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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549


FORM 10-KSB

(Mark one)

x
    
    Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
for the fiscal year ended August 31, 2003


o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934


Commission File Number 0-22969

MARKET CENTRAL, INC.

(Name of Small Business Issuer in its charter)


Delaware
    
    59-3562953(State or other jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)


1650 A Gum Branch Road, Jacksonville, NC     28540
(Address of principal executive offices)     (zip code)

Issuers telephone number:     (910) 478-0097

Securities registered under Section 12(b) of the Exchange Act:     None

Securities registered under Section 12(g) of the Exchange Act:Common Stock, par value $.001 per share
(Title of Class)

Check whether the issuer (1) filed all reports required to be filed under
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.

Yesx     No o

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SB contained in this form, and no disclosure will be contained, to
the best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this form 10-KSB.

Yeso     No x

State the issuers revenue for its most recent fiscal year: $11,720,608. State
the aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
ask prices of such stock as of November 25, 2003: $6,684,739

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date.

Outstanding as ofClass
    
    November 25, 2003Common Stock, par value $.001 per share
    
    
    13,268,969


Documents Incorporated by
Reference: None

Transitional Small business Disclosure Format. Yes o     No x





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MARKET CENTRAL, INC.
FORM 10-KSB

TABLE OF CONTENTS

PAGEITEM 1 Description of Business
    
    
    3ITEM 2. Description of Property
    
    
    10ITEM 3. Legal Proceedings
    
    
    10ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    11PART IIITEM 5. Market Price For Common Equity and Other Related Shareholder Matters
    
    
    12ITEM 6. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13ITEM 7. Financial Statements
    
    
    25ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    26ITEM 8A. Controls and Procedures
    
    
    26PART IIIITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act
    
    
    26ITEM 10. Executive Compensation
    
    
    29ITEM 11. Security Ownership of Certain Beneficial Owners and Management
    
    
    31ITEM 12. Certain Relationships and Related Transactions
    
    
    32ITEM 13. Exhibits and Reports on Form 8-K
    
    
    33ITEM 14. Principal Accountant Fees and Services
    
    
    36Signatures
    
    
    37


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RISK FACTORS AND CAUTIONARY STATEMENTS

Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Market Central, Inc. (Company) wishes to advise readers that actual results
may differ substantially from such forward-looking statements. Forward-looking
statements include statements concerning underlying assumptions and other
statements that are other than statements of historical facts. Forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by the statements, including,
but not limited to, the following: the ability of the Company to provide for
its obligations, to provide working capital needs from operating revenues, to
obtain additional financing needed for any future acquisitions, to meet
competitive challenges and technological changes, and other risks detailed in
the Companys periodic reports.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Market Central, Inc. (formerly Paladyne Corp.) (the Company) operates two
wholly-owned subsidiaries, ecommerce support centers, inc.(ecom)and U.S.
Convergion, Inc. (Convergion). ecomprovides outsourced contact center
solutions and Customer Relationship Management (CRM) services, and Convergion
provides systems design, integration, sales and service of internal contact
centers and is a reseller for Microsofts MS CRM solution. Combined, the
subsidiaries provide inbound technical support, sales, and customer service;
outbound pre-sales and sales; data mining; campaign management; CRM Integration
(contact center systems design, sales, integration and life-cycle support).

The Companys executive offices are at 1650A Gum Branch Road, Jacksonville, NC
28540 and its telephone number is (910) 478-0097.

HISTORY

Market Central, Inc. (f/k/a Paladyne Corp) is the surviving Company from a
March 5, 1999 merger with Synaptx Worldwide, Inc., a Utah corporation.

On February 1, 2001, Market Central, Inc. through a wholly-owned subsidiary
merged (the Merger) with e-commerce support centers, inc., a North Carolina
corporation (ecom), pursuant to an Agreement and Plan of Merger, dated as of
December 21, 2000, as amended (collectively, the Merger Agreement). Upon the
Merger, ecombecame a wholly-owned subsidiary of Market Central, Inc.

On February 4, 2003, at a special meeting of the stockholders, the Companys
shareholders approved the following items: 1) a change in the name of the
Company from Paladyne Corp. to Market Central, Inc., 2) a one-for-ten reverse
split of the Companys common stock and 3) sale of an aggregate of 8,880,740
post-split shares of common stock to three buyers. This resulted in a change
in control of the Company to these three buyers. In connection with this transaction the Company converted all classes
of its Preferred Stock to the Companys Common Stock.

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On April 3, 2003, the Company consummated the acquisition of U.S. Convergion,
Inc. (Convergion) pursuant to a Stock Purchase Agreement dated April 3, 2003
entered into by and among the Company and each of the six shareholders of
Convergion. The Company acquired all of the outstanding capital stock of
Convergion in exchange for the issuance of 374,630 restricted shares of the
Companys Common Stock and assumption of certain liabilities. Market Central,
Inc. also acquired, effective July 31, 2003, substantially all the assets of
Pliant Technologies, Inc. in exchange for the issuance of 228,351 restricted
shares of the Companys Common Stock and a warrant to purchase an additional
182,681 shares of the Companys Common Stock and assumption of certain
liabilities. These acquisitions resulted in a significant impact to many
phases of the Company as discussed below.

PRODUCTS AND SERVICES:

The Companys products and services were extended with the acquisitions of U.S.
Convergion, Inc. and the assets of Pliant Technologies. These acquisitions are
in concert with the Companys previously announced plans to build a full
service Customer Relationship Management (CRM) entity and to add capabilities
as presented in its value loop (discussed below) by acquisitions or
partnerships. CRM is a business strategy that enables any business to gain new
customers, retain existing customers and maximize the most profitable customer
relationships.

The Company has formed a suite of CRM solutions that include proprietary,
patented software for data capture, cleansing, mining, integration, search, and
intelligent document recognition. The Company is also a Microsoft development
partner for MS CRM solutions. Market Central provides other CRM services, such
as campaign management, and operates a 900-seat contact center to support the
software line of business and provide outsourced contact center services to
select clients as part of their overall CRM effort. Through its wholly-owned
subsidiary, US Convergion, the Company offers in-house contact center design,
sales, implementation and service for clients that seek an internal support
function for their CRM program.

(FLOWCHART)

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MARKET CENTRAL SOLUTIONS FOR BUSINESS

The Company has three basic lines of business: CRM Services consisting of CMR
systems design, and outbound contact center services and CRM products
consisting of the Companys proprietary software and other CRM software such as
campaign management, and CRM hardware related to building internal contact
centers for clients.



|CRMDataServices                                                                                                                                                                 | Contact
CenterCRMOutsourcedSolutions                                                                                                                         | Contact
CenterCRMImplementationSolutions                                                                      | OtherCRMSolutions                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------
| Software
solutions that automate the workflow management of all types
of unstructured and
structured data  Capture  Cleansing  Integration  Mining
  Patented technology |  Customer
Support  Tech
Support  Customer acquisition  Up sell
and cross sell programs  Loyalty
programs  Web site monitoring and interactive
services |  Hardware
configuration sales and support  Software
applications  Systems integration  Avaya
Gold Partner |  MS
CRM development partner and
VAR  Campaign
Management  Wireless CRM
applications  Fax/email
broadcasting  List brokerage

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Outsourced contact services continue to be provided from the Companys
e-commerce support centers (ecom) subsidiary. The Companys products and
services were extended with the merger with ecomin February 2001. ecomis a
fully web-enabled customer contact center. Companies large and small outsource
their customer support and outbound telemarketing needs to ecom, which provides
live agents operating from a 60,000 square foot facility for those services.
Outsourcing customer support and telemarketing has become a popular option for
many companies since the cost of building and maintaining a state-of-the-art
contact center is high and an outsourcer, such as ecom, can spread those costs
over many clients and maintain peak performance through specialization. Agents
answer phones and chat on the Internet with client customers and provide a
variety of services from order entry, problem solving, order tracking,
technical support, and outbound sales or research. Agents have an array of
communications capabilities; these include: live chat, voice and video over IP,
dial-around, instant messaging and other on-line communications options in
addition to traditional telephone support. The contact center has capacity for
900 representatives with flexibility to utilize workstations for inbound,
outbound or web enabled service as needed. During the year ended August 31,
2003, the Company concentrated on increasing its outbound calling activities in
order to meet greater market demand for these services.

The Companys U.S. Convergion subsidiary designs and builds internal
communications systems and contact centers for clients. It is a business
partner, development partner, and/or reseller for Microsofts MS CRM software,
Avayas range of products and utilizes other hardware and software products (as
deemed appropriate to the business objectives) in its overall systems designs
for its clients.

Market Centrals patented SourceWare® System (acquired with the assets of
Pliant Technologies) is designed as a cost-reduction solution utilizing
automation and flexibility for Enterprise Content Management (ECM) in a single,
integrated software system. It is a new class of ECM software. SourceWare®
delivers strategic data capture, search, information mining, and content
management system across a wide range of document and data types, applications,
and industries. SourceWare® is a modular architecture of three software
systems (all built on the SourceWare® Server); Intelligent Document Recognition
(IDR), Deductive Search Engine (DSE), Integrated Content Manager (ICM).

Intelligent Document Recognition (IDR)

Artificial Intelligence based data capture system that automatically reads
unlimited data from any document, media, or digital file without having to
manually create and maintain templates for each document type.

Deductive Search Engine (DSE)

Intent based search engine that search both unstructured and structured data
without the need to manually define variations (e.g., spelling, synonyms,
stems, language) or translate data in to a common format. DSE processes
searches on standard Windows systems and can search tens of millions of records
in milliseconds at a fraction of the cost of other systems. It reduces the
organizations technical resources to develop and maintain the databases and
search applications.

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Integrated Content Manager (ICM)

Manages and stores all types of documents and data in their neutral-form
(as-is) with automatic data integration, projection distributed data management
and terabyte scalability.

BUSINESS DEVELOPMENT AND STRATEGY

Market Central intends to continue to expand all of its business lines through
organic growth and additional acquisitions and strategic partnerships. Its
focus will continue to be in the Customer Relationship Management (CRM)
marketplace. The Company believes its combining of software and services,
including the essential integration of customer data for use in customer
contact situations, creates a competitive advantage in pursing this strategy.

The above are the stated future goals of the Company. However, there can be no
assurance that the Company will ever achieve its expressed goals.

STRATEGIC ALLIANCE

As noted above, the Company is extending its service offerings in the areas of
data mining, campaign management and data warehousing. Towards this goal, it
has established strategic partnerships with companies with particular expertise
in these fields. As part of its vision, the Company strives to offer full CRM
services that cover these areas of expertise.

Strategic partners include:

Service Offering
    
    PartnerCampaign management
    
    Yellow Brick Solutions, Inc.Data Mining
    
    BridgetreeData warehousing
    
    Synera Systems S.L.Fulfillment services
    
    APL LogisticsCustomer data integration viewing platform
    
    Innova Solutions


POTENTIAL NEW ACQUISITIONS AND PRODUCT LINES

The Company intends to investigate, should opportunities arise, strategic
acquisitions or mergers that fit its long-term objectives as financing and
business conditions warrant, although there can be no assurance that the
Company will be able to finalize any future acquisitions. Although the Company
occasionally explores additional acquisition and merger opportunities, there
can be no assurances that financing for any future acquisitions will be
available on terms acceptable to the Company or at all, or that any future
acquisitions or mergers will be consummated. The proposed transaction between
the Company and an investor group, described further in the liquidity and
capital resources section of Item 6, will affect the sources and timing of any
additional capital needs.

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SALES AND MARKETING

The Company markets and sells its products and services through its employees
and through the cooperative efforts of its business partners. The Company
employs an integrated marketing effort designed to establish market presence
and generate potential clients in both horizontal CRM marketplace and in
selected vertical markets. To date these efforts have generated the annual
revenues for the Company. Current clients representing more than 5% of annual
revenue are Gibralter Publishing representing 30% of revenue, APL Logistics,
representing 13.85% of revenue and Time Warner Cable representing 9.2% of
revenue. Other significant customers which represent less than 5% of
annual revenue individually include: the Sage Group and Cox Communications,
Earthlink, SurePay (a First Data company), Showtime Networks, and Talkingnets.

Lead generation and branding efforts are the responsibility of the Marketing
Department. Sales Department personnel engage prospects and develop new
business from existing clients. Both marketing and sales manage business
partner relationships.

COMPETITION

The industries to which the Company currently offers and intends to offer its
products and services are highly competitive and characterized by rapidly
changing technologies, evolving industry standards, frequent new product
introductions, and rapid changes in customer requirements. The Companys
competitors vary from market segment to market segment; however, there are
several which pursue a similar, full serviced CRM approach including contact
center services. These include: Harte-Hanks, Inc., Stream.com, Convergys
Corporation, and Sykes Enterprises, Incorporated.

The Company is of the opinion that there are no significant competitors for its
integrated software platform; however, competitors exist for the various
component modules within the platform. These include:



| |  |  | Search Capabilities: The principal competitors are Inktomi,
Google, Autonomy and Verity.
| |  |  | ----------------------------------------------------------------------------------------



| |  |  | For paper to digital capture and retrieval, the principal
competitors are: Captiva Software, SER, and MicroSystems
| |  |  | ------------------------------------------------------------------------------------------------------------------

The Companys consulting and reseller subsidiary, U.S. Convergion, Inc.,
provides clients with a complete range of custom designed Information
Technology services, plus computer hardware and software solutions,
implementation, maintenance services, creative leasing options, and end of life
disposal options both in the US and abroad  all from a single point of
contact. Convergion targets mid-tier to large organizations with regionally
dispersed requirements. Most competitors compete for the Fortune 100 market,
with less focus on the mid-tier market. Several of the competitors identified
double as strategic business partners with Convergion. In terms of
Convergions differentiation, each vendor category typically delivers a certain
aspect of a customers requirement but does not satisfy the single point of
contact end-to-end solution like Convergion. Key Competitors include:

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| |  |  | Big Five/traditional consulting firmsfocus primarily on Fortune
500 customers and do not generally deliver turnkey
hardware/software/service CRM solutions.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | VoIP Competitorsin order of relevance, within the VoIP arena
include other Avaya Partners, Alcatel, 3Com Corporation, Lucent
Technologies, Sphere Communications, Nortel Networks and Cisco
Systems.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Avaya Business Partnersprovide and support selected products from
the Avaya solution portfolio. Convergion is differentiated in its
global delivery of the entire Avaya product portfolio as a Diamond
Business Partner, and as the leading joint Avaya/Siebel partner.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Siebel Integratorscompete against Convergion on a general basis.
Currently the Companys experience in the combined Avaya / Siebel
solution portfolio differentiates it (over 150 call centers, with
a global solution).
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Internal Competitionis the main force Convergion faces in the
market. Clients have the option to integrate applications and
hardware themselves, with no indirect costs for services. The
greater the integration initiative, the more likely organizations
will seek third party support. The solutions have become
increasingly complex and the likelihood is lessening that
organizations will have the needed skill sets to successfully
accomplish the task themselves.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Principal competitive factors affecting the market for outsourced products and
services include product reputation, quality, performance, price, professional
service, multiple or backup facilities, and customer support. Features such as
adaptability, scalability, ability to integrate with other products,
functionality, and ease of use are key product differentiators.

EMPLOYEES

As of August 31, 2003, the Company employed 515 individuals, consisting of 5
executives, 103 professionals and sales representatives, office staff and 407
customer representatives. The Company believes that its relationship with its
employees is satisfactory.

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BUSINESS SEGMENTS

The Company currently operates in two business segments which are the
outsource CRM solutions provider segment and in source systems design and
implementation segment.
It provides service to many industry segments including: retail, financial
services, telecommunications and technology.

ITEM 2. DESCRIPTION OF PROPERTY

The Companys principal executive offices are located at 1650A Gum Branch Road,
Jacksonville, NC 28540. The current facility in Jacksonville is leased
through May 31, 2008, covers approximately 60,000 square feet at an approximate
annual rental rate of $218,000. The Company, through its wholly-owned
subsidiary U.S. Convergion, Inc. has leased space of approximately 4,600 square
feet located in Memphis, TN. The term of the lease extends through July 31,
2005 at an approximate annual rental rate of $37,000.

The Company believes its current premises are adequate for current purposes and
if necessary would be able to obtain alternative or additional space.

ITEM 3. LEGAL PROCEEDINGS

In November 2002, AmSouth Bank filed a complaint against UITSG, LLC (UITSG),
an entity that entered into an Asset Purchase Agreement with U.S Convergion, in
Sixth Circuit Court for Davidson County, Tennessee at Nashville. The complaint
alleges a breach of contract. AmSouth Bank received a judgment against UITSG
in the amount of $110,513. US Convergion has accounted the full amount as
accrued liabilities prior to the merger with the Company in April 2003.

In February 2003, Trammell Crow Services, Inc. filed a complaint against UITSG,
LLC (UITSG), an entity that entered into an Asset Purchase Agreement with U.S
Convergion, in Chancery Court of Shelby County, Tennessee for the Thirtieth
Judicial District at Memphis. The complaint alleges a breach of contract.
Trammell Crow Services, Inc. received a judgment against UITSG in the amount of
$105,917. US
Convergion has accounted the full amount as accrued liabilities prior to the
merger with the Company in April 2003.

In March 2003, Gerald Bastien filed a complaint against U.S. Conversion in the
United States District Court for the District of Wisconsin. The complaint
alleged that Bastien was fraudulently induced to leave his prior employment by
U.S. Convergion and was terminated immediately upon leaving. In October 2003,
Bastien and the Company entered into a settlement agreement whereby the Company
agrees to pay Bastien $65,000 in cash and 85,000 shares of the Companys common
stock. The Company has included the cash and the value of the common shares to be paid in
accrued liabilities as of August 31, 2003.

In May 2002, Ronald Lynn Weindruch filed a complaint against the Company in the
Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County,
Florida. The compliant alleges a breach of contract. In April and May 2003,
Weindruch received judgments against the Company in the amount of $150,721 plus
interest, and attorney fees and costs of $38,384. Both the judgment for damages
and attorney fees and costs are currently on appeal. The Company believes that
it has meritorious defenses to the plaintiffs claims and
intends to vigorously defend
itself against the Plaintiffs claims.

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In November 2001, Joseph Landis filed a complaint against the Company in the
Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County,
Florida. The compliant alleges a breach of contract. The Company has filed a
motion to dismiss for failure to prosecute. The Company believes it
has meritorious defences to the Plaintiffs claims and intend to
vigorously defend itself against the Plaintiffs claims.

In the ordinary course of business the Company has become subject to additional
litigation and claims on various matters. These exists the possibility that
the Company will not prevail in all cases. However, barring unanticipated
adverse final determination in these litigation and claims, the Company does
not believe that such litigation and claims would have a material adverse
effect on its financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On February 4, 2003, a special meeting of the shareholders of the Company was
held to consider and vote on the following proposals: (1) a one-for-ten reverse
stock split of the Companys outstanding Common Stock (Proposal 1); (2)
approval of a Stock Purchase Agreement pursuant to which an aggregate of
8,880,740 post-reverse split shares would be issued to WAG Holdings, LLC, Glen
H. Hammer and A. Randall Barkowitz (Proposal 2); and (3) an amendment to the
Companys certificate of incorporation to change the name of the Company to
Market Central, Inc. (Proposal 3). Set forth below are the results of the
shareholders vote on each proposal:

For
    
    Against
    
    AbstainProposal 1
    
    
    22,133,278
    
    
    
    -0-
    
    
    
    30,000Proposal 2
    
    
    22,162,635
    
    
    
    -0-
    
    
    
    643Proposal 3
    
    
    22,163,278
    
    
    
    -0-
    
    
    
    -0-


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PART II

ITEM 5. MARKET PRICE FOR COMMON EQUITY AND OTHER RELATED SHAREHOLDER MATTERS

(a) The Companys Common Stock has been traded on a limited basis in the
over-the-counter market and quotations are published on the OTC Bulletin Board
under the symbol MKTE, and in the National Quotation Bureau, Inc. pink
sheets under Market Central, Inc.

The following table sets forth the range of high and low bid prices of the
Common Stock for each fiscal quarterly period (1:10 reverse stock split was effective
in February 4, 2003). Prices reported represent prices between dealers, do not
include retail markups, markdowns or commissions and do not represent actual
transactions.

Fiscal Year2003
    
    2002High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    .32
    
    
    $
    .04
    
    
    $
    .58
    
    
    $
    .06Second Quarter
    
    
    3.60
    
    
    
    .17
    
    
    
    .38
    
    
    
    .20Third Quarter
    
    
    3.00
    
    
    
    1.30
    
    
    
    .38
    
    
    
    .10Fourth Quarter
    
    
    3.30
    
    
    
    1.30
    
    
    
    .11
    
    
    
    .07


The ability of individual stockholders to trade their shares in a particular
state may be subject to various rules and regulations of that state. A number
of states require that an issuers securities be registered in their state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to register its
securities in any particular state. Further, most likely the Companys shares
will be subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), commonly
referred to as the penny stock rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities
exchange meeting specified criteria set by the Commission; authorized for
quotation on The NASDAQ Stock Market; issued by a registered investment
company; excluded from the definition on the basis of price (at
least $5.00 per share) or the issuers net tangible assets (at least $2
million); or exempted from the definition by the Commission. If the Companys
shares are deemed to be a penny stock, trading in the shares will be subject to
additional sales practice requirements of broker-dealers who sell penny stocks
to persons other than established customers and accredited investors, generally
persons with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse.

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For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchasers written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker-dealers
to trade and/or maintain a market in the Companys Common Stock and may affect
the ability of stockholders to sell their shares.

As of November 14, 2003, there were 326 holders of record of the Companys
Common Stock. This amount does not take into account those stockholders whose
certificates are held in the name of broker-dealers or otherwise in street or
nominee name.

DIVIDEND POLICY

The Company has not declared or paid cash dividends on its Common Stock or made
distributions in the past, and the Company does not anticipate that it will pay
cash dividends or make distributions in the foreseeable future. In addition,
the Company has a deficit stockholders equity, which would restrict payment of
dividends. The Company currently intends to retain and invest future earnings
to finance its operations.

TRANSFER AGENT

The Company has designated American Stock Transfer and Trust Company, 59 Maiden
Lane, New York, NY, as its transfer agent for the Common Stock.

(b) During the fiscal year ended August 31, 2003, the Company issued
11,598,034 shares of common stock. These shares were issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933
under Sections 3 (a) (9) and 4(2) thereof.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information:

This document includes forward-looking statements. All statements other than
statements of historical fact included in this document, including, without
limitation, the
statements under Managements Discussion and Analysis of Financial Condition
and Results of Operations and Liquidity and Sources of Capital regarding the
Companys strategies, plans, objectives, expectations, and future operating
results are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable at
this time, it can give no assurance that such expectations will prove to have
been correct. Actual results could differ materially based upon a number of
factors including, but not limited to, the state of the economy,

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competition,
unanticipated business opportunities, availability of financing, market
acceptance, government regulation, dependence on key personnel, limited public
market and liquidity, shares eligible for future sale, and other risks that may
apply to the Company.

The following is a discussion of the financial condition and results of
operations of the Company as of the date of this Annual Report. This
discussion and analysis should be read in conjunction with the accompanying
audited Consolidated Financial Statements of the Company including the Notes
thereto which are included elsewhere in this Form 10-KSB.

General

Market Central, Inc. is a full service Customer Relationship Management (CRM)
provider. The Company has developed a next-generation suite of CRM solutions
that include proprietary, patented software for data capture, cleansing,
mining, integration, search, and intelligent document recognition. The Company
is also a Microsoft development partner for MS CRM solutions. Market Central
provides other CRM services, such as campaign management, and operates a
900-seat contact center to support the software line of business and provide
outsourced contact center services to select clients as part of their overall
CRM effort. Through its wholly-owned subsidiary, US Convergion, the Company
offers in-house contact center design, sales, implementation and service for
clients that seek an internal support function for their CRM program.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect our reported assets, liabilities,
revenues, and expenses, and the disclosure of contingent assets and
liabilities. We base our estimates and judgments on historical experience and
on various other assumptions we believe to be reasonable under the
circumstances. Future events, however, may differ markedly from our current
expectations and assumptions. While there are a number of significant
accounting policies affecting our consolidated financial statements; we believe
the following critical accounting policies involve the most complex, difficult
and subjective estimates and judgments:



| |  |  | revenue recognition
| | - |  | -------------------



| |  |  | allowance for doubtful accounts
| | - |  | -------------------------------



| |  |  | business combinations
| | - |  | ---------------------



| |  |  | goodwill and intangible asset impairment
| | - |  | ----------------------------------------

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| |  |  | legal contingencies
| | - |  | -------------------



| |  |  | income taxes
| | - |  | ------------



| |  |  | stock-based compensation.
| | - |  | -------------------------

Revenue Recognition

In accordance with generally accepted accounting principles (GAAP) in the
United States, revenue is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the service is
performed, and collectibility of the resulting receivable is reasonably
assured. Noted below are brief descriptions of the product or service revenues
that the Company recognizes in the financial statements contained herein.

We recognize revenues from contracts in which the Company provides only
consulting services as the services are performed. The contractual terms of the
agreements dictate the recognition of revenue by the Company. Payments received
in advance are deferred until the service is provided.

We recognize revenues from equipment and implementation contracts on the
percentage-of-completion method, measured by the percentage of cost incurred to
date to the estimated total cost for each contract. This method is used because
management considers total job cost to be the best available measure of
progress on these contracts.

Contract costs include all direct equipment, material, and labor costs and
those indirect costs related to contract performance, such as indirect labor.
Selling, general and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in contract performance, contract
conditions, and estimated profitability that may result in revisions to costs
and income are recognized in the period in which the revisions are determined.

Amounts collected prior to satisfying the above revenue recognition criteria
are included in deferred revenue and advance payments in the accompanying
consolidated balance sheets.

Allowance for doubtful accounts

We maintain an allowance for doubtful accounts to reduce amounts to their
estimated realizable value. A considerable amount of judgment is required when
we assess the realization of accounts receivables, including assessing the
probability of collection and the current credit-worthiness of each customer.
If the financial condition of our customers were to deteriorate, resulting in
an impairment of their ability to make payments, an additional provision for
doubtful accounts could be required. We initially record a provision for
doubtful accounts based on our historical experience, and then adjust this
provision at the end of each reporting period based on a detailed assessment of
our accounts receivable and allowance for doubtful accounts. In estimating the
provision for doubtful accounts, we consider: (i) the aging of the accounts
receivable; (ii) trends within and ratios involving the age of the accounts
receivable; (iii) the customer mix in each of the aging categories and the
nature of the receivable; (iv) our historical provision for doubtful accounts;
(v) the credit worthiness of the customer; and (vi) the economic conditions of
the customers industry as well as general economic conditions, among other
factors.

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Business combinations

The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations, which established
accounting and reporting standards for business combinations and requires that
all business combinations be accounted for by the purchase method. Under the
purchase method of accounting, the cost, including transaction costs, is
allocated to the underlying net assets, based on their respective estimated
fair values. The excess of the purchase price over the estimated fair values of
the net assets acquired is recorded as goodwill.

The judgments made in determining the estimated fair values and expected useful
lives assigned to each class of assets and liabilities acquired can
significantly impact net income. For example, different classes of assets will
have useful lives that differ. Consequently, to the extent a longer-lived asset
is ascribed greater value under the purchase method than a shorter-lived asset,
there may be less amortization recorded in a given period.

Determining the fair value of certain assets and liabilities acquired is
subjective in nature and often involves the use of significant estimates and
assumptions. We use a one-year period following the consummation of
acquisitions to finalize estimates of the fair values of assets and liabilities
acquired. Two areas, in particular, that require significant judgment are
estimating the fair values and related useful lives of identifiable intangible
assets. While there are a number of different methods used in estimating the
value of acquired intangibles, there are two approaches primarily used: the
discounted cash flow and market comparison approaches. Some of the more
significant estimates and assumptions inherent in the two approaches include:
projected future cash flows (including timing); discount rate reflecting the
risk inherent in the future cash flows; perpetual growth rate; determination of
appropriate market comparables; and the determination of whether a premium or a
discount should be applied to comparables. Most of the foregoing assumptions
are made based on available historical information.

Goodwill and intangible asset impairment

We adopted Statement of Financial Accounting Standards No. 142-Goodwill and
Other Intangible Assets(SFAS 142) on April 1, 2001. Under SFAS 142, goodwill
and other intangible assets with indefinite useful lives are no longer
amortized, but are tested for impairment on an annual basis and between annual
tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of the asset below its carrying value amount. Events
or circumstances which could trigger an impairment review include a significant
adverse change in the business climate, an adverse action or assessment by a
regulator, unanticipated competition, a loss of key personnel, significant
changes in the manner of our use of the acquired assets or the strategy for our
overall business, or significant negative industry or economic trends.

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Our principal consideration in determining impairment includes the strategic
benefit to the Company of the particular assets as measured by undiscounted
current and future operating income of the specified group of assets and
expected undiscounted cash flows. Should impairment be identified, a loss would
be reported to the extent that the carrying value of the asset exceeds the fair
value as determined by discounted future cash flows.

In fiscal year 2003, the Company analyzed goodwill for impairment at the
Company level. As a result of the ongoing reorganization of the Companys
reporting structure, the Company anticipates that, in the future, it will have
sufficiently discrete financial information to conduct a goodwill impairment
analysis at the reporting unit level. This change may affect the amounts
recorded for goodwill impairment in future periods.

Based on the impairment tests performed by management, there was no impairment
of goodwill in fiscal 2003 . There can be no assurance that future goodwill
impairment tests will not result in a charge to earnings.

Purchased intangible assets are carried at cost less accumulated amortization.
Amortization is computed over the estimated useful lives of the respective
assets, generally two to five years.

Legal contingencies

We are currently involved in legal proceedings, certain of which are discussed
elsewhere in this Form 10-KSB. We record liabilities related to pending
litigation when an unfavorable outcome is probable and we can reasonably
estimate the amount of loss. We have not recorded liabilities for certain
pending litigation because of the uncertainties related to assessing both the
amount and the probable outcome of those claims. As additional information
becomes available, we continually assess the potential liability related to
each pending litigation. While we currently believe that the liabilities
recorded on our balance sheet are sufficient to cover pending litigation for
which an unfavorable outcome is probable and the amount of loss can be
reasonably estimated, the outcome of litigation is inherently uncertain, and
there can be no assurance that such estimates will be accurate or that, in the
future, additional reserves will not be required.

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Income taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS 109 prescribes the use of the liability
method. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to temporary differences between
the financial statement carrying amounts and the tax basis of assets and
liabilities. Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. We then assess
the likelihood that our deferred tax assets will be recovered from future
taxable income and to the extent we believe that recovery is not likely, we
establish a valuation allowance. To the extent we establish a valuation
allowance, or increase or decrease this allowance in a period, we increase or
decrease our income tax provision in our statement of operations. If any of our
estimates of our prior period taxable income or loss prove to be incorrect,
material differences could impact the amount and timing of income tax benefits
or payments for any period. In addition, as a result of the significant change
in the Companys ownership, the Companys future use of its existing net
operating losses may be limited.

Stock-Based Compensation

In December 2002, the FASB issued SFAS No. 148  Accounting for Stock-Based
Compensation  Transition and Disclosure. This statement amends SFAS No. 123 
Accounting for Stock-Based Compensation, providing alternative methods of
voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of
the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2002.

The Company elected to continue to account for stock-based compensation plans
using the intrinsic value-based method of accounting prescribed by APB No. 25,
Accounting for Stock Issued to Employees, and related interpretations. Under
the provisions of APB No. 25, compensation expense is measured at the grant
date for the difference between the fair value of the stock and the exercise
price.

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RESULTS OF OPERATIONS

The following selected financial information has been derived from the
Companys consolidated financial statements. The information set forth below
is not necessarily indicative of results of future operations and cash flows
and should be read in conjunction with the consolidated financial statements
and notes thereto appearing elsewhere in this Form 10-KSB.

The following table sets forth the percentage relationships to revenues of
principal items contained in the Companys Consolidated Statements of
Operations for the fiscal years ended August 31, 2003 and 2002. The
percentages discussed throughout this analysis are stated on an approximate
basis.

Fiscal Year
    
    Fiscal YearEnded
    
    EndedAugust 31,
    
    August 31,2003
    
    2002Revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    67.2
    %
    
    
    64.5
    %Gross profit
    
    
    32.8
    %
    
    
    35.5
    %Operating expenses
    
    
    60.8
    %
    
    
    52.8
    %Operating loss
    
    
    (28.0
    %)
    
    
    (17.3
    %)Other expenses, net
    
    
    3.4
    %
    
    
    7.5
    %Net loss
    
    
    (31.4
    %)
    
    
    (24.8
    %)


Year Ended August 31, 2003 and 2002

Revenues

The Companys revenues of
$11,720,608 and $8,755,369 for the years ended August 31, 2003
and 2002, respectively reflect an increase of $2,965,239 or 33.8%.
This increase is due almost exclusively to the acquisition of U.S. Convergion,
Inc. in April 2003 (see Acquisitions below). Revenue from Convergion from the date of acquisition to
August 31, 2003 totaled $2,875,077. Revenue from the Companys ecom
subsidiary has remained at essentially
the same levels as the prior year in spite of reduction in the volume of the
Gibralter contract from $4,495,652 in 2002 to $3,472,773 for the years ended
August 31, 2002 and 2003, respectively. This decline in the Gibralter revenues
is due to continued declines in their business operations since September 11,
2001. This loss of revenue was more than offset with the addition of other
unrelated revenue sources.

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Cost of revenues

Cost of revenues increased $2,231,855 or 39% from $5,647,667 in fiscal 2002 to
$7,879,522 in fiscal 2003. This increase, like the increase in revenue, is
attributable almost exclusively to the August 31, 2003 fiscal year containing
the operations of U.S. Convergion, Inc from the date of acquisition in April
2003 through August 2003. The cost of sales for Convergion for this period was
$2,204,678. The slight increase in cost of revenues, as a percentage of total
revenue, from 64.5% to 67.2% from August 31, 2002 to August 31, 2003 was due
primarily to slightly lower margins of the Convergion subsidiary than the
Companys ecomsubsidiary and continuing pricing pressures on ecoms call
center revenue due to general economic pressures.

Selling, General and Administrative

Selling, general and administrative expenses (SG&A) during the year ended
August 31, 2003 and 2002, including depreciation and amortization were
$7,124,116 and $4,624,991, respectively. This increase of $2,499,125 from 2002
to 2003 represents an increase from 52.8% to 60.8% in SG&A as a percentage of
total revenues. The purchase of Convergion in April 2003 accounted for
$2,286,216 or 90.1% of the increase in SG&A costs. The Company began making
reductions in Convergions SG&A within 90 days of the acquisition date but the
initial months after acquisition contained significantly higher SG&A as a
percentage of total revenue than the Company generally operates with and these
cuts continued through the August 2003 year end. Professional fees related to
the acquisition of U.S. Convergion, Pliant Technologies and the February 2003
transaction with the Companys new controlling shareholders resulted in an
increase in these costs from $185,125 to $423,233 in fiscal 2002 and 2003,
respectively. Compensation costs of $3,633,369 and $2,103,819 for the years
ended August 31, 2003 and 2002, respectively comprise 51.0% and 45.5% of total
SG&A. The fiscal year ended August 31, 2003 contains $1,783,092 of
compensation costs for five months of operations of Convergion while the prior
year does not have any such costs.

Occupancy costs account for $308,353 and $193,870 or 4.3% and 4.2% of SG&A for
the years ended August 31, 2003 and 2002, respectively. This increase in
occupancy costs is primarily related to the Convergion acquisition in April
2003 and a slight increase in the rental rate on the Companys Jacksonville
facility. Depreciation of equipment and amortization of goodwill and
capitalized Software Costs accounted for $1,001,467 and $993,809 in the fiscal
year ended August 31, 2003 and 2002, respectively.

Interest Expense

Interest expense of $396,260 and $654,517 during the years ended August 31,
2003 and 2002, respectively included $125,000 and $499,998, respectively of
accrued interest related to the $5,000,000 in notes to Gibralter Publishing
that were issued in conjunction with the Merger in February 2001. These notes
were converted into Series D Preferred Shares in December 2002 and in
March 2003 these were converted into Common Stock of the Company. The balance of
interest expense during the year ended August 2003 related to the Companys
borrowings under its $1,000,000 loan with a bank secured in June 2003,
borrowings under a revolving credit agreement with a bank relating to
Convergions accounts receivable, certain other vendor notes relating to
Convergions accounts payable and certain capital leases. Interest expense
during the August 2002 period not related to the $5,000,000 in notes to
Gibralter Publishing was primarily attributable to capital leases.

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NET OPERATING LOSS

The Company has accumulated approximately $15,334,000 of net operating loss
carryforwards as of August 31, 2003, which may be offset against taxable income
and income taxes in future years. The use of these losses to reduce future
income tax liabilities will depend on the generation of sufficient taxable
income prior to the expiration of the net operating loss carryforwards. The
carryforwards expire in the year 2024. The February 2003 transaction with the
Companys new controlling shareholders resulted in a change in control of the
Company, there will be an annual limitation on the amount of net operating loss
carryforwards that can be used.

ACQUISITIONS

U.S. CONVERGION, INC.

On April 3, 2003, the Company
acquired all of the issued and outstanding common shares of
U.S. Convergion, Inc. (Convergion), through an
Agreement and Plan of Exchange (Agreement). Pursuant to
the Agreement, the Company acquired Convergion, in exchange for
$671,899 consisting of 374,630 shares of the Companys
restricted common stock in a transaction accounted for using the
purchase method of accounting.

The following summarizes the
acquisition of Convergion:

|                    |  |   |            |  
|------------------- |  | - | ---------- | -
|Assets acquired     |  | $ | 2,588,152  |  
|Liabilities assumed |  |   | (5,817,256 | )
|Goodwill            |  |   | 4,062,003  |  
|Acquisition costs   |  |   | (161,000   | )
|                    |  |   |            |  
|                    |  | $ | 671,899    |  
|                    |  |   |            |  

The Company valued the common stock
issued to the Convergion shareholders at $1.79 per share, which
approximated the fair value of the Companys common stock at the
date of acquisition. The Company has recorded the carryover basis of
the net assets acquired, which did not differ materially from their
fair value and its operating results have been included in the
Companys consolidated financial statements since the date of
purchase.

PLIANT TECHNOLOGIES, INC.

In July 2003, the Company acquired
certain assets from Pliant Technologies, Inc. (Pliant) in
a transaction accounted for using the purchase method of accounting.

The following summarizes the asset purchase agreement
with Pliant:

|                    |  |   |          |  
|------------------- |  | - | -------- | -
|Assets acquired     |  | $ | 128,358  |  
|Liabilities assumed |  |   | (872,408 | )
|Goodwill            |  |   | 745,050  |  
|                    |  |   |          |  
|Cash paid           |  | $ | (1,000   | )
|                    |  |   |          |  

The Company has recorded the carryover
basis of the net assets acquired, which did not differ materially
from their fair value and its operating results have been included in
the Companys consolidated financial statements since the date
of purchase.

Pursuant to a separate agreement
between the Company and the holders of Pliants previously
incurred debt assumed by the Company, the Company issued an aggregate
of 228,351 shares of its restricted common stock
and warrants to purchase an aggregate of 182,681 shares of its
common stock in exchange for the discharge and cancellation of
$830,150 of assumed liabilities. The remaining amount ($42,258) of
the assumed debt remains outstanding and is secured by a lien on the
purchased assets.

The following unaudited pro forma information presents the condensed
consolidated statement of operations of the Company as if the merger with
Convergion had taken place on September 1, 2001. Convergions results for the
year ended August 31, 2002 include the period from Convergions inception in
November 2001 through August 2002; these have been consolidated with the
Companys results for the year ended August 31, 2002.

For the Years Ended August 31,2003
    
    2002Revenues
    
    $
    19,624,945
    
    
    $
    20,522,928Net loss attributable to common
shareholders
    
    $
    (6,275,950
    )
    
    $
    (2,246,234
    )Weighted average common shares
outstanding:Basic and dilutedLoss per share:
    
    
    8,497,877
    
    
    
    2,273,891Basic and diluted
    
    $
    (0.74
    )
    
    $
    (0.99
    )


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These unaudited pro forma results have been prepared for comparative purposes
only and include certain pro forma adjustments. They do not purport to be
indicative of the results of operations that actually would have resulted on
the date indicated, or which may be obtained in the future.

LIQUIDITY AND CAPITAL RESOURCES

Although the Company generated
positive cash flow during the year ended August 31, 2003, its cash
resources on hand are insufficient for its long term needs. As a result,
certain vendor payables, capital leases and other obligations are in arrears
and in default. This situation was evident in the prior year, and together
with the anticipated need for additional working capital for the Company to
increase its marketing and revenue base, the Board of Directors took
significant actions intended to stabilize the Company and enhance its
operations going forward. The results of this Board action were the closing of
an equity investment transaction in February 2003 that resulted in a change in
control of the Company and provided it with relief from certain liabilities.
The equity investors also have provided the Company with loans on an as needed
discretionary basis and arranged for credit facilities with certain lending
institutions. One such credit facility arranged by the new equity investors
was a $1,000,000 loan from a bank that is secured by certain assets of the
Company and guaranteed by the investors. This facility was funded in June
2003. Additionally, in November 2003, the equity investors helped the Company
secure an asset-based loan facility secured by the Companys accounts
receivable. This facility has a $4,000,000 capacity, but at this time, the
Companys accounts receivable are not large enough to enable the Company to
draws funds to the extent of this capacity. The Company has also secured a
commitment for a $2,000,000 facility to finance purchase orders for equipment
necessary to complete customer jobs. The Company anticipates that this
facility will be operational by mid- December of 2003. The Company believes
that with its current loan facilities in place plus at such time as the
$2,000,000 purchase order financing facility is operational, the Company will
have access to the capital necessary to generate positive cash flow from
operations and significantly increase operating results during the next year.
Notwithstanding this anticipated increase in
operating results, the Company anticipates the need for additional equity or
quasi-equity capital to provide the liquidity necessary for the Company to
improve its ability to better manage and reduce its existing level of past due
obligations.

Much of the Companys current
cash requirements arise from liabilities assumed in connection with the
Companys acquisition of U.S. Convergion, Inc in April, 2003. Additional cash requirements relate
to the July 2003 acquisition of certain Pliant assets, as there is overhead associated with this business
unit, but the products have not been aggressively marketed due to cash
restraints, as a
result, there are no
significant revenues currently being generated to offset these overhead costs.
Although it is not currently anticipated, the Board would consider selling the
Pliant business unit if the timeline for significant revenue generation extends
beyond 2004. Such a sale, which may be structured as a license, could generate
significant cash that would be available to the Company for its other cash
needs, which include typical operating items such as selling, general and
administrative expenses, employee costs, funding of capital expenditures.

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To further address the cash needs of the Company, the Company is actively
investigating the feasibility of raising equity capital through a private
placement of convertible preferred stock. The Company has had discussions with
investment bankers regarding this transaction and if secured, this private
placement is expected to provide up to $2,000,000 in additional operating
capital during the calendar quarter ending March 31, 2004. The Company is also
pursuing an equity investment from an institutional investor in the
$3,000,000.00 range. Both this transaction and the private placement
referenced above are independent events and the Company may pursue either or
both of them. There are no assurances the Company will be successful
in raising the funds required.

The Companys two principal shareholders (who took control of the Company in
the February 2003 transaction) have also consistently provided the Company with
additional capital in the form of loans throughout the year, on a discretionary
basis. Advances have been in response to a pressing need to meet a critical
obligation of the Company. As of August 31, 2003, these shareholders had
provided the Company with advances of $308,696. The Company expects that the
need to rely on these loans will be greatly diminished if either or both of the
capital raising activities is successful. Prior to fiscal 2003, the Companys
primary sources of cash have been from a private placement of the Companys
Series C Preferred Stock and sale of Subordinated Convertible Debentures that
accounted for $1,361,095 of net proceeds in the fiscal year 2002.

In connection with the change in
control of the Company in February 2003, the Company took the
following steps to restructure its financial position:


    In February 2003, the Company's Board of
Directors effected a one for ten reverse stock split
    In February 2003, the Company issued 8,880,739
of the Company's restricted common stock in exchange for $750,000 of
previously incurred debt
    In March 2003, the Company issued an aggregate
of 2,089,339 shares of the Company's restricted common stock in
exchange for all of the Company's outstanding shares of Series A, C
and D preferred stock. In connection with the exchange the holders of
the preferred stock agreed to relinquish all rights to unpaid
accumulated dividends of $190,400.


For the year ended August 31, 2003, cash and cash equivalents increased from an
overdraft of $38,856 at the beginning of the year to a balance of $226,372 at
the end of the year.

Net cash provided by (used in) operating activities in the years ended August
31, 2003 and 2002, respectively was $55,047 and $(389,048) due to the net loss
of $3,679,290 and $2,171,806. This was comprised of a net decrease in working
capital items of approximately $1,975,369 and $631,914. The effect on cash
from operating activities caused by these losses were offset by non-cash
depreciation and amortization expenses of $1,001,467 and $993,809 during
fiscal 2003 and 2002, respectively and payment of certain expenses with the
issuance of the Companys capital stock. The total of expenses
paid with the issuance of capital stock and stock options and warrants was $407,501 and $157,035 during fiscal
2003 and 2002, respectively.

Net cash (used in) or provided by investing activities in fiscal 2003 and 2002
was $(496,311) and $(311,848), respectively. This use in 2003 was due
to the purchase of certain fixed assets necessary to the operations of the
business and fees related to the business acquisitions and in 2002 cash
provided was attributable to a reduction in short-term investments as required
by operating uses during the year.

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Cash provided by financing activities in fiscal 2003 and 2002 was $779,217 and
$542, 671 due primarily to borrowings in 2003 and the sale of Series C
Preferred Shares in 2002.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued
Interpretation No. 46, Consolidation of Variable Interest
Entities. Interpretation 46 changes the criteria by which
one company includes another entity in its consolidated financial
statements. Previously, the criteria were based on control through
voting interest. Interpretation 46 requires a variable interest
entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entitys
activities or entitled to receive a majority of the entitys
residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately
to variable interest entities created after January 31, 2003.
The consolidation requirements apply to older entities in the first
fiscal year or interim period beginning after June 15, 2003.
Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect
the adoption to have a material impact to the Companys
financial position or results of operations.

In April 2003, the FASB issued
Statement of Financial Accounting Standards (SFAS) No. 149,
AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide
clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with
similar characteristics be accounted for on a comparable basis. The
provisions of SFAS 149 are effective for contracts entered into
or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The adoption of SFAS 149
will not have a material impact on the Companys results of
operations or financial position.

In May 2003, the FASB issued SFAS
No. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150
establishes standards on the classification and measurement of
certain financial instruments with characteristics of both
liabilities and equity. The provisions of SFAS 150 are effective
for financial instruments entered into or modified after May 31,
2003 and to all other instruments that exist as of the beginning of
the first interim financial reporting period beginning after
June 15, 2003. The adoption of SFAS 150 will not have a
material impact on the Companys results of operations or
financial position.

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INFLATION

In the opinion of management, inflation has not had a material effect on the
operations of the Company.

ITEM 7. FINANCIAL STATEMENTS

The consolidated financial statements for Market Central, Inc. as of and for
the fiscal years ended August 31, 2003 and 2002 are included herein in response
to Item 7 of this Form 10-KSB.

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FINANCIAL STATEMENTS AND SCHEDULES

AUGUST 31, 2003 AND 2002

FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934

MARKET CENTRAL, INC.

(FORMERLY PALADYNE CORP.)


F-1



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
INDEX TO FINANCIAL STATEMENTS

PageReport of Independent Certified Public Accountants
    
    
    F-3Consolidated Balance Sheets at August 31, 2003 and 2002
    
    
    F-4Consolidated Statements of Losses for the Years Ended
August 31, 2003 and 2002
    
    
    F-5Consolidated Statements of Deficiency in Stockholders Equity
for the Two Years Ended August 31, 2003
    
    
    F-6~F-7Consolidated Statements of Cash Flows for the Years Ended
August 31, 2003 and 2002
    
    
    F-8~F-9Notes to Consolidated Financial Statements
    
    
    F-10~F-29


F-2



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##### 



RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
CERTIFIED PUBLIC ACCOUNTANTS

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Market Central, Inc.
Jacksonville, NC

We have audited the accompanying consolidated balance sheets of Market Central,
Inc. (formerly Paladyne Corp.) and subsidiaries (the Company) as of August
31, 2003 and 2002 and the related consolidated statements of losses, deficiency
in stockholders equity, and cash flows for the two years then ended. These
financial statements are the responsibility of the companys management. Our
responsibility is to express an opinion on these financial statements based
upon our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company and subsidiaries as of August 31, 2003 and 2002, and the results of its
operations and its cash flows for the two years then ended, in conformity with
accounting principles generally accepted in the United States of America.

/s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLPRussell Bedford Stefanou Mirchandani LLPCertified Public Accountants


McLean, Virginia
October 31, 2003, except for Note N, which date is
November 5, 2003

F-3



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2003 AND 2002

2003
    
    2002ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    337,953
    
    
    $
    Accounts receivable, net of allowance for doubtful accounts of $84,897
and $350,000 at August 31, 2003 and 2002, respectively
    
    
    1,905,316
    
    
    
    279,883Due from related parties, net (Note H)
    
    
    362,673
    
    
    
    548,320Inventory (Note A)
    
    
    9,678
    
    
    
    Costs in excess of billings
    
    
    50,446
    
    
    
    Prepaid expenses and other assets
    
    
    66,013
    
    
    
    77,718Total Current Assets
    
    
    2,732,079
    
    
    
    905,921Property,
Plant and Equipment: (Note C)Furniture and Fixtures
    
    
    1,010,228
    
    
    
    369,028Computers and Software
    
    
    2,059,445
    
    
    
    1,943,193Leasehold Improvement
    
    
    1,227,905
    
    
    
    1,212,8124,297,578
    
    
    
    3,525,033Less: Accumulated Depreciation
    
    
    2,778,725
    
    
    
    1,777,258Net property, plant and equipment
    
    
    1,518,853
    
    
    
    1,747,775Other Assets:Deposits
    
    
    77,442
    
    
    
    Patents and trademarks (Note B)
    
    
    97,319
    
    
    
    Other assets
    
    
    425
    
    
    
    425Goodwill (Note B)
    
    
    4,807,053
    
    
    
    Total other assets
    
    
    4,982,239
    
    
    
    425$
    9,233,171
    
    
    $
    2,654,121LIABILITIES AND DEFICIENCY IN STOCKHOLDERS EQUITYCurrent Liabilities:Cash Disbursed in Excess of Available Funds
    
    $
    111,581
    
    
    $
    38,856Accounts Payable and Accrued Liabilities
    
    
    7,187,146
    
    
    
    2,458,591Accrued Liabilities in connection with Merger
    
    
    335,136
    
    
    
    Deferred Revenue (Note A)
    
    
    432,448
    
    
    
    Note Payable to Related Parties (Note D and H)
    
    
    428,696
    
    
    
    Notes Payable, Current Portion (Note D)
    
    
    2,097,761
    
    
    
    5,350,000Accrued Preferred Stock Dividend (Note F)
    
    
    
    
    
    
    190,400Current Portion of Capital Lease Obligation (Note L)
    
    
    691,606
    
    
    
    749,809Total Current Liabilities
    
    
    11,284,374
    
    
    
    8,787,656Notes Payable, Long-term Portion (Note D)
    
    
    288,816
    
    
    
    Capital Lease Obligation  Long-term Portion (Note L)
    
    
    113,439
    
    
    
    166,926Commitments and Contingencies (Note L)
    
    
    
    
    
    
    Deficiency in Stockholders Equity:Preferred Stock, par value $.001 per share; 10,000,000 shares authorized;
Series A  none and 137,143 shares issued and outstanding at August 31,
2003 and 2002, respectively (Note F)
    
    
    
    
    
    
    137Series C  none and 1,000,101 shares issued at August 31, 2003 and 2002,
respectively. (Note F)
    
    
    
    
    
    
    1,000Series D  none issued at August 31, 2003 and 2002 (Note F)
    
    
    
    
    
    
    Common Stock, par value $.001 per share; 75,000,000 shares authorized;
13,268,969 and 1,670,935 shares issued and outstanding at August 31,
2003 and 2002, respectively. (Note F)
    
    
    13,269
    
    
    
    1,671Additional Paid-In-Capital
    
    
    21,876,847
    
    
    
    14,361,015Accumulated Deficit
    
    
    (24,343,574
    )
    
    
    (20,664,284
    )Total deficiency in stockholders equity
    
    
    (2,453,458
    )
    
    
    (6,300,461
    )Total Liabilities and Deficiency in Stockholders Equity
    
    $
    9,233,171
    
    
    $
    2,654,121


See accompanying notes to consolidated financial statements

F-4



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
CONSOLIDATED STATEMENTS OF LOSSES
FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002

2003
    
    2002Revenues
    
    $
    11,720,608
    
    
    $
    8,755,369Cost of Sales
    
    
    7,879,522
    
    
    
    5,647,667Gross Profit
    
    
    3,841,086
    
    
    
    3,107,702Operating Expenses:Selling, General and Administrative
    
    
    6,122,649
    
    
    
    3,631,182Depreciation
    
    
    1,001,467
    
    
    
    993,809Total Operating Expenses
    
    
    7,124,116
    
    
    
    4,624,991Loss from Operations
    
    
    (3,283,030
    )
    
    
    (1,517,289
    )Other Income (Expenses)
    
    
    
    
    
    
    Interest Income (Expenses)
    
    
    (396,260
    )
    
    
    (654,517
    )Income (Taxes) Benefit
    
    
    
    
    
    
    Net Loss
    
    $
    (3,679,290
    )
    
    $
    (2,171,806
    )Cumulative Convertible Preferred Stock Dividend Requirements
    
    
    
    
    
    
    (40,800
    )Net Loss Attributable to Common Shareholders
    
    $
    (3,679,290
    )
    
    $
    (2,212,606
    )Loss Per Common Share (Basic and Assuming Dilution)(Note J)
    
    $
    (0.45
    )
    
    $
    (1.32
    )Weighted Average Shares Outstanding (Basic and Diluted)
    
    
    8,090,736
    
    
    
    1,670,935


See accompanying notes to the consolidated financial statements

F-5



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS EQUITY
FOR THE TWO YEARS ENDED AUGUST 31, 2003

Common StockCommon
    
    StockShares
    
    AmountBalance at August 31, 2001
    
    
    1,670,935
    
    
    $
    1,671Issuance of Series C Preferred
Stock in connection with a private
placement, net of offering costs
    
    
    
    
    
    
    Conversion of Convertible
Debenture Notes to shares of
Series C Preferred Stock
    
    
    
    
    
    
    Issuance of Series C Preferred
Stock for settlement of lawsuit
    
    
    
    
    
    
    Series A preferred dividend accrual
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    Balance at August 31, 2002
    
    
    1,670,935
    
    
    $
    1,671


[Additional columns below][Continued from above table, first column(s) repeated]

Preferred StockSeries A
    
    Series A
    
    Series B
    
    Series B
    
    Series C
    
    Series C
    
    Series D
    
    Series DShares
    
    Par Value
    
    Shares
    
    Par Value
    
    Shares
    
    Par Value
    
    Shares
    
    Par ValueBalance at August 31, 2001
    
    
    137,143
    
    
    $
    137
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Issuance of Series C Preferred
Stock in connection with a private
placement, net of offering costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    905,880
    
    
    
    906
    
    
    
    
    
    
    
    Conversion of Convertible
Debenture Notes to shares of
Series C Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,221
    
    
    
    79
    
    
    
    
    
    
    
    Issuance of Series C Preferred
Stock for settlement of lawsuit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    15
    
    
    
    
    
    
    
    Series A preferred dividend accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at August 31, 2002
    
    
    137,143
    
    
    $
    137
    
    
    
    
    
    
    $
    
    
    
    
    1,000,101
    
    
    $
    1,000
    
    
    
    
    
    
    $
    


[Additional columns below][Continued from above table, first column(s) repeated]

AdditionalPaid-In-
    
    AccumulatedCapital
    
    Deficit
    
    TotalBalance at August 31, 2001
    
    $
    12,884,685
    
    
    $
    (18,492,478
    )
    
    $
    (5,605,985
    )Issuance of Series C Preferred
Stock in connection with a private
placement, net of offering costs
    
    
    1,360,189
    
    
    
    
    
    
    
    1,361,095Conversion of Convertible
Debenture Notes to shares of
Series C Preferred Stock
    
    
    131,956
    
    
    
    
    
    
    
    132,035Issuance of Series C Preferred
Stock for settlement of lawsuit
    
    
    24,985
    
    
    
    
    
    
    
    25,000Series A preferred dividend accrual
    
    
    (40,800
    )
    
    
    
    
    
    
    (40,800
    )Net loss
    
    
    
    
    
    
    (2,171,806
    )
    
    
    (2,171,806
    )Balance at August 31, 2002
    
    $
    14,361,015
    
    
    $
    (20,664,284
    )
    
    $
    (6,300,461
    )


See accompanying notes to the consolidated financial statements

F-6



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS EQUITY
(Continued)
FOR THE TWO YEARS ENDED AUGUST 31, 2003

Common StockCommon
    
    StockShares
    
    AmountBalance forward
    
    
    1,670,935
    
    
    $
    1,671Issuance of Series D Preferred Stock in
exchange for notes
payable
    
    
    
    
    
    
    Issuance of Common Stock
in exchange for
previously incurred debt
    
    
    8,880,739
    
    
    
    8,881Conversion of Series D
Preferred Stock to Common
Stock
    
    
    1,000,000
    
    
    
    1,000Conversion of Series C
Preferred Stock to Common
Stock
    
    
    1,080,101
    
    
    
    1,080Conversion of Series A
Preferred Stock to Common
Stock
    
    
    9,238
    
    
    
    9Reversal of Series A
Preferred Stock dividend
accrual
    
    
    
    
    
    
    Issuance of Common Stock
in exchange for services
rendered
    
    
    25,000
    
    
    
    25Issuance of Common Stock
in connection with
acquisition of U.S Convergion, Inc.
    
    
    374,630
    
    
    
    375Fractional shares
    
    
    (25
    )
    
    
    Issuance of Common Stock
in connection with
acquisition of Pliant
Technologies, Inc.
    
    
    228,351
    
    
    
    228Stock options and
warrants issued to
consultants in exchange
for services rendered
(Note G)
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    Balance at August 31, 2003
    
    
    13,268,969
    
    
    $
    13,269


[Additional columns below][Continued from above table, first column(s) repeated]

Preferred StockSeries A
    
    Series A
    
    Series B
    
    Series B
    
    Series C
    
    Series C
    
    Series D
    
    Series DShares
    
    Par Value
    
    Shares
    
    Par Value
    
    Shares
    
    Par Value
    
    Shares
    
    Par ValueBalance forward
    
    
    137,143
    
    
    $
    137
    
    
    
    
    
    
    $
    
    
    
    
    1,000,101
    
    
    $
    1,000
    
    
    
    
    
    
    $
    Issuance of Series D Preferred Stock in
exchange for notes
payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    1,000Issuance of Common Stock
in exchange for
previously incurred debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Series D
Preferred Stock to Common
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000,000
    )
    
    
    (1,000
    )Conversion of Series C
Preferred Stock to Common
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000,101
    )
    
    
    (1,000
    )
    
    
    
    
    
    
    Conversion of Series A
Preferred Stock to Common
Stock
    
    
    (137,143
    )
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reversal of Series A
Preferred Stock dividend
accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Common Stock
in exchange for services
rendered
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Common Stock
in connection with
acquisition of U.S Convergion, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fractional shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Common Stock
in connection with
acquisition of Pliant
Technologies, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options and
warrants issued to
consultants in exchange
for services rendered
(Note G)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at August 31, 2003
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    


[Additional columns below][Continued from above table, first column(s) repeated]

AdditionalPaid-In-
    
    AccumulatedCapital
    
    Deficit
    
    TotalBalance forward
    
    $
    14,361,015
    
    
    $
    (20,664,284
    )
    
    $
    (6,300,461
    )Issuance of Series D Preferred Stock in
exchange for notes
payable
    
    
    4,999,000
    
    
    
    
    
    
    
    5,000,000Issuance of Common Stock
in exchange for
previously incurred debt
    
    
    741,119
    
    
    
    
    
    
    
    750,000Conversion of Series D
Preferred Stock to Common
Stock
    
    
    
    
    
    
    
    
    
    
    Conversion of Series C
Preferred Stock to Common
Stock
    
    
    (80
    )
    
    
    
    
    
    
    Conversion of Series A
Preferred Stock to Common
Stock
    
    
    128
    
    
    
    
    
    
    
    Reversal of Series A
Preferred Stock dividend
accrual
    
    
    190,400
    
    
    
    
    
    
    
    190,400Issuance of Common Stock
in exchange for services
rendered
    
    
    44,975
    
    
    
    
    
    
    
    45,000Issuance of Common Stock
in connection with
acquisition of U.S Convergion, Inc.
    
    
    671,524
    
    
    
    
    
    
    
    671,899Fractional shares
    
    
    
    
    
    
    
    
    
    
    Issuance of Common Stock
in connection with
acquisition of Pliant
Technologies, Inc.
    
    
    829,922
    
    
    
    
    
    
    
    830,150Stock options and
warrants issued to
consultants in exchange
for services rendered
(Note G)
    
    
    38,844
    
    
    
    
    
    
    
    38,844Net loss
    
    
    
    
    
    
    (3,679,290
    )
    
    
    (3,679,290
    )Balance at August 31, 2003
    
    $
    21,876,847
    
    
    $
    (24,343,574
    )
    
    $
    (2,453,458
    )


See accompanying notes to the consolidated financial statements

F-7



---



##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002

2003
    
    2002Cash flows from operating activities:Net loss from operations
    
    $
    (3,679,290
    )
    
    $
    (2,171,806
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation
    
    
    1,001,467
    
    
    
    993,809Preferred stock issued in exchange for convertible debenture notes
    
    
    
    
    
    
    132,035Preferred stock issued in exchange for lawsuit settlement
    
    
    
    
    
    
    25,000Common stock issued in exchange for services rendered
    
    
    45,000
    
    
    
    Stock options and warrants issued in exchange for services rendered
    
    
    38,844
    
    
    
    Write off of accounts receivable
    
    
    350,000
    
    
    
    Common stock issued in exchange for expenses paid by shareholders
    
    
    323,657
    
    
    
    (Increase) decrease in:Accounts receivable
    
    
    80,638
    
    
    
    586,270Other assets
    
    
    334,672
    
    
    
    36,242Increase (decrease) in:Cash disbursed in excess of available funds
    
    
    72,725
    
    
    
    Accounts payable and accrued expenses
    
    
    2,053,941
    
    
    
    37,662Other liabilities
    
    
    (566,607
    )
    
    
    (28,260
    )Net cash provided by (used in) operating activities
    
    
    55,047
    
    
    
    (389,048
    )Cash flows from investing activities:Cash
paid in connection with Acquisition of Pliant Assets
    
    
    (1,000
    )
    
    
    Acquisition costs paid in connection with Purchase Agreement with US Convergion
    
    
    (161,000
    )
    
    
    Capital
expenditures, net
    
    
    (334,311
    )
    
    
    (311,848
    )Net cash (used in) investing activities
    
    
    (496,311
    )
    
    
    (311,848
    )Cash flows from financing activities:Proceeds from issuance of Series C Preferred Stock
    
    
    
    
    
    
    1,361,095Proceeds
from (repayments of) notes payable, net
    
    
    779,217
    
    
    
    (818,424
    )Net cash provided by financing activities
    
    
    779,217
    
    
    
    542,671Net increase (decrease) in cash and cash equivalents
    
    
    337,953
    
    
    
    (158,225
    )Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    158,225Cash and cash equivalents at end of year
    
    $
    337,953
    
    
    $
    


See accompanying notes to the consolidated financial statements

F-8



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2003 AND 2002
(continued)

Supplemental Disclosures of Cash Flow Information:Cash paid during period for interest
    
    $
    188,329
    
    
    $
    654,517Common stock issued in exchange for notes payable
    
    
    426,343
    
    
    
    Common stock issued in exchange for expenses paid by shareholders
    
    
    323,657
    
    
    
    Common stock issued in exchange for services rendered
    
    
    45,000
    
    
    
    Stock options and warrants issued in exchange for services rendered
    
    
    38,844
    
    
    
    Accrued preferred stock dividend
    
    
    
    
    
    
    40,800Preferred stock issued in exchange for notes payable
    
    
    5,000,000
    
    
    
    Acquisition of U.S. Convergion:Assets acquired
    
    
    2,588,152
    
    
    
    Liabilities assumed
    
    
    (5,817,256
    )
    
    
    Issuance of common stock
    
    
    (671,899
    )
    
    
    Goodwill
    
    
    4,062,003
    
    
    
    Cost of acquisition paid in cash
    
    
    161,000Purchase agreement with Pliant:Assets acquired
    
    
    128,358
    
    
    
    Liabilities assumed
    
    
    (872,408
    )
    
    
    Goodwill
    
    
    745,050
    
    
    
    Cash paid
    
    
    (1,000
    )
    
    
    Common stock issued in exchange for assumed liabilities in
connection with Pliant Asset Acquisition
    
    $
    830,150
    
    
    $
    


See accompanying notes to the consolidated financial statements

F-9



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE A  SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying financial statements follows.

Business and Basis of Presentation

Market Central, Inc. (formerly Paladyne Corp.) (the Company) operates two
wholly owned subsidiaries, ecommerce support centers, inc.(ecom) and U.S.
Convergion, Inc. (Convergion). ecom provides outsourced contact center
solutions and Customer Relationship Management (CRM) services, and Convergion
provides systems design, integration, sales and service of internal contact
centers and is a reseller for MicroSofts MS CRM solution. Combined, the
subsidiaries provide inbound technical support, sales, and customer service;
outbound pre-sales and sales; data mining; campaign management; CRM Integration
(contact center systems design, sales, integration and life-cycle support).

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, ecom and Convergion. The Companys acquisition
of Convergion occurred on April 3, 2003, and, accordingly, the financial
statements included herein include the results of operations of Convergion from
April 3, 2003. All significant inter-company transactions and balances have
been eliminated on consolidation.

Change in Control of Company

As shown in the accompanying financial
statements, the Company incurred a net loss of $3,679,290 and
$2,171,806 during the year ended August 31, 2003 and 2002,
respectively. The Companys current liabilities exceeded
its current assets by $8,552,295 as of August 31, 2003.

In February 2003, the Companys
control changed and the Companys new management took the
following steps to restructure its financial position and improve its
liquidity:

|  |  |                                                                                                                                                                                                                                                                                                                                                        
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Companys new controlling
shareholders advanced the Company $308,696 through August 31,
2003 (see Note D) and an additional $753,781 subsequent to the
date of the financial statements for working capital purposes.                                                                                                                              
| 
| |  | The Company issued 8,880,739 of the
Companys restricted common stock in exchange for $750,000 of
previously incurred debt (See Note F).                                                                                                                                                                                                               
| 
| |  | The Company issued an aggregate of
2,089,339 shares of the Companys restricted common stock in
exchange for all of the Companys outstanding shares of
Series A, C and D preferred stock. In connection with the
exchange the holders of the preferred stock agreed to relinquish all
rights to unpaid accumulated dividends of $190,400 (see
Note F).

Revenue Recognition

The Company recognizes revenues from contracts in which the Company provides
only consulting services as the services are performed. The contractual terms
of the agreements dictate the recognition of revenue by the Company. Payments
received in advance are deferred until the service is provided.

Revenues from equipment and implementation contracts are recognized on the
percentage-of-completion method, measured by the percentage of cost incurred to
date to the estimated total cost for each contract. This method is used because
management considers total job cost to be the best available measure of
progress on these contracts.

Contract costs include all direct equipment, material, and labor costs and
those indirect costs related to contract performance, such as indirect labor.
Selling, general and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. Changes in contract performance, contract
conditions, and estimated profitability that may result in revisions to costs
and income are recognized in the period in which the revisions are determined.

The asset, costs in excess of billings , represents revenues recognized in
excess of amounts billed. The liability, deferred revenue represents billings
in excess of revenues recognized. Deferred revenues as of August 31, 2003 and
2002 are $432,448 and $0, respectively.

Advertising

The Company follows the policy of charging the costs of advertising to expenses
incurred. The Company incurred no advertising costs during the year ended
August 31, 2003. Advertising costs incurred during the year ended August 31,
2002 were $254.

F-10



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE A  SUMMARY OF ACCOUNTING POLICIES (Continued)

Research and Development

The Company accounts for research and development costs in accordance with the
Financial Accounting Standards Boards Statement of Financial Accounting
Standards No. 2 (SFAS 2), Accounting for Research and Development Costs.
Under SFAS 2, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as
incurred. Third-party research and developments costs are expensed when the
contracted work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. The Company incurred no
research and product development costs for the year ended August 31, 2003 and
2002.

Income Taxes

Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Standards
No. 109, Accounting for Income Taxes. Under this method deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be removed or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in the statement of operations in the
period that includes the enactment date.

Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost and depreciated over their estimated
useful lives of 27 to 60 months using the straight-line method.

Long-Lived Assets

The Company has adopted Statement of Financial Accounting Standards No. 144
(SFAS 144). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted undercounted cash
flows. Should an impairment in value be indicated, the carrying value of
intangible assets will be adjusted, based on estimates of future discounted
cash flows resulting from the use and ultimate disposition of the asset. SFAS
No. 144 also requires assets to be disposed of be reported at the lower of the
carrying amount or the fair value less costs to sell.

F-11



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE A  SUMMARY OF ACCOUNTING POLICIES (Continued)

Inventories

Inventories are stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method. Inventories consist of Internet
applications, routers and related products available for sale to distributors
and retailers. Components of inventories as of August 31, 2003 and 2002 are as
follows:

2003
    
    2002Finished Goods
    
    $
    9,678
    
    
    $
    


Capitalized Computer Hardware and Software

The Company records the purchase of computer hardware at historical cost and
amortizes this cost over a period of three to five years. The Company has
adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. The Company capitalizes software purchased from
third parties if the related software product under development has reached
technological feasibility or if there are alternative future uses for the
purchased software provided that capitalized amounts will be realized over a
period not exceeding five years.

In addition, the company capitalizes costs of materials, consultants, interest,
and payroll and payroll-related costs for employees incurred in developing
internal-use computer software once technological feasibility is attained.
Costs incurred prior to the establishment of technological feasibility are
charged to general and administrative expense.

Concentrations of Credit Risk

Financial instruments and related items, which potentially subject the Company
to concentrations of credit risk, consist primarily of cash, cash equivalents
and related party receivables. The Company places its cash and temporary cash
investments with credit quality institutions. At times, such investments may
be in excess of the FDIC insurance limit. The Company periodically reviews its
trade receivables in determining its allowance for doubtful accounts. The
allowance for doubtful accounts was $84,897 and $350,000 at August 31, 2003 and
2002, respectively.

Stock Based Compensation

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123. This
statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary charge to the fair
value based method of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in APB Opinion No. 25 and related interpretations.
Accordingly, compensation expense for stock options is measured as the excess,
if any, of the fair market value of the Companys stock at the date of the
grant over the exercise price of the related option. The Company has adopted
the annual disclosure provisions of SFAS No. 148 in its financial reports for
the year ended August 31, 2003 and will adopt the interim disclosure provisions
for its financial reports for the subsequent periods. Had compensation costs
for the Companys stock options been determined based on the fair value at the
grant dates for the awards, the Companys net loss and losses per share would
have been as follows (transactions involving stock options issued to employees
and Black-Scholes model assumptions are presented in Note G):

F-12



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE A  SUMMARY OF ACCOUNTING POLICIES (Continued)

Stock Based Compensation (Continued)

2003
    
    2002Net loss  as reported
    
    $
    (3,679,290
    )
    
    $
    (2,171,806
    )Add: Total stock based employee compensation expense as
reported under intrinsic value method (APB. No. 25)
    
    
    
    
    
    
    Deduct: Total stock based employee compensation expense
as reported under fair value based method (SFAS No. 123)
    
    
    (184,045
    )
    
    
    (1,026
    )Net loss  Pro Forma
    
    $
    (3,863,335
    )
    
    $
    (2,172,832
    )Net loss attributable to common stockholders  Pro forma
    
    $
    (3,863,335
    )
    
    $
    (2,213,632
    )Basic (and assuming dilution) loss per share  as reported
    
    $
    (0.45
    )
    
    $
    (1.32
    )Basic (and assuming dilution) loss per share  Pro forma
    
    $
    (0.48
    )
    
    $
    (1.32
    )


Liquidity

As shown in the accompanying financial statements, the Company incurred a net
loss of $3,679,290 and $2,171,806 during the year ended August 31, 2003 and
2002, respectively. The Companys current liabilities exceeded its current
assets by $8,552,295 as of August 31, 2003.

Goodwill and Purchased Intangible Assets

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). Effective for fiscal years beginning after
December 15, 2001, SFAS 142 requires goodwill to be tested for impairment on
an annual basis and between annual tests in certain circumstances, and written
down when impaired, rather than being amortized as previous accounting
standards required. Furthermore, SFAS 142 requires purchased intangible assets
other than goodwill to be amortized over their useful lives unless these lives
are determined to be indefinite.

In accordance with SFAS 142, the Company ceased amortizing goodwill as of
the beginning of fiscal 2003. Based on the impairment tests performed by
management, there was no impairment of goodwill in fiscal 2003 . There can be
no assurance that future goodwill impairment tests will not result in a charge
to earnings.

Purchased intangible assets are carried at cost less accumulated amortization.
Amortization is computed over the estimated useful lives of the respective
assets, generally two to five years.

Segment Information

The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information (SFAS
131). SFAS establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS 131 also establishes standards for related disclosures about
products and services and geographic areas. Operating segments are identified
as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker,
or decision making group, in making decisions how to allocate resources and
assess performance. The information disclosed herein, materially represents all
of the financial information related to the Companys principal operating
segments.

F-13



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE A  SUMMARY OF ACCOUNTING POLICIES (Continued)

Net Earnings (Losses) Per Share

The Company computes earnings per share under Financial Accounting Standard No.
128, Earnings Per Share (SFAS 128). Net loss per common share is computed by
dividing net loss by the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding during the year. Dilutive common
stock equivalents consist of shares issuable upon conversion of convertible
preferred shares and the exercise of the Companys stock options and warrants
(calculated using the treasury stock method). During the year ended August 31,
2003 and 2002, common stock equivalents are not considered in the calculation
of the weighted average number of common shares outstanding because they would
be anti-dilutive, thereby decreasing the net loss per common share.

Comprehensive Income

Statement of Financial Accounting Standards No. 130 (SFAS 130), Reporting
Comprehensive Income, establishes standards for reporting and displaying of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. The Company does not have any items of comprehensive
income in any of the periods presented.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly actual
results could differ from those estimates.

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. Interpretation 46 changes the criteria by which
one company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The Company does not expect the
adoption to have a material impact to the Companys financial position or
results of operations.

In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide clarification on
the financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be
accounted for on a comparable basis. The provisions of SFAS 149 are effective
for contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 will not
have a material impact on the Companys results of operations or financial
position.

F-14



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE A  SUMMARY OF ACCOUNTING POLICIES (Continued)

New Accounting Pronouncements (Continued)

In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150
establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS 150 are effective for financial instruments entered into or
modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The adoption of SFAS 150 will not have a material impact on the
Companys results of operations or financial position.

Reclassifications

Certain reclassifications have been made in prior years financial statements
to conform to classifications used in the current year.

NOTE B  BUSINESS COMBINATIONS

U.S. Convergion, Inc.

On April 3, 2003, the Company acquired all of the issued and outstanding common
shares of U.S. Convergion, Inc. (Convergion), through an Agreement and Plan of
Exchange (Agreement). Pursuant to the Agreement, the
Company acquired Convergion, in exchange for $671,899 consisting of
374,630 shares of the Companys restricted common
stock in a transaction accounted for using the purchase method of
accounting (see Note F).

The following summarizes the acquisition of Convergion:

Assets acquired
    
    $
    2,588,152Liabilities assumed
    
    
    (5,817,256
    )Goodwill
    
    
    4,062,003Acquisition costs
    
    
    (161,000
    )$
    671,899


The Company valued the common stock
issued to the Convergion shareholders at $1.79 per share, which
approximated the fair value of the Companys common stock at the
date of acquisition. The Company has recorded the carryover basis of
the net assets acquired, which did not differ materially from their
fair value and its operating results have been included in the
Companys consolidated financial statements since the date of
purchase.

F-15



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE B  BUSINESS COMBINATIONS (Continued)

Pliant Technologies, Inc.

In July 2003, the Company acquired certain assets from
Pliant Technologies, Inc. (Pliant) in a transaction
accounted for using the purchase method of accounting.

The following summarizes the asset purchase agreement with Pliant:

Assets acquired
    
    $
    128,358Liabilities assumed
    
    
    (872,408
    )Goodwill
    
    
    745,050Cash paid
    
    $
    (1,000
    )


The Company has recorded the carryover
basis of the net assets acquired, which did not differ materially
from their fair value and its operating results have been included in
the Company's consolidated financial statements since the date of
purchase.

Pursuant to a separate agreement
between the Company and the holders of Pliant's previously incurred
debt assumed by the Company, the Company issued an aggregate of
228,351 shares of its restricted common stock (Note F) and warrants
to purchase an aggregate of 182,681 shares of its common stock in
exchange for the discharge and cancellation of $830,150 of assumed
liabilities. The remaining amount ($42,258) of the assumed debt
remains outstanding and is secured by a lien on the purchased assets.

The unaudited pro-forma combined historical results, as if Convergion and
Pliant had been acquired at the beginning of fiscal 2002 and 2003,
respectively, are estimated to be:

2003
    
    2002Net sales
    
    $
    19,624,945
    
    
    $
    20,522,928Net income (loss)
    
    $
    (6,275,950
    )
    
    $
    (2,246,234
    )Loss per share (assuming dilution)
    
    $
    (0.74
    )
    
    $
    (0.99
    )


The unaudited proforma information has been prepared for comparative purposes
only and do not purport to be indicative of what would have occurred had the
acquisition actually been made at such a date , nor is it necessarily
indicative of future operating results

NOTE C  PROPERTY AND EQUIPMENT

Major classes of property and equipment at August 31, 2003 and 2002 consist of
the following:

2003
    
    2002Leasehold Improvements
    
    $
    1,227,905
    
    
    $
    1,212,812Furniture and Fixtures
    
    
    1,010,228
    
    
    
    369,028Computer Equipment and Software
    
    
    2,059,445
    
    
    
    1,943,1934,297,578
    
    
    
    3,525,033Less: Accumulated Depreciation
    
    
    (2,778,725
    )
    
    
    (1,777,258
    )Net Property and Equipment
    
    $
    1,518,853
    
    
    $
    1,747,775


F-16



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE D  NOTES PAYABLE

Notes Payable at August 31, 2003 and 2002 are as follows:

2003
    
    2002Note payable to a related party in
quarterly installments of $377,000,
including interest at 10% per annum,
secured by property and equipment
This note was converted to equity in
December 2002 (See Note F).
    
    $
    
    
    
    $
    3,500,000Note payable to a related party in
two installments of $750,000, plus
interest at 10% per annum, secured
by property and equipment. The first
installment is due after completion
of a $3,000,000 equity or
convertible debt offering by the
Company and the remaining
installment payment due the later of
six months after the first
installment payment is made and
after three consecutive months of
positive cash flow from operations
(as defined). This note was
converted to equity in December 2002
(See Note F).
    
    
    
    
    
    
    1,500,000Note payable to Bank in monthly
installments of interest only at the
Banks prime lending rate plus 1%,
secured by accounts receivable.
    
    
    
    
    
    
    350,000Note payable in monthly installments
of $33,333 including interest at 6%
per annum; maturity date is in March
2005; collateralized by 500,000
shares held by a major stockholder
and personal guarantees by two
stockholders.
    
    
    628,045
    
    
    
    Note payable in monthly installments
of $1,919 including interest at
7.34% per annum; unsecured; maturity
date is in May 2005.
    
    
    40,787
    
    
    
    Note payable in monthly installments
of $2,813 including interest at 6%
per annum; unsecured; maturity date
is in February 2005.
    
    
    48,298
    
    
    
    Note payable in monthly installments
of $10,000, including interest at
4.15% per annum; unsecured; maturity
date is in April 2003; the Company
is currently in default under the
terms of the note agreement.
    
    
    238,481
    
    
    
    Note payable to Bank in monthly
installments of interest only at
LIBOR daily floating rate; maturity
date is February 9, 2004;
collateralized by Company furniture
and equipment.
    
    
    1,000,000
    
    
    
    Note payable on demand to a related
party, interest payable at 6% per
annum on repayment date; unsecured
(Note H).
    
    
    275,954
    
    
    
    Note payable on demand to a related
party, interest payable at 6% per
annum on repayment date; unsecured
(Note H).
    
    
    32,742
    
    
    
    Note payable on demand to a related
party, non-interest bearing;
unsecured; maturity date is in May
2004; the Company shall repay the
note with Company common stock. (Note H)
    
    
    120,000
    
    
    
    Notes Payable to Bank in monthly
payments; interest rate is at banks
prime lending rate plus 4.5%,
maturity date is in 2004 secured by Company accounts
receivable.
    
    
    389,833
    
    
    
    Note payable; liabilities assumed
pursuant to Assets Purchase
Agreement with Pliant (see Note B);
interest payable at 12% per annum,
interest due and principal due in
March 2004; unsecured.
    
    
    41,133
    
    
    
    2,815,273
    
    
    
    5,350,000Less: current portion
    
    
    (2,526,457
    )
    
    
    (5,350,000
    )$
    288,816
    
    
    $
    


Aggregate maturities of notes payable as of August 31, 2003 are as follows:

Year
    
    Amount2004
    
    $
    2,526,4572005
    
    
    288,816Total
    
    $
    2,815,273


F-17



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE
E  ACCOUNTS PAYABLE AND ACCURED LIABILITIES

Accounts payable and accrued liabilities at August 31, 2003 and 2002 are as
follows:

2003
    
    2002Accounts payable
    
    $
    5,657,953
    
    
    $
    1,864,034Accrued interest
    
    
    24,500
    
    
    
    1,535Accrued payroll, payroll expenses and taxes
    
    
    1,053,263
    
    
    
    593,022Other accrued expenses in connection with
litigation (Note L)
    
    
    451,430
    
    
    
    Total
    
    $
    7,187,146
    
    
    $
    2,458,591


NOTE F  CAPITAL STOCK

The Company is authorized to issue 75,000,000 shares of common stock with
$0.001 par value per share and 10,000,000 shares of preferred stock with $.001
par value per share. In July 2001, the Board of Directors designated 1,800,000
shares as 8% Cumulative Convertible Series C Preferred Stock and 1,050,000
shares as 8% Cumulative Convertible Series D Preferred Stock. In February 2003,
the Company effected a one-for-ten reverse stock split of its outstanding
shares of common stock. The Companys 75,000,000 authorized shares of common
stock with $.001 par value remained unchanged. All references in consolidated
financial statements and notes to financial statements, numbers of shares and
share amounts have been restated to reflect the reverse split. As of August 31,
2003, the Company has 13,268,969 shares of common stock issued and outstanding.

In September 2001, the Board of Directors authorized a private placement of up
to 600,000 units priced at $5.00 per unit, with one unit consisting of three
shares of Series C 8% Cumulative Convertible Preferred Stock. Each share is
convertible into ten shares of the Companys Common Stock at $.001 par value
per share. Net proceeds from this private placement were $1,361,095, net of
offering expenses. In February 2002, three convertible debenture note holders
converted their note principal with accrued and unpaid interest in the total of
$132,035 into 79,221 shares of Series C Preferred Stock. Additionally, the
Company issued 15,000 shares, or $25,000, of Series C Preferred Stock to settle
a lawsuit. This resulted in the issuance of an aggregate of 1,000,101 shares of
Series C Preferred Stock.

F-19



---



##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE F  CAPITAL STOCK (Continued)

On December 10, 2002, the Company issued 1,000,000 shares of Series D preferred
stock to Gibralter Publishing, Inc. in exchange for the cancellation of notes
payable (Note D) of $3,500,000 and $1,500,000 and any accrued and unpaid
interest thereon.

In February 2003, the Company issued an aggregate of 8,880,739 shares of common
stock in exchange for $750,000 of previously incurred debt.

In March 2003, the Company issued 1,000,000 shares of common stock in exchange
for all of the outstanding shares of Series D Preferred Stock,
1,080,101 shares of common stock for all of the outstanding shares of Series C Preferred Stock
and 9,238 shares of common stock for all of the outstanding shares of Series A
Preferred Stock. Pursuant to the conversion agreements with the holders of
Series A Preferred Stock, stockholders relinquished all rights to accumulated
dividends. The Company accounted all accumulated and unpaid dividends of
$190,400 as additional paid-in capital.

In March 2003, the Company issued 25,000 shares of common
stock to a consultant in exchange for services valued at $1.80 per share, which
approximated the fair value of the shares issued during the period the services
were rendered. Compensation costs of $45,000 were charged to income during the
year ended August 31, 2003. In April 2003, the Company issued an aggregate of
374,630 shares of restricted common stock in connection with the acquisition of
U.S Convergion. (Note B). In July 2003, the Company issued an aggregate of
228,351 shares of restricted common stock in exchange for the assumed
liabilities of $830,150 as part of the acquisition of certain assets of Pliant
Technologies. (Note B).

NOTE G  STOCK OPTIONS AND WARRANTS

Options

The following table summarizes the changes in options outstanding and the
related prices for the shares of the Companys common stock issued to
employees, consultants and shareholders at August 31, 2003, after giving effect
to 1:10 reverse split in common stock in February 2003:

Options Outstanding
    
    Options ExercisableWeighted Average
    
    Weighted
    
    
    
    
    
    WeightedNumber
    
    Contractual Life
    
    Average
    
    Number
    
    AverageExercise Price
    
    Outstanding
    
    (Years)
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$2.00 - $2.98
    
    
    201,000
    
    
    
    3.25
    
    
    $
    2.45
    
    
    
    72,333
    
    
    $
    2.45$7.00
- $9.50
    
    
    25,000
    
    
    
    1.35
    
    
    $
    8.08
    
    
    
    25,000
    
    
    $
    8.08$10.25 - $11.40
    
    
    68,335
    
    
    
    1.42
    
    
    $
    10.26
    
    
    
    68,335
    
    
    $
    10.26$15.60 - $25.00
    
    
    7,875
    
    
    
    0.33
    
    
    $
    23.21
    
    
    
    7,875
    
    
    $
    23.21302,210
    
    
    
    1.86
    
    
    $
    5.22
    
    
    
    173,543
    
    
    $
    7.28


F-20



---



##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE G  STOCK OPTIONS AND WARRANTS (Continued)

Options (Continued)

Transactions involving the Companys options issuance are summarized as
follows:

Number
    
    Weighted Averageof shares
    
    Exercise PriceOutstanding at August 31, 2001
    
    
    210,693
    
    
    $
    10.60Granted
    
    
    16,000
    
    
    
    .10Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (18,950
    )
    
    
    24.80Outstanding at August 31, 2002
    
    
    207,743
    
    
    
    9.00Granted
    
    
    185,000
    
    
    
    2.30Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (90,533
    )
    
    
    3.66Outstanding at August 31, 2003
    
    
    302,210
    
    
    $
    5.22


The weighted-average fair value of stock options granted to shareholders during
the years ended August 31, 2003 and 2002 and the weighted-average significant
assumptions used to determine those fair values, using a Black-Scholes option
pricing model are as follows:

2003
    
    2002Significant assumptions (weighted-average):Risk-free interest rate at grant date
    
    
    1.28
    %
    
    
    1.95
    %Expected stock price volatility
    
    
    38
    %
    
    
    23
    %Expected dividend payout
    
    
    
    
    
    
    Expected option life-years (a)
    
    3.0 to 4.0
    
    3.0 to 5.0


(a)The expected option life is based on contractual expiration dates.

Warrants

The following table summarizes the changes in warrants outstanding and the
related prices for the shares of the Companys common stock issued to
employees, consultants and shareholders at August 31, 2003 after giving effect
to 1:10 reverse split in common stock in February 2003.

Warrants Outstanding
    
    Warrants ExercisableWeighted Average
    
    Weighted
    
    
    
    
    
    WeightedNumber
    
    Contractual Life
    
    Average
    
    Number
    
    AverageExercise Prices:
    
    Outstanding
    
    (Years)
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$2.20 - $7.81
    
    
    3,905,892
    
    
    
    4.15
    
    
    $
    2.79
    
    
    
    3,905,892
    
    
    $
    2.79$10.00 - $11.88
    
    
    170,083
    
    
    
    1.59
    
    
    $
    11.26
    
    
    
    170,083
    
    
    $
    11.26$12.81 - $17.50
    
    
    21,350
    
    
    
    2.22
    
    
    $
    15.13
    
    
    
    21,350
    
    
    $
    15.13$3.00 - $3.38
    
    
    37,851
    
    
    
    .75
    
    
    $
    28.14
    
    
    
    37,851
    
    
    $
    28.144,135,176
    
    
    
    4.01
    
    
    $
    3.43
    
    
    
    4,135,176
    
    
    $
    3.43


F-21



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE G  STOCK OPTIONS AND WARRANTS (Continued)

Transactions involving the Companys warrants issuance are summarized as
follows:

Number
    
    Weighted Averageof shares
    
    Exercise PriceOutstanding at August 31, 2001
    
    
    868,056
    
    
    $
    25.60Granted
    
    
    
    
    
    
    0.00Exercised
    
    
    
    
    
    
    0.00Cancelled
    
    
    (265,622
    )
    
    
    12.50Outstanding at August 31, 2002
    
    
    602,434
    
    
    $
    17.00Granted
    
    
    3,891,014
    
    
    
    2.83Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (358,272
    )
    
    
    7.94Outstanding at August 31, 2003
    
    
    4,135,176
    
    
    $
    3.43


The weighted-average fair value of stock warrants granted to shareholders
during the years ended August 31, 2003 and 2002 and the weighted-average
significant assumptions used to determine those fair values, using a
Black-Scholes option pricing model are as follows:

2003
    
    2002Significant assumptions (weighted-average):Risk-free interest rate at grant date
    
    
    1.28
    %
    
    
    1.95
    %Expected stock price volatility
    
    
    38
    %
    
    
    23
    %Expected dividend payout
    
    
    
    
    
    
    Expected warrant life-years (a)
    
    3.0 to 4.0
    
    2.0 to 5.0


(a)The expected warrant life is based on contractual expiration dates.

If the Company recognized compensation cost for the non-qualified stock option
and warrant plan in accordance with SFAS No. 123, the Companys pro forma net
loss and net loss per share would have been $3,863,335 and $(0.48) in 2003 and
$2,213,632 and $(1.32) in 2002, respectively. The estimated value of the
options granted to consultants was in lieu of cash compensation for services
performed. The amount of the expense charged to operations in connection with
granting the stock options and warrants was $38,844 and $0 during the year
ended August 31, 2003 and 2002, respectively.

NOTE H  RELATED PARTY TRANSACTIONS

During the years ended August 31, 2003 and 2002, the Company recognized
$3,472,773 and $4,495,653 of sales in connection with services provided
Gibraltar Publishing, Inc., (Gibraltar) representing 30% and 51% of the
Companys sales for the years ended August 31, 2003 and 2002, respectively.
Gibraltar was indebted to the Company for services in the amount of $168,607
(net of allowance for doubtful account of $60,000) and $548,320 at August 31,
2003 and 2002, respectively. An individual that is an officer, director and
significant shareholder of the Company owns Gibraltar. During the year ended
August 31, 2003, the Company paid certain general and administrative expenses
on behalf of Gibraltar, the amount Gibraltar owes the Company is $101,376 at
August 31, 2003.

F-22



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE H  RELATED PARTY TRANSACTIONS (Continued)

The Company also provides services to J&C Nationwide, Inc. and Cheapseats,
Inc., companies owned by a director and significant shareholder of the Company.
The Company recognized $121,895 of sales in connection with services provided
J&C Nationwide, Inc. and Cheapseats, Inc., representing 1% of the Companys
sales for the years ended August 31, 2003. J&C Nationwide, Inc. and
Cheapseats, Inc. were indebted to the Company for services in the amount of
$91,460 at August 31, 2003.

As of August 31, 2002 the company was indebted to Gibraltar Publishing to the
extent of approximately $5,000,000. In December 2002, the Company issued
1,000,000 shares of Series D Preferred Stock to Gibraltar Publishing in
exchange for such debt. The Series D Preferred Stock was converted into
1,000,000 shares of the Companys common stock in February 2003 as final
settlement for the $5,000,000 notes payable to Gibraltar Publishing (Note F).
Accrued interest on the notes of $920,652 was applied to the balance that
Gibraltar Publishing owed the Company for services.

During the year ended August 31, 2003, two of the Companys principal
shareholders advanced funds in the form of unsecured notes, interest payable at
6% per annum, to the Company for working capital purposes. As of August 31,
2003, the amount due to the shareholders is $308,696 (Note D). Additionally, a
principal shareholder of the Company advanced funds in the form of an unsecured,
non-interest bearing note to the Company for working capital purposes. As of
August 31, 2003, the amount due to the shareholder is $120,000. The Company
has agreed to repay the note with the Companys restricted common stock at the rate of 100,000 shares
per $120,000 of advances (Note D).

During
the year ended August 31, 2003, the Company advanced a principal
shareholder in the amount of $1,230. No formal repayment terms and arrangements
exist.

NOTE I  MAJOR CUSTOMERS AND VENDORS

Revenue
from three (3) major customers including related parties, approximated $5,668,000 or 48% of sales
and $3,921,000 or 45% of sales for the years ended August 31, 2003 and 2002,
respectively.

NOTE J  LOSSES PER COMMON SHARE

The following table presents the computation of basic and diluted loss per
share:

2003
    
    2002Net loss available for common shareholders
    
    $
    (3,679,290
    )
    
    $
    (2,212,606
    )Basic and fully diluted loss per share
    
    $
    (0.45
    )
    
    $
    (1.32
    )Weighted average common shares outstanding
    
    
    8,090,736
    
    
    
    1,670,935


Net
loss per share is based upon the weighted average of shares of common
stock outstanding. In February, 2003, a one (1) for ten (10) reverse
stock split of the Companys common stock was effected (See
Note F). Accordingly, all historical weighted average share and
per share amounts have been restated to reflect the reverse stock
split.

F-23



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE K  INCOME TAXES

The Company has adopted Financial Accounting Standard Number 109 (SFAS 109)
which requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statement or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between financial statements
and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Temporary
differences between taxable income reported for financial reporting purposes
and income tax purposes are insignificant.

For income tax reporting purposes, the Companys aggregate unused net operating
losses approximate $15,334,000, which expire through 2024. The deferred tax
asset related to the carryforward is approximately $5,267,000. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit, since in the opinion of management based upon the earnings history of
the Company, it is more likely than not that the benefits will be realized.
Due to significant changes in the Company's ownership, the
Companys future use of its
existing net operating losses may be limited.

Components of deferred tax assets as of August 31, 2003 are as follows:

Non-current:Net operating loss carryforward
    
    $
    5,267,000Valuation allowance
    
    
    (5,267,000
    )Net deferred tax asset
    
    $
    


NOTE L  COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases office space under operating leases in Memphis, Tennessee
for its corporate use. Commitments for minimum rentals under non-cancelable
leases at August 31, 2003 are monthly payments of $3,067 through May 2005.

The Company also leases office space under operating leases in Emeryville,
California for its corporate use. Commitments for minimum rentals under
non-cancelable leases at August 31, 2003 are monthly payments of $5,389 through
December 2003 and $5,550 through December 2004.

The Company leases office space under operating leases in North Carolina for
its corporate use. The lease is non-cancelable with a five-year term through
May 31, 2008 and rental payments are $15,000 per month, adjusted
annually.

The Company incurred  and charged to operations
$308,353 and
$193,870 in rental expense
for the years ended August 31, 2003 and 2002, respectively.

F-24



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE L  COMMITMENTS AND CONTINGENCIES (Continued)

Operating Lease Commitments (Continued)

Commitments for minimum rentals under non-cancelable leases at August 31, 2003
are as follows:

Year
    
    Amount2004
    
    $
    282,7602005
    
    
    229,8032006
    
    
    195,0002007
    
    
    195,0002008
    
    
    210,000Total
    
    $
    1,112,563


Capital Lease Obligations

Computer equipment and software includes the following amounts for capitalized
leases at August 31, 2003 and 2002:

2003
    
    2002Computer equipment and software
    
    $
    1,419,496
    
    
    $
    1,187,011Less: accumulated depreciation and amortization
    
    
    (1,207,120
    )
    
    
    (721,678
    )$
    212,376
    
    
    $
    465,333


Future minimum lease payments required under the capital leases are as follows:

2004
    
    $
    760,5832005
    
    
    49,4752006
    
    
    54,3882007
    
    
    9,5762008 and after
    
    
    $
    874,022Less: amount representing interest
    
    
    (68,977
    )805,045Less: current portion
    
    
    (691,606
    )Long-term portion
    
    $
    113,439


The Company had computer equipment and software purchased under non-cancelable
leases with an original cost of $1,855,238 as of August 31, 2003 and 2002.
Depreciation expense of $1,207,120 and $721,678 has been charged to operations
through August 31, 2003 and 2002, respectively. The Company is currently in
default under the terms of the capital lease agreements in a total amount of $628,552.

F-25



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE L  COMMITMENTS AND CONTINGENCIES (Continued)

Employment Agreements and Consulting Agreements

The Company has an employment agreement with its President which began in
February 2003, it has a two year term and provides for a $150,000 annual salary
and incentive compensation up to 10% of the Companys operating
earnings, adjusted for interest, taxes, depreciation and amortization

The Company has consulting agreements with outside contractors, certain of whom
are also Company stockholders. The Agreements are generally for a term of 12
months from inception and renewable automatically from year to year unless
either the Company or Consultant terminates such engagement by written notice.

Litigation

In November 2002, AmSouth Bank filed a complaint against UITSG, LLC (UITSG),
an entity that entered into an Asset Purchase Agreement with U.S Convergion, in
Sixth Circuit Court for Davidson County, Tennessee at Nashville. The complaint
alleges a breach of contract. AmSouth Bank received a judgment against UITSG
in the amount of $110,513. US Convergion has accounted the full amount as
accrued liabilities prior to the merger with the Company in April 2003.
However, the Company believes that it has meritorious defenses to the
plaintiffs claims and intends to vigorously defend itself against the
plaintiffs claims.

In February 2003, Trammell Crow Services, Inc. filed a complaint against UITSG,
LLC (UITSG), an entity that entered into an Asset Purchase Agreement with U.S
Convergion, in Chancery Court of Shelby County, Tennessee for the Thirtieth
Judicial District at Memphis. The complaint alleges a breach of contract.
Trammell Crow Services, Inc. received a judgment against UITSG in the amount of
$105,917. US Convergion has accounted the full amount as accrued liabilities
prior to the merger with the Company in April 2003. However, the Company
believes that it has meritorious defenses to the plaintiffs claims and intends
to vigorously defend itself against the plaintiffs claims.

In March 2003, Gerald Bastien filed a complaint against U.S. Conversion in the
United States District Court for the District of Wisconsin. The complaint
alleged that Bastien was fraudulently induced to leave his prior employment by
U.S. Convergion and was terminated immediately upon leaving. In October 2003,
Bastien and the Company entered into a settlement agreement whereby the Company
agrees to pay Bastien $65,000 in cash and 85,000 shares of the Companys common
stock. The Company has included the cash and the value of the common shares to be paid in
accrued liabilities as of August 31, 2003.

In May 2002, Ronald Lynn Weindruch filed a complaint against the Company in the
Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County,
Florida. The compliant alleges a breach of contract. In April and May 2003,
Weindruch received judgments against the Company in the amount of $150,721 plus
interest, and attorney fees and costs of $38,384. Both the judgment for damages
and attorney fees and costs are currently on appeal. The Company believes it has meritorious defenses to the plaintiffs claims and intends to vigorously
defend itself against the plaintiffs claims.

F-26



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE L  COMMITMENTS AND CONTINGENCIES (Continued)

Litigation (Continued)

In November 2001, Joseph Landis filed a complaint against the Company in the
Circuit Court of the Eighteenth Judicial Circuit in and for Seminole County,
Florida. The compliant alleges a breach of contract. The Company believes it
has meritorious defenses to the Plaintiffs claims and intends
to vigorously defend itself against the Plaintiff claims.

The Company is subject to other legal proceedings and claims, which arise in
the ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters will not have material adverse effect on its financial position,
results of operations or liquidity.

NOTE M  SEGMENT INFORMATION

The Companys two reportable segments are managed separately based on
fundamental differences in their operations. During 2003 , the Company
operated in the following two reportable segments:



| |  |  | Outsourced contact center solutions and Customer Relationship
Management (CRM) services to customers primarily in the United States
of America.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Systems design, integration, sales and service of internal contact
centers and reselling MicroSofts MS CRM solution primarily in the
United States of America.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

During 2002, the Companys sole reportable business segment was the outsourced
contact center solutions and CRM services

Segment operating income is total segment revenue reduced by operating expenses
identifiable with the business segment. Corporate includes general corporate
administrative costs.

The Company evaluates performance and allocates resources based upon operating
income. The accounting policies of the reportable segments are the same as
those described in the summary of accounting policies. There are no
inter-segment sales.

F-27



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE M  SEGMENT INFORMATION (continued)

The following table summarizes segment asset and operating balances by
reportable segment.

2003
    
    2002Net Sales to External Customers:Outsourced contact center services
    
    $
    8,845,531
    
    
    $
    8,755,369Systems design and integration
    
    
    2,875,077
    
    
    
    Corporate
    
    
    
    
    
    
    Total Sales to External Customers
    
    $
    11,720,608
    
    
    $
    8,755,369Depreciation and Amortization:Outsourced contact center services
    
    $
    967,587
    
    
    $
    993,809Systems design and integration
    
    
    33,886
    
    
    
    Corporate
    
    
    
    
    
    
    Total Depreciation and Amortization
    
    $
    1,001,467
    
    
    $
    993,809General and Administrative Expense:Outsourced contact center services
    
    $
    2,819,516
    
    
    $
    2,749,830Systems design and integration
    
    
    2,252,330
    
    
    
    Corporate
    
    
    1,050,803
    
    
    
    881,352Total General and Administrative Expense
    
    $
    6,122,649
    
    
    $
    3,631,182Capital Expenditures:Outsourced contact center services
    
    $
    334,311
    
    
    $
    311,848Systems design and integration
    
    
    
    
    
    
    Corporate
    
    
    
    
    
    
    Total Capital Expenditures
    
    $
    334,311
    
    
    $
    311,848Operating (losses):Outsourced contact center services
    
    $
    (609,091
    )
    
    $
    (635,937
    )Systems design and integration
    
    
    (1,615,817
    )
    
    
    Corporate
    
    
    (1,058,122
    )
    
    
    (881,352
    )Total Segment Operating Losses
    
    $
    (3,283,030
    )
    
    $
    (1,517,289
    )Segment Assets:Outsourced contact center services
    
    $
    7,477,919
    
    
    $
    2,610,595Systems design and integration
    
    
    1,719,831
    
    
    
    Corporate
    
    
    35,421
    
    
    
    43,526Total Segment Assets
    
    $
    9,233,171
    
    
    $
    2,654,121


F-28



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##### 



MARKET CENTRAL, INC.
(FORMERLY PALADYNE CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2003 AND 2002

NOTE N  SUBSEQUENT EVENTS

On November 5, 2003, the Company arranged for a credit facility for accounts
receivable financing. This facility provides for up to $4,000,000 of borrowing
secured by certain accounts receivable generated by the Company and its
subsidiaries. In addition to interest and fees customary with this type of
facility, the Company provided the lender with a warrant for the purchase of
204,925 shares of the Companys common stock at an exercise price of $2.75.

F-29



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##### 





|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.



|         |                        
|-------- | -----------------------
|ITEM 8A. | CONTROLS AND PROCEDURES

The registrants principal executive officers and principal financial officer,
based on their evaluation of the registrants disclosure controls and
procedures (as defined in Rules 13a-15(f) and 15d-15(e) of the Securities
Exchange Act of 1934) as of December 16, 2003 have concluded that the
registrants disclosure controls and procedures are adequate and effective to
ensure that material information relating to the registrant and its
consolidated subsidiaries is recorded, processed, summarized and reported
within the time periods specified by the SECs rules and forms, particularly
during the period in which this annual report has been prepared.

The registrants principal executive officers and principal financial officer
have concluded that there were no significant changes in the registrants
internal controls or in other factors that could significantly affect these
controls subsequent to September 30, 2003, the date of their most recent
evaluation of such controls, and that there were no significant deficiencies or
material weaknesses in the registrants internal controls.

PART III



|        |                                                                                                                
|------- | ---------------------------------------------------------------------------------------------------------------
|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Executive Officers and Directors

As of November 25, 2003, the executive officers and directors of the Company
were as follows:

DirectorNAME
    
    AGE
    
    Since
    
    POSITIONTerrence J. Leifheit
    
    
    41
    
    
    
    2002
    
    
    Director, CEO and Pres.Glen H. Hammer
    
    
    55
    
    
    
    2003
    
    
    Director, Co-ChairmanWilliam A. Goldstein
    
    
    44
    
    
    
    2003
    
    
    Director, Co-ChairmanJames L. McGovern**#
    
    
    60
    
    
    
    1998
    
    
    DirectorWilliam P. OReilly**#
    
    
    57
    
    
    
    2002
    
    
    DirectorClifford A. Clark
    
    
    51
    
    
    
    2002
    
    
    Director, CFO


26



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NOTE:
    
    The terms of the directors are divided into three separate three-year
classes. Each director holds office until the year in which his term
expires. OReilly and Clarks terms expire in 2003. Leifheit and
McGoverns terms expire in 2004. Mr. OReilly has
submitted his resignation from the Board of Directors effective
December 1, 2003.** member of Audit Committee# member of Compensation Committee


There are no agreements with respect to the election of directors.

The Company has not compensated its directors in cash for service on the Board
of Directors or any committee thereof, but directors are reimbursed for
expenses incurred for attendance at meetings of the Board of Directors and any
committee of the Board of Directors. Certain directors have been compensated
with options in recognition of their service on the Board, as described further
below. Officers are appointed annually by the Board of Directors and each
executive officer serves at the discretion of the Board of Directors.

The Board of Directors has two standing committees: an Audit Committee and a
Compensation Committee. The Audit Committee oversees the Companys accounting
and financial reporting and internal controls, reviews annual audit reports and
management letters and makes recommendations to the Board regarding appointment
of independent auditors. The principal function of the Compensation Committee
is to recommend to the Board of Directors the compensation of officers and to
oversee the administration of the 1999 Stock Option Plan, at the request of the
Board.

None of the officers and/or directors of the Company have, nor have any of the
affiliates or promoters of the Company, filed any bankruptcy petition, been
convicted in or been the subject of any pending criminal proceedings, or the
subject or any order, judgment, decree involving the violation of any state or
federal securities laws within the past five years.

The business experience of each of the persons listed above during the past
five years is as follows:

GLEN H. HAMMER serves as Co-Chairman of the Board of Directors for Market
Central, Inc. Mr. Hammer brings to the Company over 20 years of broad
entrepreneurial experience in the development and growth of both privately held
and publicly traded entities that provide services in which telemarketing and
customer support services are vital parts of the operations. He is the founder
and current Chairman of WACA, one of the nations leading providers of consumer
product warranty related services, with more than 400 employees nationwide and
abroad. Previously, Mr. Hammer was the founder and Chairman of Automobile
Protection Corporation, which grew into one of the automotive industrys most
prominent automobile warranty service companies. Established in 1984, Mr.
Hammer successfully guided Automobile Protection Corporations growth and
transition to a highly successful, publicly traded company in 1988, which was
subsequently sold to Ford Motor Corporation. Additionally, Mr. Hammer has

27



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##### 



substantial business interests in real estate, as well as an extensive
background in management of mergers and acquisitions and the formation of
strategic alliances.

WILLIAM A. GOLDSTEIN serves as Co-Chairman of the Board of Directors for Market
Central, Inc He is the founder and current Chairman and CEO of J & C
Nationwide, Inc., a leading medical staffing company based in Atlanta, Georgia.
Mr. Goldstein has also founded and acted as Chairman of several start-up
ventures in a variety of industries, including technology and other service
industries.

TERRENCE J. LEIFHEIT became President, Chief Operating Officer and a Director
of Paladyne upon the ecom Merger and CEO and Chairman in April 2001. He
presides over all operations of Market Central, Inc. In 1993, he co-founded
Gibralter and led the evolution of that company from hardbound reference
publishing into an on-line publishing and membership organization with $20
million in sales to customers in over 150 countries. In 1998, he founded
Gibralter Data Services, Inc., an Internet service provider specializing in Web
page development and hosting services. Prior to these activities, from 1991 to
1992, he served as Vice President of Florida Safety Corporation and Vice
President of Dallas Chemicals Corporation. Mr. Leifheit attended the
University of Texas at El Paso where he majored in business.

CLIFFORD A. CLARK has been the Companys VP of Finance since February 2001 and
a director since July 2001. From 1999 to 2002, Mr. Clark served as Vice
President of Finance for Gibralter and other entities comprising Gibralter
Publishing, Inc. Mr. Clark served as President of Kane Realty from 1994
through 2001 and was also President of Parallel Corporation from 1991 through
June 2003. Mr. Clarks experience includes more than 25 years in numerous
financial and accounting roles, including 11 years with Price Waterhouse and 5
years in the venture capital arena. Mr. Clark has a bachelors degree in
Business Administration from the University of North Carolina at Chapel Hill.

JAMES L. MCGOVERN has been President of McGovern & Associates since 1996. In
1996, he retired from Norstan where he was President of Norstan Communications
from 1985 to 1996. Prior, he was Chief Operating Officer of Electronic
Engineering Co., which was acquired by Norstan in 1985. McGovern also held a
number of key sales and management positions with Xerox Corporation. He was
Chairman of Virtual Hold Corporation, and a Director for Paknetx, which was
acquired by Aspect Telecommunications. Mr. McGovern holds a B.S. from
Northeastern University.

WLLIAM P. OREILLY is a private investor having been Chairman of Verso
Technology until he retired in December 2000. From August 1995 to September
2000, Mr. OReilly served as CEO of Eltrax Systems, a NASDAQ traded information
technology company that was merged into Cereus Technology in September 2000.
In 1989, he acquired Military Communications Corporation (MCC), which
provided international public switched network services via telephone centers
to the U.S. military worldwide. MCC was sold to WorldCom in 1994. In 1981,
Mr. OReilly founded Lexitel Corporation; which merged with Allnet in 1984 to
form ALC Communications, a leading national long distance carrier. He was also
a founder and CEO of Digital Signal, a leading provider of low-cost fiber optic
capacity that is now part of Qwest.

28



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Mr. OReilly was also a founder and past President of COMPTEL, the
telecommunications industry association.



|         |                       
|-------- | ----------------------
|ITEM 10. | EXECUTIVE COMPENSATION

The following table sets forth all compensation actually paid or accrued by the
Company for services rendered to the Company for the years ended August 31,
2001, 2002 and 2003 to the Companys Chief Executive Officer or others who
earned a salary greater than $100,000 annually for any of the periods below:

STOCKALL OTHER
    
    WARRANTSCOMPEN-
    
    AND OPTIONSNAME AND PRINCIPAL POSITION
    
    YEAR
    
    SALARY
    
    BONUS
    
    SATION
    
    ISSUEDTerrence J. Leifheit, President CEO (1)
    
    
    2001
    
    
    $
    175,000
    
    
    None2002
    
    
    $
    366,664
    
    
    None
    
    
    
    
    
    
    (3
    )2003
    
    
    $
    247,819
    
    
    NoneRonald L. Weindruch, (2)
    
    
    2001
    
    
    
    123,438Executive Vice President, 2001William Hadel
    
    
    2002
    
    
    $
    122,395
    
    
    
    -0-
    
    
    
    9,905
    
    
    
    50,000VP of Marketing
    
    
    2003
    
    
    $
    126,002Robert Hornbuckle
    
    
    2002
    
    
    $
    107,708
    
    
    NoneVP of Information Technology
    
    
    2003
    
    
    $
    110,881


(All other compensation includes consulting and commission income)
1 Mr. Leifheits employment began in February 2001 in conjunction with the ecom
merger.
2 Mr. Weindruchs employment ceased in January 2002.
3 Does not include warrants issued to Mr. Leifheit upon the ecom merger.

In addition to cash compensation, Mr. Leifheit, Mr. Foster and Mr. Weindruch
participate in the Companys stock option plan. The following table details
options granted in fiscal year 2001 and 2003:

# of sharesunderlying
    
    % of total optionsHolder
    
    options
    
    granted in FY 01
    
    Exer. Price
    
    Exp. DateTerrence J. Leifheit
    
    
    51,595
    
    
    
    58.4
    %
    
    $
    10.20
    
    
    
    2/1/05Terrence J. Leifheit
    
    
    10,000
    
    
    
    5.4
    %
    
    $
    2.20
    
    
    
    12/4/05


No stock options held by this individual were exercised in the current fiscal
year whether the options were issued in the current year or in years prior, and
none of those options are in the money.

29



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##### 



Employee Stock Option Plan

The Companys 1999 Stock Option Plan (the Plan), assumed the 1996 Stock
Option Plan, as amended on the migratory merger, which was adopted in 1996 and
amended in October, 1997, July 2001 and October 2003 to increase the number of
issuable shares under the Plan to 1,500,000 shares of common stock and to
clarify the basis for determining fair market value of shares in conjunction
with setting the exercise price of options at issuance. The purpose of the Plan
is to encourage stock ownership by management and employees of the Company, to
provide an additional incentive for those employees to contribute to the
success of the Company and to provide the Company with the opportunity to use
stock options as a means of recruiting new managerial personnel where
appropriate.

The Plan authorizes the grant of options which qualify as incentive stock
options under Section 422A of the Internal Revenue Code (qualified options),
as well as stock options which do not qualify under that section of the Code
(nonqualified options). The Plan is administered by the Companys Board of
Directors who may delegate these duties to the Compensation Committee. The
Board is authorized to select the individual employees to receive options under
the Plan, the number of shares subject to each option, the option term and
other matters specified in the Plan.

The Plan provides that the exercise price of any option may not be less than
100% of the fair market value of the Companys stock at the date of grant,
defined as the average bid and ask price over the prior five days trading in
which at least 1,000 shares have traded. Options must be granted within ten
years from the date the Plan was approved by the Companys shareholders.

A maximum of 1,500,000 shares of the Companys Common Stock are authorized for
issuance pursuant to options granted under the Plan, subject to adjustments to
prevent dilution or enlargement of rights of participants in certain
circumstances. As of August 31, 2003, 298,424 options were outstanding all of
which were issued inside the Plan. As of August 31, 2003, 173,543 shares are
exercisable at an option price per share ranging from $2.00 to $25.00 per share
and with expiration dates from November 2003 through April 2005.

Profit Sharing Plan

The Company sponsors a qualified employee savings plan (commonly referred to as
a 401K plan) for all eligible employees, including all the officers of the
Company. Participants may make contributions from their gross pay (limited to
15% of the employees compensation, as defined), with Paladyne matching such
contributions (subject to certain limitations) at the rate of 25% of the first
6% of each participants contribution. Effective June 1, 2002, the Company
modified the plan to eliminate any matching of contributions. No other
deferred compensation plan is currently in place.

Employment Agreements

The Company has employment agreements with Terrence J. Leifheit, its President
and with four other management personnel. Mr. Leifheits employment agreement
was changed in February 2003 to being a two year term and an annual salary of
$150,000 with incentive compensation payable up to 10% of the
Companys operating earnings, adjusted for interest, taxes,
depreciation and amortization.

30



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|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, to the best of the Companys
knowledge, as of August 31, 2003, with respect to each person known by Company
to own beneficially more than 5% of the outstanding Common Stock, each director
and all directors and executive officers as a group.

AMOUNT ANDNATURE OFNAME AND ADDRESS OF
    
    BENEFICIALBENEFICIAL OWNER
    
    OWNERSHIP (1)
    
    PERCENT OF CLASS (2)Glen H. Hammer*
    
    
    5,257,037
    (3)
    
    
    39.6
    %William A. Goldstein*
    
    
    5,607,037
    (3)
    
    
    42.2
    %Terrence J. Leifheit*
    
    
    2,206,102
    (4)
    
    
    16.6
    %A. Randall Barkowitz
    
    
    700,000
    (5)
    
    
    5.2
    %James L. McGovern*
    
    
    16,479
    (6)
    
    
    0.1
    %William P. OReilly*
    
    
    59,066
    (7)
    
    
    0.4
    %Clifford A. Clark*
    
    
    35,017
    (8)
    
    
    0.3
    %All directors and
executive officers as
a group (7 persons in
group)
    
    
    13,880,738
    (9)
    
    
    100.0
    %


Note:
    
    Unless otherwise noted, all persons address is 1650A Gum Branch Road,
Jacksonville, NC 28540*
    
    Director and/or executive officerNote:
    
    Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting and investment power over
the shares indicated above.




| | (1) |  | Share amounts include, where indicated, Common Stock issuable
upon the exercise of certain stock options and stock warrants which
are exercisable or convertible within sixty days from August 31,
2003
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) |  | Based upon 13,268,969 shares of Common Stock outstanding on
August 31, 2003. Percentage ownership is calculated separately for
each person on the basis of the actual number of outstanding shares
as of August 31, 2003 and assumes the exercise of certain stock options and warrants held by such person
(but not by anyone else) exercisable within sixty days.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31



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| | (3) |  | Based upon 4,090,370 shares owned directly and 1,070,747
shares that may be acquired by Mr. Hammer and Mr. Goldstein pursuant
to the exercise of stock purchase warrants exercisable within sixty
days at exercise price of $3.16 per share.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) |  | Includes (i) 1,151,173 shares owned directly and 1,000,000
shares issued to Gibralter Publishing, Inc which Mr. Leifheit
controls, (ii) 137,831 shares held in a Voting Trust for which Mr.
Leifheit is the sole voting trustee. Includes 34,399 shares that
may be acquired by Mr. Leifheit pursuant to the exercise of stock
purchase options and warrants exercisable within sixty days at
exercise prices from $2.17 to $11.46 per share. Does not include
(i) 36,559 shares of Common Stock underlying warrants owned
directly, (ii) 31,151 shares of Common Stock underlying warrants
held in trust for the benefit of Mr. Leifheits minor children, and
which warrants are not presently exercisable.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) |  | Based upon 700,000 shares owned directly and 183,919 shares
that may be acquired by Mr. Barkowitz pursuant to the exercise of
stock purchase warrants exercisable within sixty days at exercise
price of $3.16 per share.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) |  | Includes 10,000 shares that may be acquired by Mr. McGovern
pursuant to the exercise of stock purchase options and warrants
exercisable within sixty days at exercise prices from $2.20 per
share.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) |  | Includes 21,667 shares that may be acquired by Mr. OReilly
pursuant to the exercise of stock purchase options and warrants
exercisable within sixty days at exercise prices from $2.20 to
$30.00 per share.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) |  | Includes 28,538 shares that may be acquired by Mr. Clark
pursuant to the exercise of stock purchase options and warrants
exercisable within sixty days at exercise prices from $2.20 to
$11.20 per share.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (9) |  | See notes 2 through 8
| | --- |  | ---------------------



|         |                                               
|-------- | ----------------------------------------------
|ITEM 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Gibralter Publishing, Inc. is the Companys principal customer comprising
approximately 30% of the Companys revenues for the fiscal year ended August
31, 2003. J&C Nationwide, Inc. and Cheapseats, Inc. are also related party
customers of the Company. Combined, these two companies represent 1% of the
Companys total revenues.

The Company leases office space to Gibralter Publishing, Inc. in its
Jacksonville facility.

32



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##### 





|         |                                 
|-------- | --------------------------------
|ITEM 13. | EXHIBITS AND REPORTS ON FORM 8-K

(a)
    
    EXHIBITS2.1
    
    Merger Agreement and Plan of Reorganization previously filed as
Exhibit 2.1 to Form 10-SB/A dated December 31, 19972.2
    
    Articles of Merger filed in North Carolina previously filed as
Exhibit 2.2 to Form 8-K dated February 1, 20023.1
    
    Certificate of Incorporation filed in Delaware on January 11,
1999 previously filed as Exhibit 3.1 to Form 10KSB dated August
31, 20023.2
    
    Certificate of Merger filed in Delaware on March 5, 1999
previously filed as Exhibit 3.2 to Form 10KSB dated August 31,
20023.3
    
    Amendment to Certificate of Incorporation dated July 10, 2002
filed in Delaware previously filed as Exhibit 3.3 to Form 10KSB
dated August 31, 20023.4
    
    Certificate of Designations for Series B Preferred Stock filed
in Delaware previously filed as Exhibit 2.1 to Form 8-K dated
February 1, 20023.5
    
    Certificate of Designations for Series C Preferred Stock and
Series D Preferred Stock filed in Delaware on November 1, 2002
previously filed as Exhibit 3.5 to Form 10KSB dated August 31,
20023.6
    
    By-Laws of Registrant previously filed as Exhibit 3.2 (ii) to
Form 10-SB/A, dated December 31, 1997.4.1
    
    Specimen of Common Stock Certificate previously filed as
Exhibit 4.1 to Form 10-SB/A dated December 31, 19974.2
    
    Certificate of Series A Cumulative Convertible Preferred Stock
Certificate previously filed as Exhibit 4.2 to Form 10-KSB
dated November 28, 20004.3
    
    Registration Rights Agreement between Paladyne and Terrence
Leifheit individually and on behalf of the other ecom
shareholders previously filed as Exhibit 4.1 to Form 8-K dated
February 2, 20024.4
    
    Form of Anti-Dilution Warrant previously filed as Exhibit 4.2
to Form 8-K dated February 1, 20024.5
    
    Form of Parent Performance Warrant previously filed as Exhibit
4.3 to Form 8-K dated February 1, 200210.1
    
    Purchase Agreement of Synaptx Access, Inc. f.k.a. North
American Telco / Cable Representatives, Inc. previously filed
as Exhibit 10.2 to Form 10-SB/A dated December 31, 1997


33



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##### 



10.2
    
    Purchase Agreement for Synaptx Impulse, Inc., f.k.a. Maxwell
Partners, Inc. previously filed as Exhibit 10.3 to Form 10-SB/A
dated December 31, 199710.3
    
    Employment Agreement for Ronald L. Weindruch previously filed
as Exhibit 10.5 to Form 10-SB/A dated December 31, 199710.4
    
    New Lease Agreement on Principal Place of Business previously
filed as Exhibit 10.7 to Form 10-KSB dated November 28, 200010.5
    
    Agreement and Plan of Merger for WG Controls, Inc. between
Synaptx Worldwide, Inc. and the WG Controls, Inc. shareholders
as follows: James M. Gleason, Shirley Gleason, Michael
Concialdi, and James Gammon previously filed as Exhibit 10.1 to
Form 8-K dated March 23, 199810.6
    
    Agreement and Plan of Stock for Stock Exchange, dated June 1,
1998 between Synaptx Worldwide, Inc. (the Company) and John
Primus and Jannine Primus previously filed as Exhibit 10.1 to
Form 8-K dated August 14, 199810.7.1
    
    Agreement and Plan of Merger, dated December 21, 2000, among
Paladyne, Acquisition Sub and ecom filed as Exhibit 10.1.1 to
Form 8-K dated February 1, 200210.7.2
    
    Amendment to Agreement and Plan of Merger among Paladyne,
Acquisition Sub and ecom filed As Exhibit 10.1.2 to Form 8-K
Dated February 1, 200210.7.3
    
    Second Amendment to Agreement and Plan of Merger, between
Paladyne and Mr. Leifheit on behalf of himself and as a
representative for the former shareholders of ecom, dated April
9, 2002, previously filed as Exhibit 10.1.3 to Form 8K/A dated
February 1, 200210.8
    
    Indemnification Escrow Agreement among Paladyne, Mr. Leifheit,
Clifford A. Clark and Thelen Reid & Priest LLP, as escrow
agent, previously filed as Exhibit 10.2 to Form 8-K dated
February 1, 200210.9
    
    Form of Lock-up Agreement, previously filed as Exhibit 10.3 to
Form 8-K dated February 1, 200210.10.1
    
    Gibralter Option Agreement, dated as of April 13, 2000, between
Gibralter and ecom, previously filed as Exhibit 10.4.1 to Form
8-K dated February 1, 200210.10.2
    
    First Amendment to Gibralter Option Agreement among ecom,
Gibralter and Paladyne, previously filed as Exhibit 10.4.2 to
Form 8-K dated February 1, 200210.10.3
    
    Gibralter Assets Assignment among ecom and Gibralter,
previously filed as Exhibit 10.4.3 to Form 8-K dated February
1, 2002


34



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##### 



10.10.4
    
    Promissory Note A from ecom to Gibralter in the principal
amount of $1,500,000, previously filed as Exhibit 10.4.4.1 to
Form 8-K dated February 1, 200210.10.5
    
    Amended Promissory Note A from ecom to Gibralter in the
principal amount of $1,500,000, previously filed as Exhibit
10.4.4.1 to Form 8-K dated February 1, 200210.10.6
    
    Promissory Note B from ecom to Gibralter in the principal
amount of $3,500,000, previously filed as Exhibit 10.4.5 to
Form 8-K dated February 1, 200210.10.7
    
    Amended Promissory Note B from ecom to Gibralter in the
principal amount of $3,500,000, previously filed as Exhibit
10.4.5.1 to Form 8-K/A dated February 1, 200210.10.8
    
    Gibralter Security Agreement among ecom and Gibralter,
previously filed as Exhibit 10.4.6 to Form 8-K dated February
1, 200210.10.9
    
    Unconditional Guaranty Agreement, among ecom, Paladyne and
Gibralter, previously filed as Exhibit 10.4.7 to Form 8-K dated
February 1, 200210.10.10
    
    Gibralter Default and Assignment Agreement among ecom,
Gibralter and Paladyne, previously filed as Exhibit 10.4.8 to
Form 8-K dated February 1, 200210.10.11
    
    Gibralter Secondary Operating Agreement among ecom and
Gibralter, previously filed as Exhibit 10.4.9 to Form 8-K dated
February 1, 200210.10.12
    
    Gibralter Escrow Agreement among Gibralter, ecom, Paladyne, and
Kilpatrick Stockton LLP, as escrow agent, previously filed as
Exhibit 10.4.10 to Form 8-K dated February 1, 200210.10.13
    
    Amending Agreement among Gibralter, Paladyne and ecom,
previously filed as Exhibit 10.4.11 to Form 8-K/A dated
February 1, 200210.11
    
    Gibralter Equipment Use Agreement among ecom, Gibralter and
Paladyne, previously filed as Exhibit 10.5 to Form 8-K dated
February 1, 200210.12
    
    Gibralter Teleservices Agreement between Gibralter and ecom
previously filed as Exhibit 10.6 to Form 8-K dated February 2,
200210.13
    
    Employment Agreement between Paladyne and Mr. Leifheit
previously filed as Exhibit 10.7 to Form 8-K dated February 1,
200210.14
    
    Letter of Intent from Market Central, Inc. to Market Central,
Inc. previously filed as Exhibit 10.1 to form 8-K dated October
9, 200310.15
    
    First Amendment to Letter of Intent from Market Central, Inc.
to Market Central, Inc. previously filed as Exhibit 10.2 to
Form 8-K dated October 9, 2003


35



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##### 



10.16
    
    Loan and Security Agreement by and among Paladyne, ecom, and
Market Central, Inc. previously filed as Exhibit 10.3 to Form
8-K dated October 9, 200310.17
    
    Revolving Note from Market Central, Inc. and ecom to Market
Central, Inc. dated August 29, 2003 previously filed as Exhibit
10.4 to Form 8-K dated October 9, 200321.1
    
    *Subsidiaries of Market Central, Inc.31.1
    
    *Certification by the Companys principal executive officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2003.31.2
    
    *Certification by the Companys principal financial officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2003.32.1
    
    *Certification by the Companys principal executive officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.32.2
    
    *Certification by the Companys principal financial officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2003.


*Filed herewith



|(b) |  | Reports on 8-Ks
|--- |  | ----------------

8/15/032   Items 2 and 7. Acquisition or Disposition of Assets; Financial
Statements, Pro Forma Financial Information and Exhibits



|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

The
following is a summary of the fees billed to Market Central by
Russell Bedford Stefanou Mirchandani LLP for professional services
rendered for the fiscal years ended August 31, 2003 and 2002:

Fee Category
    
    Fiscal 2003 Fees
    
    Fiscal 2002 FeesAudit Fees
    

$79,054
    

$92,838Audit-related Fees
    


    

Tax Fees
    

$7,525
    

All Other Fees
    


    

Total Fees
    

$86,579
    

$92,838


Audit
Fees. Consists of fees billed for professional services rendered
for the audit of Market Central's consolidated financial statements
and review of the interim consolidated financial statements included
in quarterly reports and services that are normally provided by
Russell Bedford Stefanou Mirchandani LLP in connection with statutory
and regulatory filings or engagements.

Audit-Related
Fees. Consists of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review
of Market Central's consolidated financial statements and are not
reported under Audit Fees. There were no Audit-Related
services provided in fiscal 2003 or 2002.

Tax
Fees.Consists of fees billed for professional services for tax
compliance, tax advice and tax planning.

All
Other Fees. Consists of fees for products and services other than
the services reported above. There were no management consulting
services provided in fiscal 2003 or 2002.

Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors

The
Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These
services may include audit services, audit-related services, tax
services and other services. Pre-approval is generally provided for
up to one year and any pre-approval is detailed as to the particular
service or category of services and is generally subject to a
specific budget. The independent auditors and management are required
to periodically report to the Audit Committee regarding the extent of
services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date. The
Audit Committee may also pre-approve particular services on a
case-by-case basis.

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##### 



SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly organized.

MARKET CENTRAL, INC.
(Registrant)By:
    
    /S/ Terrence J. LeifheitDate: November 28, 2003
    
    
    
    Terrence J. Leifheit
President, COO and CEO


In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

Name
    
    Position
    
    Date/S/ Terrence J. Leifheit

Terrence J. Leifheit
    
    President, Director
    
    November 28, 2003Glen H. Hammer
    
    Director
    
    November 28, 2003William A. Goldstein
    
    Director
    
    November 28, 2003/S/ William P. OReilly

William P. OReilly
    
    Director
    
    November 28, 2003James
L. McGovern
    
    Director
    
    November 28, 2003/S/ Clifford A. Clark

Clifford A. Clark
    
    Vice President
Finance and Director
    
    November 28, 2003


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