 3,372,501
Retained earnings (3,009,586) (2,991,949)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 364,048 381,685
----------- ------------

TOTAL LIABILITIES AND EQUITY$469,604 $ 485,673
============= =============
</TABLE>

<TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
<S> <C> <C>
Three Months Nine Months
Ended July 31 Ended July 31
2000 1999 2000 1999
------- -------- ------- -------
REVENUE
Sales $421,248 421,322 1,557,133 873,772
Cost of sales 250,611 265,215 800,244 557,436
------- -------- ------- -------
GROSS PROFIT 170,637 156,107 756,889 316,336

GENERAL & ADMINISTRATIVE EXPENSES
Advertising 280 6,385 1,848 10,463
Auto 457 2,574 2,274 2,574
Bank charges 248 68 631 264
Depreciation and amortization 38,757 27,450 113,410 60,213
Dues and subscriptions 1,145 420 1,825 1,777
Legal and accounting 13,015 32,542 60,343 79,603
Maintenance and repairs 372 6,358 1,132 7,794
Marketing 23,898 0 104,179 0
Meals and entertainment 1,937 118 3,120 4,154
Office and occupancy expense 91,328 38,440 287,784 61,112
Rent 11,959 13,650 32,772 27,400
Officers salaries 64,800 70,200 210,200 1,288,417
Telephone 12,926 8,142 54,796 16,300
Travel 2,091 0 9,479 7,363
------- -------- -------- --------
Total 263,213 206,347 883,793 1,567,434
------- -------- -------- --------
INCOME (LOSS) FROM OPERATION (92,576) (50,240) (126,904) (1,251,098)

OTHER INCOME AND (EXPENSE)

Interest - net 176 (661) 1,268 (2,270)
Gain on sale of stock 0 0 108,000 0
------- -------- -------- --------
Total 176 (661) 109,268 (2,270)
------- -------- -------- --------

NET INCOME (LOSS) $ (92,400)$ (50,901) $ (17,636)$(1,253,368)
======== ======== ======== ========

NET EARNINGS PER SHARE
Basic and Diluted
Net loss per share Less than(.01) Less than (.01)

Basic and Diluted Weighted Average
Number of Common Shares Outstanding 11,330,183 8,103,721

</TABLE>

<TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENT OF STOCKHOLDER'S EQUITY
As of July 31, 2000

<S> <C> <C> <C> <C> <C>
ADDITIONAL
COMMON STOCK PAID
SHARES AMOUNT CAPITAL DEFICIT TOTAL
----------------------------------------------------------------
Issuance for services 1,525,000 $ 153 $ 59,323 $ 0 $ 59,476
Acquisition 500,000 50 19,450 19,500
First offering 800,000 80 19,920 20,000
Second offering 1,000,000 100 49,900 50,000
Third offering 880,000 88 87,912 88,000
Stock compensation 3,175,000 318 123,507 123,825
Net loss for the year (305,545) (305,545)
----------------------------------------------------------------
Balance at October 31, 1998 7,880,000 $ 788 $360,012 $ (305,545)$ 55,256

Third offering 1,349,572 135 354,635 354,770
Issuance for consulting fees 250,000 25 24,975 25,000
Officer Compensation 850,000 85 1,991,165 1,991,250
Asset acquisition 999,111 99 629,901 630,000
Stock issued for services 1,500 11,813 11,813
Net loss for the year (2,686,404) (2,686,404)
---------------------------------------------------------------
Balance at October 31,1999 11,330,183 $1,133 $3,372,501 $(2,991,949) $ 381,685

Net loss at July 31, 2000 (17,637) (17,637)

Balance at July 31, 2000 11,330,183 $1,133 $3,372,501 $(3,009,586) $ 364,048
===============================================================
</TABLE>
<TABLE>
ROANOKE TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
For the Nine Months ending July 31, 2000 and 1999

<S> <C> <C>
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ (17,636) $(1,253,368)

Adjustments to reconcile net income to net cash
provided by (used in) operating activities:

Depreciation and amortization 113,410 60,213
Stock issued for services 0 1,181,250
(Increase) decrease in employee advance (990) 500
(Increase) decrease in accounts receivable (24,276) 0
Increase (decrease) in payables & accrued expenses 52,920 41,777
Increase (decrease) in deposits 0 (1,500)
Increase (decrease) in deferred revenue (44,025)
---------- -----------
Total adjustments to net income 97,039 1,281,740
---------- -----------

Net cash flows from operations 79,403 28,372

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid on officers loan (22,932) (62,324)
Capital expenditures on equipment (90,401) (92,068)
----------- -----------
Net cash flows from investing (113,333) (154,392)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES

Cash received - stock 0 258,760
Payments on notes (7,329) (1,939)
Cash received - note payable 0 15,721
----------- ----------
Net cash flows from financing (7,329) 272,542
----------- ----------
CASH RECONCILIATION

Net increase (decrease) in cash (41,259) 146,522
Cash at beginning of year 77,904 13,795
---------- ----------
CASH BALANCE AT July 31, 2000 $ 36,645 $160,317
=========== ==========

</TABLE>
ROANOKE TECHNOLOGY CORPORATION

NOTES TO THE FINANCIAL STATEMENTS

(See Audit Report)

1. Summary of significant accounting policies:
-------------------------------------------

Industry Roanoke Technology Corporation (The Company)
--------
was incorporated December 11, 1997 as Suffield
Technologies Corp., its original name, under the laws of
the State of Florida. The Company is headquartered in
Roanoke Rapids, North Carolina and does business as Top-
10 Promotions, Inc. The Company is engaged in the
design, development, production, and marketing of
technology to provide enhanced internet marketing
capabilities.

Revenue Recognition and Service Warranty Revenues
----------------------------------------
resulting from technology consulting services is
recognized as such services are performed, paid and
complete the service guarantee of 90 days. A deferred
revenue account had been established in the financial
statements to account for revenue and costs of revenue to
be recognized in the income statement at the end of the
service agreement period. During February of 2000 the
service agreement was changed thus not requiring a
deferred revenue account. Services are most often paid
for in advance of the service being performed. The
services performed are completed by a software program
leaving the time when a service is paid for and the time
the service is performed immaterial. The Company has no
extended maintenance contracts and warrants its
consulting services to meet the consulting service
contract guarantee. No provision for estimated future
costs relating warranties have been made as these
costs have been historically immaterial.

Cash and Cash Equivalents The Company considers cash on
-------------------------
hand and amounts on deposit with financial institutions
which have original maturities of three months or less to
be cash and cash equivalents.

Short-Term Investments Short-term investments
----------------------
ordinarily consist of short-term debt securities acquired
with cash not immediately needed in operations. Such
amounts have maturities of less than one year.

Basis of Accounting- The Company's financial statements
-------------------
are prepared in accordance with generally accepted
accounting principles. All costs associated with
software development and advancement are expensed as
a cost of sales through an ongoing research and
development program.

Property and Equipment Property and equipment are
----------------------
recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of
the various classes of assets as follows:

Machinery and equipment 2 to 10 years
Furniture and fixtures 5 t0 10 years

Leasehold improvements are amortized on the straight-line
basis over the lessor of the life of the asset or the
term of the lease. Maintenance and repairs, as incurred,
are charged to expenses; betterments and renewals are
capitalized in plant and equipment accounts. Cost and
accumulated depreciation applicable to items replaced or
retired are eliminated from the related accounts; gain or
loss on the disposition thereof is included as income.

Long-lived Assets - Long lived assets, including property
----------------- and equipment and certain intangible
assets to be held and used by the Company are reviewed
for impairment whenever events or changes in
circumstances indicate that the carrying value of the
assets may not be recoverable. Impairment losses are
recognized if expected future cash flows of the related
assets are less than their carrying values. Measurement
of an impairment loss is based on the fair value of the
asset. Long-lived assets and certain identifiable
intangibles to be disposed of are reported at the lower
of carrying amount or fair value less cost to sell.

Intangibles Goodwill represents the excess of purchase
-----------
price over the fair value of business acquired and is
amortized on a straight-line basis over 3 years.

Other acquired intangibles principally include core
technology in the form of software programs and are
amortized over their estimated lives of primarily 3 to 5
years., existing Organization costs are being amortized
by the straight-line method over 5 years.

Research and Development Research and development costs
------------------------
incurred in the discovery of new knowledge and the
resulting translation of this new knowledge into plans
and designs for new services, prior to the attainment of
the related products' technological feasibility, are
recorded as expenses in the period incurred.

Income Taxes The Company utilizes the asset and
------------
liability method to measure and record deferred income
tax assets and liabilities. Deferred tax assets and
liabilities reflect the future income tax effects of
temporary differences between the financial statement
carrying amounts of existing assets and liabilities and
their respective tax bases and are measured using enacted
tax rates that apply to taxable income in the years in
which those temporary differences are expected to be
recovered or settled. 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.

Fair Value of Financial Instruments The Company's
-----------------------------------
financial instruments include cash and cash equivalents,
short-term investments, accounts receivable, accounts
payable and liabilities to banks and shareholders. The
carrying amount of long-term debt to banks approximates
fair value based on interest rates that are currently
available to The Company for issuance of debt with
similar terms and remaining maturities. The carrying
amounts of other financial instruments approximate their
fair value because of short-term maturities.

Earnings Per Share Basic earnings per share ("EPS") is
------------------
computed by dividing earnings available to common
shareholders by the weighted-average number of common
shares outstanding for the period as required by the
Financial Accounting Standards Board (FASB) under
Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings per Shares". Diluted EPS reflects the
potential dilution of securities that could share in the
earnings.

Concentrations of Credit Risk Financial instruments
-----------------------------
which potentially expose The Company to concentrations of
credit risk consist principally of operating demand
deposit accounts. The Company's policy is to place its
operating demand deposit accounts with high credit
quality financial institutions.

No customer represented 10 % or more of The Company's
total sales as of the current reporting period.

Stock-Based Compensation In accordance with the
------------------------
recommendations in SFAS No. 123, "Accounting for Stock-Based
Compensation," ("SFAS No. 123"), The Company's
management has considered adopting this optional standard
for disclosure purposes, along with Accounting Principles
Board opinion no. 25. The Company may consider using
full implementation of SFAS No. 123 at a future date.
The Company accounted for the stock bonus of 750,000
shares of restricted stock given to the President of the
company as compensation. The bonus was accounted for in
the current period in order to match the compensation
expense with the time in which it was earned. In
accordance with the tax accounting, the compensation will
not be deductible until the President sells those shares.
The shares are restricted from sale for a period of two
years from the date of issuance and are accounted for at
their fair value.

Recently Adopted Accounting Standards In June 1997, the
--------------------------------------
FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 requires
that all items that are required to be recognized under
accounting standards as components of comprehensive
income be reported in a statement that is displayed with
the same prominence as other financial statements.

SFAS No. 130 does not require a specific format for that
financial statement but requires that an entity display
an amount representing total comprehensive income for the
period in that statement. SFAS No. 130 requires that an
entity classify items of other comprehensive income by
their nature in a financial statement. For example,
other comprehensive income may include foreign currency
and unrealized gains and losses on certain investments in
debt and equity securities. In addition, the accumulated
balance of other comprehensive income must be displayed
separately from retained earnings and additional paid in
capital in the equity section of a statement of financial
position. The Company adopted this accounting standard
at inception as required.

In October 1997 the American Institute of Certified
Public Accountants issued Statement of position 97-2,
"Software Revenue Recognition" (SOP 97-2). SOP 97-2
provides guidance on applying generally accepted
accounting principles in recognizing revenue on software
transactions and is effective for transactions entered
into in fiscal years beginning after December 15, 1997.
The Company adopted SOP 97-2 at inception as required.
Adoption of this SOP 97-2 did not have a material effect
on the financial statements.

In February 1997, the FASB issued SFAS No. 132,
"Employer's Disclosure about Pensions and Other
Postretirement Benefits" ("SFAS No. 132"), effective for
fiscal years beginning after December 15, 1997. SFAS 132
revises employer disclosures about pension and other
postretirment benefit plans. It does not change the
measurement or recognition of those plans. This
statement standardizes the disclosure requirements for
pensions and other postretirement benefits to the extent
practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets
that will facilitate financial analysis and eliminates
certain disclosures. Adoption of SFAS 132, when needed
is not expected to have a material impact on the
financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities",
effective for fiscal years beginning after June 15, 1999.
SFAS 133 requires companies to record derivatives on the
balance sheet as assets and liabilities, measured at fair
value. Gains or losses resulting from changes in the
values of those derivatives would be accounted for
depending on the use of the derivative and whether it
qualifies for hedge accounting. The Company's management
believes that adoption of SFAS 133, when needed, will not
have a material impact on the financial statements.

2. Related Party Transactions and Going Concern:
----------------------------------------------

The Company's financial statements have been presented on
the basis that it is a going concern, which contemplates
the realization of assets and the satisfaction of
liabilities in the normal course of business.
The Company has suffered losses from operations and may
require additional capital to continue as a going concern
as The Company develops its new markets. Management
believes The Company will continue as a going concern in
its current market and is actively marketing its products
and/or services which would enable The Company to meet
its
obligations and provide additional funds for continued
new product and/or service development. In addition,
management is currently negotiating several additional
contracts for its services. Management is also embarking
on other strategic initiatives to expand its business
opportunities. However, there can be no assurance these
activities will be successful.

3. Accounts Receivable and Customer Deposits:
------------------------------------------

Accounts receivable historically have been immaterial as
The Company's policy is to have the software that it
sells paid for in advance. As of the balance sheet date
there were no deposits paid in advance.

4. Use of Estimates:
-----------------

The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that effect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

5. Revenue and Cost Recognition:
-----------------------------

The Company uses the accrual basis of accounting for
financial statement reporting. Revenues are recognized
when products are shipped and expenses realized when
obligations are incurred.

6. Accounts Payable and accrued expenses:
--------------------------------------

Accounts payable and accrued expenses consist of trade
payables and accrued payroll and payroll taxes created
from normal operations of the business.

Long term debt consists of:

Note payable to a finance company which bears interest at
16.53%. The note is collateralized by equipment and
requires that monthly payments of $197 be made through
the maturity date of June, 2003.

Capital Lease with a finance company which bears an
interest rate of 13.61%. The lease is collateralized by
equipment and requires that monthly payments of $534 be
made through the maturity date of April, 2002.

Aggregate maturities of long term debt over the next
five years are as follows:

<TABLE>
<S> <C> <C> <C>
For the quarter ending July 31, 2000 For the year ending October 31, 1999
YEAR AMOUNT YEAR AMOUNT
2000 7,140 2000 6,760
2001 7,727 2001 7,803
2002 354 2002 5,710
2003 0 2003 2,275
2004 0 2004 0
</TABLE>

8. Operating Lease Agreements:
---------------------------

The Company rents office space with monthly payments of
$2,500. The lease term for this space is ninety months
beginning on May 1, 1999 and ending on November 1, 2006.

The Company also rents a house for the convenience of
Company employees that are relocating to the area and out
of town business guests. The house also serves as a
satellite office as added security for computer system
continuation in the event that the main office should
encounter problems with their system. The house has
monthly payments of $1,200. The lease term is March 1,
1999 through August 31,2001.

The Company also leases its phone systems, internet lines
and various equipment . The lease terms range from month
to month leases to leases with a term of sixty months.
All long - term leases include an upgrade clause of which
management intends to upgrade technology when available.
For this reason, The Company considers all of these types
of lease arrangements as operating. Currently the lease
costs are at $33,800 per year and shown as part of cost
of sales.

9. Stockholders' Equity:
---------------------

Preferred Stock
---------------

The Company has been authorized 10,000,000 shares of
preferred stock at $.0001 par value. As of January 31,
1999, none of these shares had been issued and the
limitations, rights, and preferences were yet to be
determined by the Board of Directors.

Common Stock
------------

During the period ending October 1998, the Board of
Directors issued 1,525,000 shares of restricted common
stock to The Company's officer's, and legal counsel in
exchange for services, and issued 500,000 shares of
restricted common stock in the acquisition of Top-10
Promotions, Inc.

In addition to the restricted shares issued, The Company
sold common stock through two separate private offerings
during the period. In the initial offering 800,000
shares were sold each at a price of $0.025. In the
second offering 1,000,000 shares were sold each at a
price of $0.05.

On October 15, 1998, the majority shareholders of The
Company undertook a Regulation D, Rule 504, offering
whereby it sold 2,000,000 shares of common stock, $.0001
par value per share or an aggregate of $200,000. In
addition, each investor in the offering received an
option to purchase, for a twelve month period commencing
on the date of this offering, an additional one share of
The Company at $1.00 per share for each eight (8) shares
purchased in the original offering (or $250,000). In
addition, each investor received an option to purchase
for an eighteen month period commencing on the date of
this offering an additional one (1) share of The Company
for each 8.88 shares previously purchased at $2.00 per
share or an aggregate of 225,000 shares (or $450,000).

The Company also approved of the investment by Arthur
Harrison & Associates in the offering provided that such
investment in The Company was in lieu of monies owed to
Arthur Harrison & Associates by The Company for two (2)
promissory notes dated September 22, 1998 and October 10,
1998. Further more, Arthur Harrison & Associates agreed
to waive its rights to any interest on promissory notes.

Stock Incentive Plans

On March 1, 1999, The Company entered into a stock option
agreement with the Director of Operation, Glenn Canady,
as noted in footnote number eleven. The Company applies
Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock
options.

Pro forma information regarding net income and earnings
per share is required by SFAS 123, and has been
determined as if The Company had accounted for its
employee stock options under the fair value method of
SFAS 123. As of the balance sheet date, there is no
material effect on earnings and earnings per share.

10. Acquisitions:
-------------

On March 30, 1999 The Company acquired assets of Offshore
Software Development Ltd. ("Offshore") in an exchange of
assets for 999,111 shares of The Company issued to the
shareholders of that company. The Company's management
has valued the transaction at $630,000.

The assets included were comprised of four computers
valued at $8,000 and two software programs valued at
$622,000. The value of these assets was determined on
the basis of the management's estimation.

An unusual impairment loss of $257,075 was recorded in
October of 1999 to reflect an impairment of the
intangible assets resulting from the acquired "Offshore"
assets on March 30, 1999. The impairment resulted from
the Company's revised forecast of the cash flows expected
from intangible assets. Amortization expenses will drop
by $8,583 per month.

Effective May 29, 1998, The Company acquired all the
outstanding common stock of Top-10 Promotions, Inc.,
consisting of 100 shares, effective. These shares were
redeemed and canceled. The 100 shares of Top-10
Promotions, Inc. were acquired in exchange for 500,000
"restricted" shares of The Company's common stock issued
to David Smith, the sole shareholder of Top-10
Promotions, Inc. This transaction has been accounted for
using the purchase method of accounting. The value of
the share exchanged by both parties was determined to be
$19,500, including a value of $(114) attributed to the
fair value of assets and liabilities, and $19,614 of
goodwill attributed to the method of doing business and
the internally developed software.

Simultaneous with the acquisition, The Company purchased
all of the remaining authorized shares of Top-10
Promotions, Inc. for $50,000 payable at closing and
$17,500 per month payable over an eleven month period as
other consideration. The Company borrowed funds for this
transaction and later, upon agreement with the lender,
converted a portion of the amount due as capital
contributed to The Company. 
Also, the former owner of Top-10 Promotions, Inc. was
given the right to borrow up to 25% of retained earnings
of Roanoke Technologies Corporation in fiscal year 1998
or the first two quarters of fiscal 1999. Such
borrowings
shall be secured by his restricted stock received in the
acquisition at a 75% discount value to market. Repayment
shall be for a two- year period at a 5% annual interest
rate. The Company also entered into an employment
contract with the former owner of Top-10 Promotions.

11. Employment Contract and Incentive Commitments:
-----------------------------------------------

The Company has entered into a two year employment
contract with the former owner of Top-10 Promotions.
The contract provides for: salary not to exceed $10,000
per month (with not more than a 3% salary increase
provided The Company is profitable by at least twice the
amount of the salary increase); quarterly bonus of 30% of
the net income before income tax of The Company; standard
non-competition clause; an option to renew the employment
agreement for an additional two year term (provided he is
not in default under the employment agreement); and the
following management incentives: for fiscal year ending
September 30, 1999 (a) 100,000 "restricted" shares if the
surviving corporation has $2 million in gross revenues;
(b) 100,000 "restricted" shares if The Company has
$400,000 in after tax earnings. The shares have been
issued at a market value of $810,000.

At November 1, 1998 The Company's management approved the
issuance of 750,000 shares of restricted common shares of
The Company to the former owner of Top-10 Promotions for
attaining gross revenues in excess $200,000.00 or more in
sales for the first three month period of 1999. The
shares have been issued at a market value of $1,181,250.

The Company has entered into an employment agreement with
The Company's Director of Operations on March 1, 1999.
The agreement calls for a contract period of four years
upon which The Director will be paid an annual salary of
$60,000 with standard company commissions and bonuses.
The salary will adjust to $80,000 at June 4th 1999. In
addition the director's salary shall increase to $100,000
at the time The Company's gross revenues exceed
$1,000,000 during any twelve month period and $120,000
once The Company's gross revenues exceed $2,000,000
during any twelve month period. Upon the director's
salary increasing to $80,000 or above, the director shall
no longer be entitled to commissions and bonuses.

In addition to the above mentioned, the director will be
granted stock options in The Company at an exercise price
of $1.00 per share of common stock in the amount of
50,000 shares per year, after each year's service, for a
four year period. Such shares will be restricted for a
two year period from the date of issuance.

The Company will account for these options during the
time that they are earned in accordance with APB Opinion
No. 25. At the present time, the fair value of these
options are not in excess of the exercise price and not
exercisable; therefore there is no compensation expense
to record. A determination of the fair value of these
options may be extended to the end of the current fiscal
year. Other conditions are included in this employment
agreement, but remain immaterial to the financial
statements.

12. Payroll Taxes Payable and Deferred Tax Assets and
Liabilities:
--------------------------------------------------

The Company accrues payroll and income taxes. The
Company, currently a C-Corporation, accounts for income
taxes in accordance with Statements on Financial
Accounting Standards 109. As of July 31, 2000, The
Company had a deferred tax asset in the amount of
approximately $440,000 that is derived from a net
operating tax loss carryforward associated with stock
compensation. The deferred tax assets will expire during
the years ending
October 31, 2018 and 2019 in the amounts of $40,000 and
$400,000 respectively. It is uncertain as to when this
compensation will be deductible as it can only be
deducted for tax purposes when the officers sell the
respective shares.

13. Required Cash Flow Disclosure for Interest and Taxes
Paid:
----------------------------------------------------

The Company paid interest in the net amount of $506
during the nine months ended July 31, 2000 and $2,954
during the twelve months ending October 31, 1999. The
Company has no income tax payments due and did not pay
any income tax amounts during the period.

Non-cash transactions include stock based employee
compensation as listed in the financial statements, the
acquisition of the assets of Offshore Software
Development Ltd. for stock in The Company and the
retirement of note payables of the initial funding of
The Company upon acquisition of Top-10 as a contribution
to additional paid in capital .

The Company acquired assets from "Offshore" by the
issuance of stock for a value of $630,000. An impairment
loss of $257,075 was recorded in October of 1999 to
reflect an impairment of the intangible assets resulting
from the acquired "Offshore" assets on March 30, 1999.
The impairment resulted from the Company's revised
forecast of the cash flows expected from intangible
assets. Amortization expenses will drop by $8,583 per
month. This impairment loss was a non-cash loss.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

Gross revenues refer to fees earned in the design,
development, production, and marketing of technology to
provide enhanced Internet marketing capabilities. The
Company earns revenue when it provides Internet services
that improve an Internet site's ranking when searched on
the leading Internet search engines. Generally, the
payment terms require payment to the Company at, or prior
to, the time that the services are performed.
Historically, the Company has not experienced substantial
problems with unpaid accounts or had to refund
significant monies. Our premium Service and renewals of
the same account for 97.5% of our business.

The Company has technological expertise in the preparing
and submitting web site pages with "key search words" to
the targeted search engines. The web site page is
configured so that when these key search words are
entered into a search engine, the search will most likely
hit on this web page.

Primarily as a result of the acquisition of Top-10
Promotions, Inc. on May 28, 1998, the Company's revenue
has been generated from the sale of services of Top-10
Promotions, Inc. as of the date of acquisition. The
acquisition was accounted for using the purchase method
of accounting and the results of operations of Top-10
Promotions, Inc. from the date of purchase are included
in the financial statements. In the first year of
business activity, the Company was building a sales team
and experienced gross revenue of $54,032. During the
following year, the Company had $1,144,122 in gross
revenue.

THREE MONTHS ENDED JULY 31, 2000 TO THREE MONTHS ENDED
JULY 31, 1999

Revenues for the third quarter of fiscal 2000 were
$421,248, virtually unchanged from the $421,322 of the
prior year. The company increased the selling price of
its primary product, a web site visibility enhancement
service from $1295 to $1495 on May 4, 2000. The higher
prices increased revenues approximately $26,000. Unit
sales of this product declined from 381 in last year's
quarter to 276 this year. Management attributes this
decline primarily to a redesign of its program for
generating sales leads. Temporary difficulties with the
redesign, since resolved, reduced the quantity and
quality of sales leads provided to the company's sales
force. In addition, several of the company's sales
persons either resigned or were terminated.

Cost of sales was $250,611 or 59.5% of revenues as
compared to $265,215 or 62.9% of revenues in the prior
year. The increase as a percentage of sales is
attributable primarily to temporarily reduced sales
productivity resulting from the redesign of the company's
lead generating program.

Depreciation and amortization expenses increased from
$27,450 or 6.5% of revenues to $38,757 or 9.2% of
revenues because of the depreciation and amortization on
the purchase of software and computer equipment.

Legal and accounting expenses declined from $32,452 or
7.7% of revenues to $13,015 or 3.1% of revenues.

Marketing expenses were $23,898 or 5.7% of revenues.
There were no equivalent expenses in the prior year.
These expenses were related to the global group
purchasing program developed by the company. All
marketing and software expenses related to this program
have been expensed as incurred. The company is no longer
actively pursuing this business opportunity.

Office and occupancy expenses increased from $38,440 or
9.1% of revenues to $91,328 or 21.7% of revenues. This
was the result of increased expenses for office supplies,
equipment rentals, and personnel additions.

Telephone expenses increased from $8,142 or 1.9% of
revenues to $12,926 or 3.1% or revenues. The increase in
the percentage was the result of reduced sales
efficiency.

The loss from operations increased from $50,240 or 11.9%
of revenues to $92,576 or 22.0% of revenues. Over 50% of
this increased loss was attributable to expenses incurred
in attempts to market the Global Group Purchasing
Program.

NINE MONTHS ENDED JULY 31, 2000 TO NINE MONTHS ENDED JULY
31, 1999

Net revenues for the nine months ended July 31,2000 were
$1,557,133, an increase of 78.2% from the $873,722 of the
prior year. The company increased the selling price of
its primary product, a web site visibility enhancement
service from $1,295 to $1,495 on May 4. The May 4, 2000
price increase added about $26,000 to revenues during the
nine months and accounted for about 3.8% of the revenue
gain. The remainder of the revenue gain resulted
primarily from an increase in the number of sales
personnel and improved productivity of existing sales
personnel.

Cost of goods sold increased 43.6% from $557,436 to
$800,244. The increase was primarily the result of
higher volume. As a percentage of revenues, cost of
goods sold declined from 63.8% to 51.4%.

Depreciation and amortization increased from $60,213 to
$113,410, an increase of 88.3%. The increase was due
primarily to additions to the company's depreciable
property. This expense increased from 6.9% of revenues
to 7.3% in the current year.

Marketing expenses were $104,179 or 6.7% of revenues.
There were no equivalent expenses in the prior year.
These expenses were related to the global group
purchasing program developed by the company. All
marketing and software expenses related to this program
have been expensed as incurred. The company is no longer
actively pursuing this business opportunity.

Office and occupancy expenses increased from $61,112 or
7.0%% of revenues to $287,784 or 18.5% of revenues. This
was the result of increased expenses for office supplies,
equipment rentals, and personnel additions.

Officer's salaries declined from $1,228,427 or 147.4% or
revenues to $210,200 or 13.5% of revenues. Expenses in
the prior year included $1,181,250 of non-cash expense
related to 750,000 shares of restricted common stock
issued to David Smith as a bonus.

Telephone expense increased from $16,300 or 1.9% of
revenues to $54,796 or 3.5% or revenues. This increase
was attributable primarily to a higher volume of
business, the addition of new accounting and call
tracking services, and addition of additional line
capacity to facilitate growth.

The loss from operations decreased to $126,904 or 8.1% of
revenues from $1,251,098 or 143.2% of revenues. The
decline in the loss from operations was primarily due to
the absence of $1,191,250 stock based compensation which
was incurred in the prior year.

During the second quarter of fiscal 2000 the company
realized a gain of $108,000 from the cash sale of 80% of
the stock of its subsidiary, Global GPP Corporation to
Internet Business International, an unaffiliated entity.
This sale reduced the company's loss for the nine months
ended July 2000 to $17,636 as compared to $1,253,368 in
the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operating activities was $79,403 for the
nine months ended July 31, 2000 as compared to $28,372 in
the prior year. Expenses during the period included
$104,179 related to marketing the recently developed
group purchasing program in Europe. Expenses related to
this program declined to $23,298 in the third quarter.
All of the programming expenses related to this program
have been expensed; management is currently de-emphasizing
this program and expects that its impact of
profitability will minimal in the next several quarters.
Cash flow included $108,000 from the sale of an 80%
interest in the company's Global GPP subsidiary. Absent
these two items, cash flow from operating activities
would have been $84,224.

Cash Flows from Investing Activities

The company made loans of $22,932 to Edwin Foster, Jr.and
purchased $90,401 of equipment during the period. The
equipment was primarily computer workstations, a back up
power generator, telephone equipment, and Internet
hosting equipment.

Cash Flow Provided from Financing Activities

Cash flows from financing activities decreased from
$272,542 of cash inflow in the prior year to $7,329 of
cash out flow. The cash inflow in the prior year was
primarily due to the issuance of stock for cash. The
cash outflow in the current year was due to the repayment
of loans.

Outlook

The company moved into its present facilities in May,
1999. These facilities do not have sufficient room to
accommodate the planned expansion of the company's sales
force. The company has agreed to lease a facility with
14500 square feet of floor space as compared to
3000square feet at its present facility. The new
facility is being reconfigured to meet our requirements
and we expect to occupy it in late September or in
October. We believe that this facility will provide room
to eventually increase our present work force from thirty
to approximately one hundred. Monthly rental will be
approximately $6000.00 as compared to $2550.00 at our
present facility. We are attempting to sublease our
present facility.

During the next six months we expect to spend about
$225,000.00 for moving expenses, wiring, flexible work
partitions, and additional furniture and computer
equipment at the new site. We expect to fund this
expenditure from current working capital; funds generated
from operations, and have applied for a SBA-guaranteed
bank loan in the amount of $290,000.00.

The company's general method of operation calls for cash
payments in advance of performing web site visibility
enhancement services. As a result, we have only minimal
inventories and receivables. This facilitates financing
growth. We expect growth to result primarily from
additions to our sales force. Since it usually takes
three to six months for new additions to the sales force
generate sufficient sales volume to cover the cost of
their base wage, insurance, related expenses, the rate of
sales force expansion can significantly impact our cash
requirements. We currently plan to increase our sales
force from ten to approximately sixteen by March 31, 2001
and twenty-four by September 30, 2001. We believe
internally generated cash flow, possibly supplemented by
the afore-mentioned bank loan, will be adequate to
finance growth at this rate. If the SBA-guaranteed bank
loan is not completed, and if no other source of
financing is available, the rate of growth in the sales
force will be scaled down commensurate with our cash flow
generation.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings. Not applicable

Item 2. Changes in Securities. None

Item 3. Defaults Upon Senior Securities. Not Applicable

Item 4. Submission of Matters to a Vote of Security
Holders. None

Item 5. Other Information. None

Item 6. Exhibits and Reports of Form 8-K. None

Exhibit 27 - Financial Date Schedule - Electronic Filing
Only

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this 10-Q report to be signed on its behalf
by the undersigned thereunto duly authorized.

ROANOKE TECHNOLOGY CORP.
(Registrant)

Date: September 12, 2000 /s/ David L. Smith
-------------------------
David L. Smith, Jr.
President