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, 2005


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**
              **(State
                or other jurisdiction**
              **of
                incorporation or organization)**
            **59-3562953**
              **(IRS
                Employer**
              **Identification
                No.)**6701
                Carmel Road Suite 205 Charlotte, NC 28266
              (Address
                of principal executive offices)(zip
                code)Issuer’s
                telephone number:
            (704)
                837-0500





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.




Yes x 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. o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)





Yes o No
x





State
      the
      issuer’s revenue for its most recent fiscal year: $32,277





State
      the
      aggregate market value of the voting and non-voting common equity 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 October 17, 2005.
      $10,849,294





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







**Class**
            **Outstanding
                as of**
              **October
                17, 2005**Common
                Stock, par value $.001 per share
            13,884,071





Documents
      Incorporated by Reference: None


Transitional
      Small business Disclosure Format. Yes o No
x





2




MARKET
        CENTRAL, INC.





FORM
      10-KSB





TABLE
      OF
      CONTENTS


PAGE





PART
                IITEM
                1
            Description
                of Business
            4ITEM
                2.
            Description
                of Property
            10ITEM
                3.
            Legal
                Proceedings
            10ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            11PART
                IIITEM
                5.
            Market
                For Common Equity and Related Shareholder Matters
            12ITEM
                6.
            Management’s
                Discussion and Analysis or Plan of Operations
            13ITEM
                7.
            Financial
                Statements
            21ITEM
                8
            Change
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            22ITEM
                8a
            Controls
                and Procedures
            22ITEM
                8b
            Other
                Information
            22PART
                IIIITEM
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of theExchange
                  Act
            22ITEM
                10.
            Executive
                Compensation
            25ITEM
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            28ITEM
                12.
            Certain
                Relationships and Related Transactions
            29ITEM
                13.
            Exhibits
            31ITEM
                14.
            Principal
                Accountant Fees and Services
            33Signatures
            
            34








3





**DISCLOSURE
      REGARDING FORWARD-LOOKING STATEMENTS**





We
      believe that it is important to communicate our future expectations to our
      security holders and to the public. This report, therefore, contains statements
      about future events and expectations which are "forward-looking statements"
      within the meaning of Sections 27A of the Securities Act of 1933 and 21E of
      the
      Securities Exchange Act of 1934, including the statements about our plans,
      objectives, expectations and prospects under the headings "Description of
      Business" and "Management's Discussion and Analysis or Plan of Operation."
      You
      can expect to identify these statements by forward-looking words such as "may,"
      "might," "could," "would," "anticipate," "believe," "plan," "estimate,"
      "project," "expect," "intend," "seek" and other similar expressions. Any
      statement contained in this report that is not a statement of historical fact
      may be deemed to be a forward-looking statement. Although we believe that the
      plans, objectives, expectations and prospects reflected in or suggested by
      our
      forward-looking statements are reasonable, those statements involve risks,
      uncertainties and other factors that may cause our actual results, performance
      or achievements to be materially different from any future results, performance
      or achievements expressed or implied by these forward-looking statements, and
      we
      can give no assurance that our plans, objectives, expectations and prospects
      will be achieved.





Important
      factors that might cause our actual results to differ materially from the
      results contemplated by the forward-looking statements are contained in this
      report and include, among others, the following:




·
            Our
                ability to successfully license, sell or otherwise transfer for value
                of
                our intelligent Business Process Automation technologies including
                the
                licensing of intellectual property to partners whose products and
                services
                complement our technologies for the benefit of clients.





·
            Our
                ability to raise sufficient capital to carry out our strategic business
                plan.





·
            Increased
                competition in our markets.





·
            The
                greater financial resources of competitors.





·
            Anticipated
                future losses.





·
            Our
                debt level.





·
            Our
                ability to manage anticipated growth and rapid expansion.





·
            Changes
                or advances in technology.





·
            General
                economic and business conditions.




·
            Other
                factors and risks discussed herein and in our other filings with
                the
                Commission.





We
      assume
      no obligation to publicly update or revise any forward-looking statements made
      in this report, whether as a result of new information, future events, changes
      in assumptions or otherwise, after the date of this report. All written or
      oral
      forward-looking statements attributable to us are expressly qualified in their
      entirety by these cautionary statements.




**PART
      I**




**ITEM
              1.**
            **DESCRIPTION
                OF BUSINESS**





Market
      Central, Inc., dba Scientigo, Inc. a Delaware corporation (the "Company") is
      a
      knowledge management company specializing in solutions that are designed
      to
      enable businesses to efficiently
      store, categorize and retrieve information with state of the art speed and
      precision. We believe our products are advanced in the market in the areas
      of
      information capture, storage and retrieval. We have numerous elemental patents
      issued and pending in the field of Enterprise Content Management with a
      revolutionary artificial intelligence we call Business Process Automation.




In
      addition to these elemental patents, we own patents and patent-pending
      technologies that together comprise a
      suite
      of solutions that include software for next-generation search, intelligent
      document recognition, data capture, cleansing, mining, and integration. We
      have
      two subsidiaries, Convey Systems International, Inc. and Tigo Search, Inc.
      Each
      of these subsidiaries is effectively inactive.





4


HISTORY





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





In
      February 2001, through a wholly-owned subsidiary, we merged (the “Merger”) with
      E-Commerce Support Centers, Inc., ("E-Commerce"), pursuant to an Agreement
      and
      Plan of Merger, dated as of December 21, 2000, as amended (collectively, the
      “Merger Agreement”). Upon the Merger, E-Commerce became our wholly-owned
      subsidiary.





In
      February 2003, at a special meeting of the stockholders, our stockholders
      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) the 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, we
      converted all classes of our Preferred Stock to our Common Stock.





In
      April
      2003, we consummated the acquisition of U.S. Convergion, Inc. (“Convergion”)
      pursuant to a Stock Purchase Agreement dated April 3, 2003 entered into by
      and
      among us and each of the six shareholders of Convergion. We acquired all of
      the
      outstanding capital stock of Convergion in exchange for the issuance of 374,630
      restricted shares of our Common Stock and assumption of certain liabilities.
      We
      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
      our Common Stock and a warrant to purchase an additional 182,681 shares of
      our
      Common Stock and assumption of certain liabilities.





In
      May
      2004, we disposed of the U.S. Convergion, Inc. subsidiary by selling the capital
      stock of Convergion that had been acquired in April 2003. This sale, to Sylvia
      Holdings, Inc., a New York based corporation, included costs associated with
      the
      sale that exceeded any proceeds from the sale. We wrote off approximately $4
      million in goodwill, related to the Convergion acquisition, in the second
      quarter of fiscal 2004 which coincided our decision to divest ourselves of
      Convergion; during the third quarter of fiscal 2003 the sale to Sylvia Holdings,
      Inc. was recorded which resulted in a gain of approximately $2.7 million. If
      the
      goodwill write off and sale had occurred in the same quarter our financial
      statements would have reflected a $1.3 million loss on the sale of U.S.
      Convergion, Inc.





In
      April
      2004, we signed a letter of intent to acquire the assets of Convey Systems,
      Inc.
      a wholly owned subsidiary of The TAG Group, Inc. Our CEO is a shareholder of
      the
      The Tag Group, Inc.; he has agreed to forfeit the shares entitled him to
      pursuant to the acquisition that represent his ownership interest in The TAG
      Group, Inc. The letter of intent provides for us to issue approximately
      1,180,488 shares of our Common Stock to The TAG Group, Inc. and/or its creditors
      for the assets which include cash, accounts receivable and certain proprietary
      products in the areas of web conferencing and collaboration and web-based PC
      support tools. The TAG Group, Inc., Convey Systems, Inc. and we have executed
      an
      agreement whereby we are providing day-to-day management and working capital
      for
      Convey Systems, Inc. We will receive the net proceeds from sales of Convey
      products from April 15, 2004 through closing. All net working capital advances
      made by us will reduce the shares issued in the final purchase transaction.
      This
      transaction is now expected to be completed in late 2005. Audit issues and
      stockholder notification requirements at The TAG Group, Inc. resulted in the
      delays.





In
      November 2004, we were notified by our two primary shareholders that they were
      returning, to our treasury, approximately 5,800,000 shares of our Common Stock,
      which was approximately 45% of the total common shares outstanding at that
      time.
      The notification also provided that they, Glen Hammer and Will Goldstein, were
      resigning from our Board of Directors and would return to us, for cancellation,
      a warrant to purchase approximately 2,333,000 shares of our common stock. In
      addition, these shareholders were converting a net of approximately $1,050,000
      in current debt owed them by us into our Series A Preferred Stock. This amount
      was net of approximately $428,000 of amounts owed to us by companies controlled
      by one of these shareholders.





In
      May
      2005, E-Commerce Support Centers, Inc., ("E-Commerce") our wholly-owned
      subsidiary, entered into an Asset Purchase Agreement (the "Asset Purchase
      Agreement") with Customerlinx of North Carolina, Inc., ("Customerlinx NC"),
      a
      wholly-owned subsidiary of Customerlinx Corp. ("Customerlinx"), pursuant to
      which Customerlinx NC agreed to purchase substantially all of the assets of
      E-Commerce. The purchase price for the assets was the sum of $1,100,000, and
      the
      assumption of $85,234 of net liabilities of E-Commerce (the "Liabilities").
      E-Commerce owed Customerlinx the sum of $129,000 in management fees pursuant
      to
      a management agreement which was paid with a reduction in the selling price
      and
      related promissory note (the "Note") to E-Commerce to $971,000, The Note has
      a
      maturity date of 39 months, pays simple interest at five percent (5%), and
      is
      secured by certain assets of Customerlinx NC. In the event that Customerlinx
      NC
      has not pre-paid the Note in full by May 31, 2006, then Customerlinx NC shall
      also pay to E-Commerce on or before July 31, 2006 an amount equal to (I) 0.75
      multiplied by (II) the amount by which (A) the net income (which calculation
      shall only include expenses directly attributable to Customerlinx NC's operation
      of the business in North Carolina and allocable corporate expenses) that
      Customerlinx NC generates from its operation of the business in North Carolina
      during the 12 months ending May 31, 2006 (i.e., the period commencing June
      1,
      2005 and ending May 31, 2006) exceeds (B) the greater of (i) zero or (ii) the
      net income or loss generated from the operation of the business in North
      Carolina by E-Commerce and Customerlinx NC in the calendar year ending December
      31, 2005. On August 31, 2005, we entered into an agreement to sell all of the
      outstanding capital stock of E-Commerce to Lion Development Group II, Inc.
      (the
      "Agreement"). The transaction was closed on August 31, 2005. The purchase price
      for the assets was the sum of $1,000, and the assumption of all liabilities
      of
      E-Commerce. Additionally, we and the purchaser agreed that on or before one
      year
      from the date of the closing, we would in good faith complete a reconciliation
      of claims against E-Commerce and the payment of such claims in order to compute
      the deferred portion of the purchase price. Such deferred purchase amount is
      70%
      of the amount by which the cash received from a note owned by E-Commerce and
      the
      remaining balance of such note exceeds liabilities paid or agreed to be paid
      from the proceeds of the note. Such amount is due to us either in the form
      of
      cash or assignment of a portion of such note. At closing, the note had a
      principal balance of $929,004 and is payable over a remaining term of 40 months
      together with simple interest at an annual rate of five percent (5%), and is
      secured by certain assets of the obligor.





5


PRODUCTS
      AND SERVICES





Our
      current products and services originate from the acquisition of the assets
      of
      Pliant Technologies in July 2003. Pliant’s patents and related intellectual
      property, which we acquired, provided us with a platform to build what we
      believe is a very powerful suite of software for certain significant market
      opportunities, generally considered the Enterprise Content Management (ECM)
      markets by current definitions. We hold multiple patents and patent-pending
      technologies used to develop a suite of products that we believe provide
      solutions to the chaos created by the enormous quantities of information
      available electronically today. Our software includes next generation ECM
      capabilities. ECM includes intelligent
      search for the
      Web and the Enterprise, document
      classification ,
      and intelligent
      document recognition .
      We
      believe our suite of products offers solutions and products for both Enterprise
      and Web Search, including the process of identifying and enabling specific
      content across the web or enterprise to be indexed, searched, and displayed
      to
      users. Document classification allows us to search documents for specific
      content which is we feel particularly useful in the litigation and compliance
      space. Intelligent document recognition (“IDR”) allows us to determine document
      type, extract data from documents, validate that data against other sets of
      data, or classify certain data contained in the document.





Our
      intellectual property currently includes five patents representing revenue
      opportunity via product and OEM licensing. To the extent that others are
      violating any protected rights under these patents, we intend to vigorously
      pursue our rights. The company has invested significant capital in the continued
      development of the Intellectual Property portfolio and has retained top
      specialists to leverage the company’s IP asset in sale or licensing
      opportunities.





Summary
      data on the four patents is as follows:




Patent
                    No.
                  Docket
                    No
                
                Issue Date
                
                Expiration
                  Date
                
                **Title**/Abstract5,842,213
                  002-US-002
                
                11/24/1998
                
                11/23/2015
                
                **Method
                    for Modeling, Storing, and Transferring Data in****Neutral
                    Form**/
                    The present invention simplifies the data modeling process and
                    enables its
                    full dynamic versioning by employing a non-hierarchical, non-integrated
                    structure to the organization of information. This is achieved
                    by
                    expressing data modeling, storage and transfer in a particular
                    non-hierarchical, non-integrated neutral form. The neutral form
                    of the
                    present invention enables complete parallel processing of both
                    data
                    storage and data transfer operations. It also enables the direct
                    integration of separate but related data models and their data
                    without
                    remodeling or reloading. Finally, the present invention enables
                    direct
                    transfer of neutral form information in a manner that includes
                    all of the
                    properties required to independently understand and interpret
                    each
                    transferred datavalue.6,393,426002-US-003
                
                5/21/2002
                
                11/23/2015
                
                **Method for Modeling, Storing, and
                    Transferring
                    Data in****Neutral Form**/Continuation
                    In Part (CIP) of above
  6
 6,516,320
                  002-US-004
                
                2/4/2003
                
                2/3/2020
                
                **Tiered
                    Hashing for Data Access/**A
                    memory for access by a program being executed by a programmable
                    control
                    device includes a data access structure stored in the memory,
                    the data
                    access structure including a first and a second index structure
                    (each
                    having a plurality of entries) together forming a tiered index.
                    At least
                    one entry in the first structure indicates an entry in the second
                    structure. The number of entries in the second structure being
                    dynamically
                    changeable. A method for building a tiered index structure includes
                    building a first- level index structure having a predetermined
                    number of
                    entries, building a second-level index structure having a dynamic
                    number
                    of entries, and establishing a link between an entry in the first-level
                    index structure and an entry in the second-level index structure.6,370,534
                  002-US-005
                
                4/9/2002
                
                4/8/2019
                
                **Blocking
                    Techniques for Data Storage/**Methods to store a first data structure having zero or more fixed-length
                    data items and a reference to a second data structure are described.
                    The
                    second data structure having a variable-length data item (indicated
                    by the
                    reference) may also be stored in the memory. In addition, methods
                    to
                    validate and repair a pointer element having a file identification
                    portion
                    and a file offset portion are described. The methods include
                    determining
                    if the file identification portion indicates an allocated file
                    and
                    indicating an invalid pointer condition if the file identification
                    portion
                    indicates an unallocated file, else determining if the file offset
                    portion
                    indicates an allocated block in the allocated file, and indicating
                    an
                    invalid pointer condition if the file offset portion indicates
                    an
                    unallocated block. The described methods may be stored in any
                    media that
                    is readable and executable by a programmable control
                    device.





We
      have
      also continued the marketing of the Convey products that are part of the
      acquisition that we expect to be completed in late 2005.





Our
      ECM
      solutions include a suite of software products and services designed to solve
      some of the most common and costly problems organizations face today. Our
      products are marketed under the ScientigoTM and TigoTM names, which are trademark
      protected by the Company. These solutions include products for:





**•** Intelligent
      Document Recognition for paper-to-digital conversion and information extraction
      (IDR)





**•** Intelligent
      Classification and Search for enterprise and web content management





Each
      of
      these solutions utilizes artificial intelligence derived from elements of our
      patented technology platform and consequently we believe has significant
      advantages over solutions that do not have the benefit of these patents. The
      highlights of our product offerings include:





ARTIFICIAL
      INTELLIGENCE HIGHLIGHTS





**•** Neutral
      Form: Artificial Intelligence translator converts to a universal
      format




**•**Zero
      Latency Index: Single index for all forms of structured and unstructured data
      that grows automatically and incrementally, never requiring
      reorganization





**•**Minimal
      Hardware Demands: Storage, retrieval, and processing algorithms that do not
      depend on structural optimization for performance





**•** Petabyte
      Scalability: **** Continuous
      incremental pooling at enterprise scale





**•** Peer-to-peer
      networking capable.





7


DATA
      MANAGEMENT





•
      The
      patented ScientigoTM storage schema contains all the organizational power of a
      database, but without the limitations imposed by database structure. The storage
      schema is non-hierarchical and the data elements are stored as meta tags
      allowing greater storage flexibility and zero latency.





Our
      patented artificial intelligence infrastructure operates continuously and
      incrementally to update and to process disparate structured and unstructured
      information “as-is”.




•
      We **** have
      two
      patents that address XML (Extensible Machine Language). These are U.S. Patent
      No. 5,842,213, entitled *Method
      for Modeling, Storing and Transferring Data in Neutral Form* ,
      issued
      on Nov. 24, 1998 (“the ‘213 Patent”) and U.S. Patent No. 6,393,426, also
      entitled *Method
      for Modeling, Storing and Transferring Data in Neutral Form,* issued
      May 21, 2002 (“the ’426 Patent”).





**Tigo** TM **Intelligent Document Recognition (IDR) Solution**





Our
      unique, multi-patented Intelligent Document Recognition (IDR) software product
      is part of our suite of Enterprise Content Management solutions. We provide
      users with the ability to process structured, semi-structured, and unstructured
      forms and perform data extraction to a 90% plus level of automation with a
      single-pass, all at accuracy levels on the order of double-key entry manual
      processes. TigoTM IDR solution, along with our shared-savings pricing model,
      produces significant savings for our clients with minimal risk. TigoTM
      IDR:





**•** Replaces
      slow, labor intensive document processing with high-speed automation of
      extraction and validation





**•** Artificial
      intelligence identifies form type and reads labels and content as a human
      would





**•** Artificial
      intelligence learns correct document interpretation by observing operator
      corrections





**•** Retrieve
      archived images based on all content within the image using intent-based
      search





**•** Rapid
      and
      inexpensive installation of the software





**•** Quick
      and
      efficient new form set-up with little or no programming





**•** >99.99%
      Accuracy on validated entries





**TigoTM
      Intelligent Search Solution**





We
      offer
      a multi-patented Intelligent Search product as part of the suite of Enterprise
      Content Management solutions. With ScientigoTM, users can perform a single,
      intelligent search on all their structured or unstructured data information
      regardless of location and type, including documents, databases, and
      applications such as email, or even scanned paper documents.





Scientigo’sTM
      innovative solution quickly returns results with a number of sophisticated
      characteristics such as:





**•** Sophisticated
      Relevancy Ranking w/ Personalization





**•** Intent-Based
      and Context-Sensitive Search





**•** Appropriate
      Topics Automatically Generated with Interactive Drill Down





**•** Automated
      Classification





**•** Page
      Granularity





**•** Learning
      System, So User Preferences Improve Relevancy with Each Use





**•** Simple
      to
      implement and maintain, yet scalable enough to support unlimited users and
      volumes of content on inexpensive hardware





**•** Automated,
      Customizable Definition Sets Supported at the Engine Level





8


**•** Natural
      Language Processing





**•** Artificial
      Intelligence differentiates our search capabilities versus other search
      engines





The
      foundation of our TigoTM Search is a patented artificial intelligence
      infrastructure that operates continuously and incrementally to update and to
      process various structured and unstructured information “as is” from disparate
      sources throughout the enterprise. Raw content is first converted into neutral
      form data. Artificial intelligence processes are then performed in real time
      to
      index, categorize, and integrate this neutral form data on the basis of the
      context-sensitive semantic interpretation rather than literal forms of the
      content.




We
      currently manage the operations of Convey Systems, Inc. and are receiving the
      net proceeds from sales of its products. The purchase of Convey is expected
      to
      be completed in November 2005. The Convey products include Snap Conferencing,
      a
      collaborative an inexpensive, simple-to-use, on-line web conferencing, and
      Tech
      Umbrella, a remote technical support software product for desktop computers
      that
      enables technicians to support remote desktop computers 7 days a week, 24 hours
      a day.





This
      technology offers dynamic and interactive products and services that allow
      organizations to provide virtual sales presentations, remote desktop support,
      distance-learning sessions, spontaneous web conferences, and live customer
      service and desktop support over the Internet. The Convey technology will also
      be integrated with our suite of products to further complete Market Central’s
      Enterprise Content Management suite of software products. Convey's proprietary
      technology provides e-commerce product support and customer service using a
      live, video-based portal that supports real-time interactions, and the ability
      to collaborate upon demand, the product includes  text chat, digital
      photo,
      encrypted VOIP, Data, full-motion two way video and voice share, URL sharing
      features, as well as full collaboration and application-sharing capabilities.
      The Convey solutions are described below:





•
            Snap
                - Snap Conferencing is designed to be used in a corporate environment
                as a
                quick, easy, and inexpensive conferencing solution for multi-user
                video,
                voice, and application sharing. We believe Snap has the most advanced
                application sharing capabilities on the market with the easiest user
                interface.





•
            Tech
                Umbrella, a part of the Convey product line is designed to provide
                a
                Web-based package that encompasses leading edge technology for
                streamlining PC support and repair services. Tech Umbrella is offered
                to
                the IT marketplace, software and hardware developers, providers,
                integrators and supporters, as a comprehensive suite of online tools.
                Using Tech Umbrella, the IT technician should be able to efficiently
                and
                easily diagnose and repair technical problems on remote terminals
                without
                the difficulty of licensing, installing, and pre-configuring a third-party
                software application. Tech Umbrella is working with corporate affiliate
                companies and franchisors to penetrate the IT marketplace from the
                top
                down. This should enable a quicker presence in the marketplace, as
                entire
                groups become armed with Tech Umbrella's product packages. The Company
                has
                identified over 100,000 independent affiliates and an additional
                3,000 IT
                franchises.





BUSINESS
      DEVELOPMENT AND STRATEGY





We
      have
      continued to pursue a strategy to divest ourselves of unprofitable and non-core
      operations that began in the fourth quarter of fiscal 2004. Our Enterprise
      Content Management (ECM) ** solutions
      and related products are being marketed through a series of partnerships with
      content management OEM’s and integrators. We believe that the OEM’s and
      integrators in the ECM space provide us with existing relationships and a sales
      and marketing presence that would take us years to develop. Marketing in this
      fashion (at the wholesale level), allows us to limit the size of our sales
      and
      marketing staff and still achieve economies of scale in the market place. Growth
      will occur as customer wholesalers increase their sales of our products and
      as
      we add new wholesale OEM’s and integrators. We are constantly looking for additional
      acquisitions and strategic partnerships to increase sales and market share.
      We
      believe our patented technologies and corresponding products provide unique,
      efficient solutions to numerous significant market niches. Configuring
      our ECM technologies together will enable us to produce  turn-key
      industry solutions.





The
      above
      are our stated future goals. However, there can be no assurance that we will
      ever achieve our expressed goals.





POTENTIAL
      NEW ACQUISITIONS AND PRODUCT LINES





We
      intend
      to investigate, should opportunities arise, strategic acquisitions or mergers
      that fit our long-term objectives as financing and business conditions warrant,
      although there can be no assurance that we will be able to finalize any future
      acquisitions. Although we occasionally explore additional acquisition and merger
      opportunities, there can be no assurances that financing for any future
      acquisitions will be available on terms acceptable to us or at all, or that
      any
      future acquisitions or mergers will be consummated.





9


SALES
      AND
      MARKETING





We
      market
      and sell our products and services through our employees and through the
      cooperative efforts of our business partners. We employ
      an
      integrated marketing effort designed to establish market presence
      and generate
      potential clients. Lead generation and branding efforts are the responsibility
      of our 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 we currently offer and intend to offer our 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. We are of the opinion that there
      are
      no significant competitors for our integrated software platform; however,
      competitors exist for the various component “modules” within the platform.





We
      compete primarily with products offered by ABBYY, Datacap, OCE, SWT, ReadSoft
      and AnyDoc for Intelligent Document Recognition and, Google, Yahoo,
      MicroSoft, Autonomy, Convera, FAST Search and Transfer and Verity for
      Intelligent Search. Some of our existing competitors, as well as a number of
      potential new competitors, have larger technical staffs, more established and
      larger sales and marketing organizations and greater financial resources than
      us. There can be no assurance that we will continue to compete successfully
      with
      our existing competitors or will be able to compete successfully with new
      competitors. In addition, there can be no assurance that competitors will not
      develop products that are superior to our products or achieve greater market
      acceptance. Competitive pressures in the form of aggressive price competition
      could also have a material adverse effect on our business, operating results
      and
      financial condition. Our future success will depend significantly upon our
      ability to increase our share of our target markets, to maintain and increase
      our renewal revenues from existing customers and to sell additional products,
      product enhancements, maintenance and support agreements and training services
      to existing customers and new customers. There can be no assurance that we
      will
      continue to compete favorably or that competition will not have a material
      adverse effect on our business, operating results or financial
      condition.





EMPLOYEES




As
      of
      September 30, 2005, we employed 21 individuals, consisting of 4 executives
      and
      17 professionals, sales representatives, and office staff. We believe that
      our
      relationships with our employees are satisfactory.





BUSINESS
      SEGMENTS




We
      currently operate in one business segment which is the knowledge management
      segment.





**ITEM
              2.**
            **DESCRIPTION
                OF PROPERTY**





Our
      principal executive offices are located at 6701 Carmel Road Suite 205,
      Charlotte, NC 27226. This facility is leased through September 2010 and covers
      approximately 5,000 square feet at an approximate annual rental rate of $85,000.
      We believe our current premises are adequate for current purposes and if
      necessary that we would be able to obtain alternative or additional
      space.




**ITEM
              3.**
            **LEGAL
                PROCEEDINGS**





In
      September 2004, an order requesting the U.S. Attorney for Eastern District
      of
      North Carolina to prosecute an alleged criminal contempt of court by us, that
      occurred in the case of Tweddle Litho Corp. vs. Gilbralter and Scientigo, Inc.,
      or Tweddle Case, was entered by a judge in the U.S. District Court, Eastern
      District of North Carolina in the United States District Court for the Eastern
      District of North Carolina. The U.S. Attorney for the Eastern District of North
      Carolina issued a criminal information against us alleging contempt of court
      by
      virtue of our violation of a court order entered on May 13, 2004 in the Tweddle
      Case when we sold our wholly-owned subsidiary, Convergion, on June 2, 2004
      in
      violation of the provisions of the order of May 13, 2004 enjoining us from
      transferring any of our assets out of the ordinary course of business. In
      October 2004, we and the U.S. Attorney entered into a written plea agreement
      whereby we agreed to pay $50,000 for the alleged criminal contempt of court.
      The
      matter was ruled on and accepted in U.S. District Court for the Eastern District
      of North Carolina during the three months ended May 31, 2005. We were also
      placed on probation for one year.





10


In
      April
      2004, iGate, Inc. (“iGate”) filed a complaint against Gilbralter Publishing,
      Inc. (“Gilbralter”) and us in the U.S. District of the Eastern District of North
      Carolina, Southern Division, claiming that we were liable to iGate in the amount
      of approximately $725,000. iGate asserts that Gilbralter owed this sum to iGate
      and that a fraudulent conveyance occurred when Gilbralter forgave $5,000,000
      in
      liabilities of a wholly-owned subsidiary of ours which were guaranteed by us
      in
      exchange for our issuing to Gilbralter shares of our Common Stock and warrants
      to purchase our Common Stock. In May 2004, a default judgment was entered
      against us. In November 2004, the court vacated the default judgment and granted
      us leave to answer the complaint. We filed our answer and asserted
      affirmative defenses alleging absolute defenses to the claims of iGate. We
      asserted that we had no liability to iGate and had meritorious defenses with
      respect to all liability asserted in the complaint.




In
      May  2005, the Company was notified by a
      software licensed monitoring group that it was not in compliance with certain
      computer software licensing agreements. The Company believes that it has
      meritorious defenses to the allegations and intends to vigorously defend
      itself against the claims.





In
      the
      ordinary course of business, we have become subject to additional litigation
      and
      claims on various matters. There exists the possibility that we will not prevail
      in all cases. However, based on anticipated adverse final determination of
      these
      litigations and claims, we do not believe that such litigation and claims would
      have a material adverse effect on our financial condition.





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





None




11





**PART
      II**




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





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.OB”, 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 quarter in the last two fiscal years. Prices reported
      represent prices between dealers, do not include retail markups, markdowns
      or
      commissions and may not represent actual transactions.




**Fiscal
                Year****2005**
            
            **2004****High**
            
            **Low**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            1.85
            
            $
            1.25
            
            $
            3.30
            
            $
            1.91Second
                Quarter
            
            
            1.56
            
            
            1.15
            
            
            2.19
            
            
            1.60Third
                Quarter
            
            
            2.13
            
            
            1.25
            
            
            1.85
            
            
            1.05Fourth
                Quarter
            
            
            1.80
            
            
            1.35
            
            
            1.96
            
            
            .95





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.








12





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
      October 17, 2005, there were 301 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 in the foreseeable future. In addition, the Company has a deficit
      stockholders’ equity, which would restrict payment of cash dividends. The
      Company currently intends to retain and invest future earnings to finance its
      operations.




SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY
      COMPENSATION PLANS




The
      following table sets forth as of August 31, 2005,
      the number of common shares to be issued upon the exercise of outstanding
      warrants, options and rights related to those arrangements and transactions
      as
      defined in §201(d)
      of
      Regulation S-B.




Plan
                  Category
              
              Number
                  of securities to be
                issued
                  upon exercise of
                outstanding
                  options,
                warrants
                  and rights
              
              Weighted
                  average exercise
                price
                  of outstanding
                options,warrants
                and
                  rights
              
              Number
                  of securities
                remaining
                  available for
                future
                  issuanceEquity
                  compensation plans approved by security holders
              
              
              551,424
              a
              $
              2.03
              
              
              2,198,576Equity
                  compensation plans not approved by security holders
              
              
              8,151,958
              b
              $
              1.26
              
              
              43,250,555Total
              
              
              8,703,382
              
              $
              1.31
              
              
              45,449,131




aIncludes
      shares of common stock issuable upon the exercise of stock options and warrants
      issued pursuant to individual compensation arrangements (as such term is defined
      in under Regulation S-B §201(d)
      promulgated
      under the Exchange Act) in consideration for goods and services provided by
      certain of our employees, consultants, vendors, customers, suppliers and
      lenders. Generally, the warrants and options that are granted pursuant to
      individual compensation arrangements are generally exercisable for a term of
      four years and have exercise price equal to the fair market value of our common
      stock at the time of the warrant/option issuance.




bAs
        these
        shares of common stock are issued pursuant to individual compensation
        arrangements, there is no reserve for future issuances other than the total
        number of authorized shares of common stock available to us under our
        Certificate of Incorporation.




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.





During
      the fiscal year ended August 31, 2005, the Company issued 6,769,669 shares
      of
      common stock and cancelled 6,840,370 shares of common stock upon the
      contribution of such shares by two major stockholders and the completion of
      the
      agreement with our former President. The issuances included 83,000 shares for
      services rendered by vendors, 31,064 to employees for compensation, 35,000
      to
      Board of Director members as compensation, 235,970 upon exercises of options,
      461,300 upon exercises of warrants and 5,923,335 issued as a result of the
      conversion of all of our Series A Preferred Stock into common shares. The
      cancellations related to the return of shares reflected as common stock
      receivable in the 2004 financial statements. These shares were issued pursuant
      to exemptions 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**





General





We
      are a
      provider of proprietary, patented software for data capture, cleansing, mining,
      integration, search, and intelligent document recognition.





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





13


·
            goodwill
                and intangible asset impairment





·
            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 r evenues
      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.





14





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.








15





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 2005 we analyzed goodwill for impairment at the Company level. As a result
      of the ongoing reorganization of our reporting structure, we anticipate that,
      in
      the future, we 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 2005. 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
      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.





Income
      taxes





We
      account 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. SFAS
      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.





We
      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.








16





RESULTS
      OF OPERATIONS





The
      following selected financial information has been derived from our 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.





**Comparison
      of Years Ended August 31, 2005 and 2004**





Revenues




The
      Company’s revenues from continuing operations of $32,277 and $24,279, for the
      years ended August 31, 2005 and 2004, respectively reflect an increase of $7,998
      or 32.9%. This increase is not significant due to the early stage of our
      marketing efforts related to our software products. Revenue in fiscal 2005
      relate to software license sales and charges for proof of concept with customers
      evaluating our software. The revenue in fiscal 2004 relates to consulting
      services provided to a customer that was evaluating our software. After the
      disposition of the call center operations in May 2005, all revenues related
      to
      those operations have been combined into the caption “loss from discontinued
      operations”.





Cost
      of revenues





Cost
      of
      revenues decreased $7,712 to zero in 2005 as a result of there being no direct
      costs associated with the revenue generated during the year ended August 31,
      2005.





Selling,
      General and Administrative





Selling,
      general and administrative expenses (“SG&A”) during the year ended August
      31, 2005 and 2004, including depreciation and amortization were $9,224,887
      and
      $3,521,387, respectively. This increase of $5,703,500 from 2004 was the result
      of several components including a $4,145,521 charge in 2005 relating to the
      value of the $.85 exercise price warrants issued in August. We issued warrants
      for 5,923,335 shares of common stock in conjunction with the conversion of
      our
      Series A Preferred Stock into our common stock, the charge to operations was
      the
      difference between the $.85 warrant price and the market price of our stock
      at
      time of issuance which was $1.44. Legal costs during 2005 totaled $1,092,037
      which is an increase of $746,087 over the 2004 total of $345,950. This increase
      in legal costs was caused by increased litigation defense expenditures relating
      to our defense in a number of lawsuits many of which have now been settled
      or
      dismissed. In addition to legal defense work, we charged to operations
      approximately $273,026 of legal costs related to our patent filings, preparation
      and consulting relating to future licensing or sale of our existing patents.
      Commissions and costs related to the sale of the Senior Convertible Notes of
      $640,634 and $-0- were charged to expense in 2005 and 2004,
      respectively.





The
      additional increase of $171,259 in SG&A is due to increases and declines in
      several areas, the significant areas of which are discussed below. Personnel
      costs were $1,499,217 and $1,219,743 in 2005 and 2004, respectively. The decline
      in personnel costs related to the sale and discontinued operations at the call
      center was offset by increasing payroll costs related to our software
      productization activities resulting in a net increase in payroll costs of
      $279,474 from 2004 to 2005. Rent expense charged to operations was $67,684
      and
      $15,097 in 2005 and 2004, respectively. The increase of $52,587 relates to
      the
      expansion and relocation of our Company’s headquarters to Charlotte, NC. Lawsuit
      settlement costs of $400,000 in 2004 compared to $203,000 in 2005 resulted
      from
      fewer matters in litigation. Board of Director compensation was $49,689 and
      $120,000 in 2005 and 2004, respectively, which was entirely stock grants or
      options in 2004 resulted from the reduction in number of Board members in 2005
      and fewer awards for past and previously unpaid services. Depreciation
      of
      equipment and amortization of Patent and Trademark Costs accounted for $55,028
      and $42,346 of SG&A in the fiscal year ended August 31, 2005 and 2004,
      respectively.





17




Other
      Income





Other
      income of $283,178 for the year ended August 31, 2005 was primarily the result
      of the settlement of a previously recorded accounts payable liability at a
      discount of approximately $235,000 and the recognition of approximately $59,000
      of income related to the amortization of the discount related to the Notes
      Receivable.





Interest
      Expense





Interest
      expense of $2,319,409 and $131,030 during the years ended August 31, 2005 and
      2004, respectively represents an increase of $2,188,379 from 2004 to 2005.
      The
      primary factor in this dramatic increase in interest expense was the charge
      related to the 20% discount on the 6.4% Senior Convertible Notes (“Notes”) sold
      during fiscal 2005. This charge accounted for $1,289,290 of the increase. The
      sale of these Notes also resulted in discounts related to the underlying value
      of the warrants which accompanied the Notes and that related to the value of
      the
      conversion feature. This discount is charged to Additional Paid in Capital
      initially and then amortized with a charge to interest expense. The total amount
      of these amortization charges was $810,205 and $-0- in 2005 and 2004,
      respectively. Interest expense in 2005 also includes actual interest paid on
      these Notes of $68,300 and $-0- was expensed in 2005 and 2004, respectively.





NET
      OPERATING LOSS





The
      Company has accumulated approximately $11,900,000 of net operating loss carry
      forwards as of August 31, 2005, 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 carry forwards. The carry forwards
      expire in the year 2026. 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 carry forwards
      that can be used.





LIQUIDITY
      AND CAPITAL RESOURCES





We
      have
      successfully completed several steps in our long-range plan to stabilize our
      financial structure. These steps included the raising of significant equity
      and
      debt capital during the years ended August 31, 2005, and 2004, and the sale
      and
      restructure of certain corporate assets which were significantly contributing
      to
      our on-going losses. The first step in our restructuring process was the
      offering of our Series A Preferred Stock, which raised approximately $3,000,000
      in fiscal year 2004, and approximately $3,000,000 in fiscal year
      2005. We also issued Series A Preferred Stock in exchange for
      $1,051,217 of notes payable to related parties during fiscal 2005. With
      this capital, we were able to substantially reduce vendor payables and generally
      enable obligations that were in arrears or default to be paid or settled. In
      the
      final quarter of fiscal year 2005, we offered an exchange to the holders of
      our
      Series A Preferred Stock which provided for their preferred shares to be
      exchanged for shares of our Common Stock on a one-for-one basis and warrants
      to
      purchase shares of our Common Stock exercisable at $.85 per share. In August
      2005, all holders of the Series A Preferred Stock accepted the exchange offer
      and all of such shares of Series A Preferred Stock were exchanged into 5,923,335
      shares of common stock and 5,923,335 warrants exercisable at $.85 per share.
      We
      received $563,364 and $366,726 prior to and subsequent to August 31, 2005,
      respectively, as a result of exercise of these warrants. We thereafter
      eliminated the Series A Preferred Stock as a designated series of our preferred
      stock.





In
      May
      2005, we began the offering of a new class of secured debt, our 2005 6.4% Senior
      Convertible Notes. Through the fourth quarter of fiscal year 2005, we issued
      $6,446,450 principal amount of these Notes, which were sold at a 20% discount
      from principal amount, and received proceeds, prior to commissions, of
      $5,157,160. Additional issuances after fiscal year 2005 resulted in another
      $150,000 of proceeds, prior to commissions, related to these Notes. The Notes
      are convertible into one share of our Common Stock for each $1.3325 of principal
      amount of the Notes. In addition, for each $2.00 of principal amount of the
      Notes issued, the purchasers of the Notes received a warrant to purchase one
      share of Common Stock at $1.00 per share. At August 31, 2005, we had issued
      3,223,225 of these warrants, 140,625 of which have been exercised resulting
      in
      $140,625 of proceeds to us during the year. The proceeds from the issuance
      of
      the Notes and the exercise of the warrants will be utilized to further implement
      our marketing plans for the suite of products discussed above and to monetize
      our intellectual property portfolio. In May 2005, we sold the assets of our E-Commerce subsidiary. Thereafter, we sold the stock in the E-Commerce subsidiary resulting in the complete divestiture of our call center operations
      and related liabilities. This resulted in the Company’s current liabilities
      declining $1,746,762 and eliminated a unprofitable business segment. These
      steps
      were critical in providing us with a manageable level of current debt and trade
      payables, and to lay the foundation to enable us to transform ourselves from
      a
      call center dominated operation to a technology based company.





18


These
      steps have resulted in our improved cash position, $2,124,029 at August 2005
      compared to $344,099 at August 2004 and a current ratio of greater than 1:1.
      This foundation, together with approximately 5,100,000 unexercised $.85 warrants
      and 3,070,000 unexercised $1.00 warrants provides us with the proper capital
      structure to execute our plans. The exercise of these warrants is not assured
      but we expect that they will be exercised during the second and third quarters
      of our fiscal 2006.





Net
      cash
      used in operating activities in the years ended August 31, 2005 and 2004,
      respectively was $5,107,658 and $4,721,885 due to the net loss from continuing
      and discontinued operations of $12,386,928 and $14,514,854 (excluding gain
      on
      sale of discontinued operation of $1,235,785 and $2,784,370, respectively).
      This
      was comprised of a net increase (decrease) in working capital items of
      approximately $446,891and ($380,934). The effect on cash from operating
      activities caused by these losses were offset by non-cash write off of the
      impaired goodwill relating to the our Convergion subsidiary that was sold of
      $-0- and $4,062,003 and depreciation and amortization expenses of $55,028 and
      $576,115 during fiscal 2005 and 2004, respectively. Additional non-cash expenses
      that were an offset to the effect on cash from operating activities include
      $2,090,495 and $-0- of charges related to the discount of and amortization
      of
      beneficial conversion features of the Senior Convertible Notes, respectively.
      There were also 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 $874,189 and $1,224,270 during fiscal 2005 and 2004,
      respectively.





Net
      cash
      used in investing activities in fiscal 2004 was $287,634. This was due
      to
      the purchase of certain fixed assets necessary to the operations of the
      business. Net
      cash
      provided by investing activities in fiscal 2005 includes $129,000 of cash
      received from sale of ecom, and $112,027 of cash used to purchase certain fixed
      assets.





Cash
      provided by financing activities in fiscal 2005 and 2004 was $6,870,615 and
      $5,015,665 due to sales of Senior Convertible Notes and Series A Preferred
      Stock
      in 2005 and the sale of Series A and Series B Preferred Shares in 2004. The
      Company also entered into an accounts receivable financing agreement and
      advances (repayments) from lender (factor) amounted to ($483,590) and $496,388
      during 2005 and 2004, respectively.





By
      adjusting its operations to the level of capitalization, management believes
      it
      has sufficient capital resources to meet projected cash flow deficits. However,
      if during that period or thereafter, we are not successful in generating
      sufficient liquidity from operations or in raising sufficient capital resources,
      on terms acceptable to us, this could have a material adverse effect on our
      business, results of operations liquidity and financial condition.




The
      Notes
      and Warrants that we issued to investors may not have been exempt from the
      registration requirements under the Securities Act of 1933 or from the
      registration or qualification requirements under the securities laws of certain
      states. Consequently, the issuance of the Notes and Warrants may not have been
      in compliance with the Securities Act of 1933 and the state securities laws
      of
      the states of Alabama, Georgia, Maryland, Mississippi, New Jersey,
      North Carolina, Ohio, South Carolina, Utah and Virginia. Our Board of Directors
      has determined to conduct a rescission offer to address these securities laws
      compliance issues by allowing the holders of the Notes and Warrants to rescind
      the purchase of such securities and sell those securities back to us if they
      so
      desire. Generally, if the rescission offer is accepted, we will repurchase
      such
      Notes and Warrants at the price investors paid, plus interest at the current
      state statutory rate per year, if any, from the date of purchase through the
      date of payment pursuant to the rescission offer, less interest previously
      paid
      to Note holders. This rescission offer will be accompanied by an exchange
      offer to Note holders who do not accept the rescission offer pursuant to which
      such holders will be entitled to receive, at their election, new notes and
      new
      warrants with more favorable conversion and exercise terms, respectively. The
      rescission offer will be available for a thirty-day period which will begin
      upon
      the effectiveness of a registration statement which we have filed with the
      SEC
      with respect to the rescission offer .
      While
      we do not believe a significant number of holders of the Notes and Warrants
      will
      accept the rescission offer, there can be no assurances as to the ultimate
      outcome of the offer. We do not currently have a sufficient balance of cash
      or
      cash equivalents to satisfy the rescission offer if accepted by all
      holders.




Accordingly,
      should the rescission offer be accepted by
      a significant number of note holders, this may materially adverse affect on
      the
      Company's consolidated financial condition.





EFFECTS
      OF RECENT ACCOUNTING PRONOUNCEMENTS


In
        November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
        151,
        Inventory Costs - an amendment of ARB No. 43, Chapter 4. This Statement amends
        the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the
        accounting for abnormal amounts of idle facility expense, freight, handling
        costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
        previously stated that “...under some circumstances, items such as idle facility
        expense excessive spoilage, double freight, and rehandling costs may be so
        abnormal as to require treatment as current period charges...” This Statement
        requires that those items be recognized as current-period charges regardless
        of
        whether they meet the criterion of “so abnormal.” In addition, this Statement
        requires that allocation of fixed production overheads to the costs of
        conversion be based on the normal capacity of the production facilities.
        This
        Statement is effective for inventory costs incurred during fiscal years
        beginning after June 15, 2005. Management does not believe the adoption of
        this
        Statement will have any immediate material impact in the Company.
 
 In
        December 2004, the FASB issued SFAS No.152, “Accounting for Real Estate
        Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67” (“SFAS
        152) The amendments made by Statement 152 This Statement amends FASB Statement
        No. 66, Accounting for Sales of Real Estate, to reference the financial
        accounting and reporting guidance for real estate time-sharing transactions
        that
        is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
        Estate Time-Sharing Transactions. This Statement also amends FASB Statement
        No.
        67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
        to state that the guidance for (a) incidental operations and (b) costs incurred
        to sell real estate projects does not apply to real estate time-sharing
        transactions. The accounting for those operations and costs is subject to
        the
        guidance in SOP 04-2. This Statement is effective for financial statements
        for
        fiscal years beginning after June 15, 2005, with earlier application encouraged.
        The Company does not anticipate that the implementation of this standard
        will
        have a material impact on its financial position, results of operations or
        cash
        flows.





19


On
        December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
        Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
        Payment (“SFAS 123R”). SFAS 123R requires that compensation cost related to
        share-based payment transactions be recognized in the financial statements.
        Share-based payment transactions within the scope of SFAS 123R include stock
        options, restricted stock plans, performance-based awards, stock appreciation
        rights, and employee share purchase plans. The provisions of SFAS 123R are
        effective as of the first interim period that begins after June 15, 2005.
        Accordingly, the Company will implement the revised standard in the third
        quarter of fiscal year 2005. Currently, the Company accounts for its share-based
        payment transactions under the provisions of APB 25, which does not necessarily
        require the recognition of compensation cost in the financial statements.
        Management is assessing the implications of this revised standard, which
        may
        materially impact the Company’s results of operations in the third quarter of
        fiscal year 2005 and thereafter.
 
 On
        December 16, 2004, FASB issued Statement of Financial Accounting Standards
        No.
        153, Exchanges on Nonmonetary Assets, an amendment of APB Opinion No. 29,
        Accounting for Nonmonetary Transactions (“SFAS 153”). This statement amends APB
        Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. Under SFAS 153,
        if a
        nonmonetary exchange of similar productive assets meets a commercial-substance
        criterion and fair value is determinable, the transaction must be accounted
        for
        at fair value resulting in recognition of any gain or loss. SFAS 153 is
        effective for nonmonetary transactions in fiscal periods that begin after
        June
        15, 2005. The Company does not anticipate that the implementation of this
        standard will have a material impact on its financial position, results of
        operations or cash flows.
 
 In
        March
        2005, the FASB issued FASB Interpretation (FIN) No. 47, “Accounting for
        Conditional Asset Retirement Obligations, an interpretation of FASB Statement
        No. 143”, which requires an entity to recognize a liability for the fair value
        of a conditional asset requirement obligation when incurred of the liability’s
        fair value can be reasonably estimated. The Company is required to adopt
        the
        provisions of FIN 47 no later than the second quarter of its fiscal 2006.
        The
        Company does not expect the adoption of this Interpretation to have a material
        impact on its consolidated financial position, results of operations or cash
        flows.
 
 In
        May
        2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
        154,
“Accounting Changes and Error Corrections, a replacement of APB Opinion No.
        20
        and FASB Statement No. 3.” SFAS 154 requires retrospective application to prior
        periods’ financial statements for changes in accounting principle, unless it is
        impracticable to determine either the period-specific effects or the cumulative
        effect of the change. SFAS 154 also requires that retrospective application
        of a
        change in accounting principle be limited to the direct effects of the change.
        Indirect effects of a change in accounting principle, such as a change in
        non-discretionary profit-sharing payments resulting from an accounting change,
        should be recognized in the period of the accounting change. SFAS 154 also
        requires that a change in depreciation, amortization, or depletion method
        for
        long-lived, non-financial assets be accounted for as a change in accounting
        estimate effected by a change in accounting principle. SFAS 154 is effective
        for
        accounting changes and corrections of errors made in fiscal years beginning
        after December 15, 2005. Early adoption is permitted for accounting changes
        and
        corrections of errors made in fiscal years beginning after the date this
        Statement is issued. The Company does not expect the adoption of this SFAS
        to
        have a material impact on its consolidated financial position, results of
        operations or cash flows.





20





INFLATION





Our
      opinion is that inflation has not had a material effect on our
      operations.




OFF-BALANCE
      SHEET ARRANGEMENTS




We
      do not maintain off-balance sheet arrangements,
      nor do we participate in non-exchange traded contracts requiring fair value
      accounting treatment.




**ITEM
              7.**
            **FINANCIAL
                STATEMENTS**





The
      consolidated financial statements for Market Central, Inc. as of and for the
      fiscal years ended August 31, 2005 and 2004 are included herein in response
      to
      Item 7 of this Form 10-KSB.







21








**SECURITIES
      AND EXCHANGE COMMISSION**





**WASHINGTON,
      D.C. 20549**








**FINANCIAL
      STATEMENTS AND SCHEDULES**





**AUGUST
      31, 2005 AND 2004**








**FORMING
      A PART OF ANNUAL REPORT**


**PURSUANT
      TO THE SECURITIES EXCHANGE ACT OF 1934**








**MARKET
      CENTRAL, INC.**





F-1





MARKET
      CENTRAL, INC.


INDEX
      TO
      FINANCIAL STATEMENTS





PageReport
                of Independent Registered Certified Public Accounting Firm
            F-3Consolidated
                Balance Sheets at August 31, 2005 an 2004
            F-4Consolidated
                Statements of Losses for The Years Ended
              August
                31, 2005 and 2004
            F-5Consolidated
                Statements of Deficiency in Stockholders' Equity
              for
                The Years Ended August 31, 2005 and 2004
            F-6
                ~ F-7Consolidated
                Statements of Cash Flows for The Years Ended
              August
                31, 2005 and 2004
            F-8
                - F-9Notes
                to Consolidated Financial Statements
            F-10
                ~ F-36





F-2





**RUSSELL
      BEDFORD STEFANOU MIRCHANDANI LLP**


**CERTIFIED
      PUBLIC ACCOUNTANTS**







**REPORT
      OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM**








Board
      of
      Directors


Market
      Central, Inc.


Charlotte,
      NC








We
      have
      audited the accompanying consolidated balance sheets of Market Central, Inc.
      and
      subsidiaries (the "Company") as of August 31, 2005 and 2004 and the related
      consolidated statements of losses, deficiency in stockholders' equity, and
      cash
      flows for each of the two years ended August 31, 2005. 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 standards of the Public Company
      Accounting Oversight Board (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, 2005 and 2004, and the results of its operations
      and its cash flows for each of the two years ended August 31, 2005, in
      conformity with accounting principles generally accepted in the United States
      of
      America.




/s/
                RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
              
              Russell
                Bedford Stefanou Mirchandani LLP
              Certified
                Public Accountants




McLean,
      Virginia


October
      4, 2005, except as to Note R, which is as of


November
      7, 2005





F-3
 
 **MARKET
          CENTRAL, INC.**
 **CONSOLIDATED
            BALANCE SHEETS**
 **AUGUST
              31, 2005 AND 2004**


2005
            
            2004**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            2,124,029
            
            $
            344,099Accounts
                receivable, net of allowance for doubtful accounts of $0 at August
                31,
                2005 and 2004
            
            
            10,000
            
            
            719,262Accounts
                receivable - related parties, net of allowance for doubtful accounts
                of $0
                at August 31, 2005 and 2004 (Note M)
            
            
            -
            
            
            277,119Other
              receivable - related party (Note M)
            
            
            81,090
            
            
            -Notes
                receivable - related parties (Notes F )
            
            
            378,003Prepaid
                expenses and other current assets
            
            
            124,777
            
            
            149,282Total
                Current Assets
            
            
            2,717,899
            
            
            1,489,762Property
                and Equipment: (Note D)Furniture
                and fixtures
            
            
            69,526
            
            
            42,273Computers
                and software
            
            
            185,985
            
            
            101,211255,511
            
            
            143,484Less:
                accumulated depreciation
            
            
            (120,349
            )
            
            (97,761
            )Property
                and Equipment, net
            
            
            135,162
            
            
            45,723Net
                assets from discontinued operations (Note B)
            
            
            
            
            
            870,827Other
                Assets:Restricted
                Cash (Note C)
            
            
            
            
            
            109,617Goodwill
                (Note B)
            
            
            745,050
            
            
            745,050Deposits
                and other
            
            
            2,524
            
            
            25,308Patents
                and trademarks, net of accumulated amortization of $64,880 and $32,440
                at
                August 31, 2005 and 2004, respectively (Note E)
            
            
            32,338
            
            
            64,778Total
                Other Assets
            
            
            779,912
            
            
            944,753Total
                Assets
            
            $
            3,632,973
            
            $
            3,351,065**LIABILITIES
                AND DEFICIENCY IN STOCKHOLDERS' EQUITY**Current
                Liabilities:Accounts
                payable and accrued liabilities (Note H)
            
            $
            2,123,810
            
            $
            3,442,462Note
                payable to related parties (Note G and M)
            
            
            365,148
            
            
            1,210,474Notes
                payable, current portion (Note G)
            
            
            -
            
            
            1,830,422Due
                to factor (Note J)
            
            
            
            
            
            483,590Accrued
                preferred stock dividend (Note F)
            
            
            
            
            
            61,067Unearned
                income (Note K)
            
            
            181,101
            
            
            -Total
                Current Liabilities
            
            
            2,670,059
            
            
            7,028,015Senior
                Convertible Notes Payable (Note I)
            
            
            1,354,770Notes
                payable - long term (Note G)
            
            
            793,921Other
                long term liabilities
            
            
            546Commitments
                and Contingencies (Note Q)
            
            
            -
            
            
            -Liabilities
                from discontinued operations (Note B)
            
            
            
            
            
            1,598,434Deficiency
                in Stockholders' Equity:Preferred
                stock, par value $.001 per share; 10,000,000 shares authorized;Series
                A - none and 2,251,407 shares issued and outstanding at August 31,
                2005
                and 2004, respectively (Note K)
            
            
            
            
            
            2,251Series
                B - 350,000 shares issued and outstanding at August 31, 2004 (Note
                K)
            
            
            350
            
            
            350Common
                stock, par value $.001 per share; 75,000,000 shares authorized; 13,320,992
                and 13,391,693 shares issued and outstanding at August 31, 2005 and
                August
                31, 2004, respectively (Note K)
            
            
            13,321
            
            
            13,392Common
                stock receivable (Note M)
            
            
            -
            
            
            (800
            )Stock
                subscription payable (Note K)
            
            
            102,064Additional
                paid-in-capital
            
            
            43,278,143
            
            
            27,672,231Accumulated
                deficit
            
            
            (44,580,201
            )
            
            (32,962,808
            )Total
                Deficiency in Stockholders' Equity
            
            
            (1,186,323
            )
            
            (5,275,384
            )Total
                Liabilities and Deficiency in Stockholders' Equity
            
            $
            3,632,973
            
            $
            3,351,065





See
      accompanying notes to consolidated financial statements





F-4
 **MARKET
          CENTRAL, INC.**
 **CONSOLIDATED
            STATEMENTS OF LOSSES**
 **FOR
            THE YEARS ENDED AUGUST 31, 2005 AND 2004**


2005
            
            2004Revenues,
                net
            
            $
            32,277
            
            $
            24,279Cost
                of sales
            
            
            -
            
            
            7,712Gross
                profit
            
            
            32,277
            
            
            16,567Operating
                expenses:Selling,
                general and administrative
            
            
            9,169,859
            
            
            3,479,041Depreciation
                and amortization (Note D and E)
            
            
            55,028
            
            
            42,346Total
                operating expenses
            
            
            9,224,887
            
            
            3,521,387Loss
                from operations
            
            
            (9,192,610
            )
            
            (3,504,820
            )Other
                income
            
            
            283,178
            
            
            -Interest
                expenses
            
            
            (2,319,409
            )
            
            (131,030
            )Total
                other expenses
            
            
            (2,036,231
            )
            
            (131,030
            )Loss
                from continuing operations, before income taxes and discontinued
                operations
            
            
            (11,228,841
            )
            
            (3,635,850
            )Provision
                for income taxes
            
            
            -
            
            
            -Loss
                from continuing operations, before discontinued operations
            
            
            (11,228,841
            )
            
            (3,635,850
            )Loss
                from discontinued operations (Note B)
            
            
            (1,196,936
            )
            
            (6,831,687
            )Gain
                from sales of discontinued operations (Note B)
            
            
            1,235,785
            
            
            2,784,370Net
                (loss)
            
            $
            (11,189,992
            )
            $
            (7,683,167
            )Preferred
                stock dividend - beneficial conversion feature (Note K)
            
            
            
            
            
            (875,000
            )Cumulative
                convertible preferred stock dividend (Note K)
            
            
            (427,401
            )
            
            (61,067
            )Net
                loss attributable to common shareholders
            
            $
            (11,617,393
            )
            $
            (8,619,234
            )Net
                income (loss) per common share (basic and assumed diluted) (Note
                O)
            
            $
            (0.90
            )
            $
            (0.65
            )Continuing
                operations:
            
            
            (0.90
            )
            
            (0.34
            )Discontinued
                operations:
            
            
            0.00
            
            
            (0.31
            )Weighted
                Average Shares OutstandingBasic
                and assumed diluted
            
            
            12,884,516
            
            
            13,293,655





See
      accompanying notes to the consolidated financial statements





F-5





**MARKET
      CENTRAL, INC.**


**CONSOLIDATED
      STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY**


**FOR
      THE YEARS ENDED AUGUST 31, 2005 AND 2004**





Common
                Shares
            
            Stock
                Amount
            
            Series
                A Shares
            
            Series
                A Par Value
            
            Series
                B Shares
            
            Series
                B Par Value
            
            Additional
                Paid-In-Capital
            
            Common
                Stock Receivable
            
            Accumulated
                Deficit
            
            TotalBalance
                at August 31, 2003
            
            13,268,969
            
            $13,269
            
            -
            
            $-
            
            -
            
            $-
            
            $21,876,847
            
            $-
            
            $(24,343,574)
            
            $(2,453,458)Issuance
                of Series A Preferred Stock in connection with a private placement,
                net of
                costs and fees (Note K)
            
            
            -
            
            
            -
            
            
            2,251,407
            
            
            2,251
            
            
            -
            
            
            -
            
            
            2,770,009
            
            
            -
            
            
            -
            
            
            2,772,260Issuance
                of common stock to consultants in exchange for options exercised
                at $.01
                per share (Note K)
            
            
            67,500
            
            
            68
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            91,800
            
            
            -
            
            
            -
            
            
            91,868Issuance
                of Series B Preferred Stock in connection with a private placement,
                net of
                costs and fees (Note K)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            350,000
            
            
            350
            
            
            1,282,562
            
            
            -
            
            
            -
            
            
            1,282,912Warrants
                issued to consultants in exchange financing costs (Note L)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            383,579
            
            
            -
            
            
            -
            
            
            383,579Stock
                options and warrants issued to consultants in exchange for services
                rendered (Note L)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            649,939
            
            
            -
            
            
            -
            
            
            649,939Beneficial
                conversion feature of Series B Preferred Stock (Note K)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            875,000
            
            
            -
            
            
            (875,000
            )
            
            -Common
                stock issued to Directors in exchange for compensation (Note
                K)
            
            
            55,224
            
            
            55
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            98,829
            
            
            -
            
            
            -
            
            
            98,884Common
                stock to be canceled in connection with Settlement Agreement and
                Mutual
                Release with the Company's former CEO (Note M)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (356,334
            )
            
            (800
            )
            
            -
            
            
            (357,134
            )Series
                A preferred dividend accrual (Note K)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            (61,067
            )
            
            (61,067
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,683,167
            )
            
            (7,683,167
            )Balance
                at August 31, 2004
            
            
            13,391,693
            
            $
            13,392
            
            
            2,251,407
            
            $
            2,251
            
            
            350,000
            
            $
            350
            
            $
            27,672,231
            
            $
            (800
            )
            $
            (32,962,808
            )
            $
            (5,275,384
            )




See
      accompanying notes to the consolidated financial statements








F-6





**MARKET
      CENTRAL, INC.**


**CONSOLIDATED
      STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
      (Continued)**


**FOR
      THE YEARS ENDED AUGUST 31, 2005 AND 2004**





Common
                Shares
            
            Stock
                Amount
            
            Series
                A Shares
            
            Series
                A Par Value
            
            Series
                B Shares
            
            Series
                B Par Value
            
            Stock
                Subscription Payable
            
            Additional
                Paid-In-Capital
            
            Common
                Stock Receivable
            
            Accumulated
                Deficit
            
            TotalBalance
                forward
            
            
            13,391,693
            
            $
            13,392
            
            
            2,251,407
            
            $
            2,251
            
            
            350,000
            
            $
            350
            
            $
            -0-
            
            $
            27,672,231
            
            $
            (800
            )
            $
            (32,962,808
            )
            $
            (5,275,384
            )Issuance
                of Series A Preferred Stock in connection with a private placement,
                net of
                costs and fees (Note K)
            
            
            -
            
            
            -
            
            
            2,516,270
            
            
            2,516
            
            
            -
            
            
            -
            
            
            
            
            
            2,966,834
            
            
            -
            
            
            -
            
            
            2,969,350Issuance
                of Series A Preferred Stock in conjunction with conversion of debt
                (Note K
                and M)
            
            
            
            
            
            
            
            
            788,906
            
            
            789
            
            
            
            
            
            
            
            
            
            
            
            1,050,428
            
            
            
            
            
            
            
            
            1,051,217Issuance
                of common stock to employees in exchange for options exercised at
                $.01 per
                share (Note K)
            
            
            235,970
            
            
            236
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            188,824
            
            
            -
            
            
            -
            
            
            189,060Common
                stock canceled in connection with Settlement Agreement and Mutual
                Release
                with the Company's former CEO (Note M)
            
            
            (800,000
            )
            
            (800
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            800
            
            
            -
            
            
            -0-Common
                stock canceled in conjunction with return of common stock by the
                Company’s
                two significant shareholders (Note K)
            
            
            (5,880,740
            )
            
            (5,881
            )
            
            
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            5,881
            
            
            
            
            
            -
            
            
            -0-Common
                stock canceled in conjunction with return of common stock and loan
                to
                shareholder (Note F and M)
            
            
            (159,630
            )
            
            (160
            )
            
            
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            (239,285
            )
            
            -
            
            
            -
            
            
            (239,445
            )Issuance
                of common stock to consultants in exchange for services rendered
                (Note
                K)
            
            
            83,000
            
            
            83
            
            
            
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            107,817
            
            
            
            
            
            
            
            
            107,900Stock
                options and warrants issued to consultants in exchange for services
                rendered (Note L)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            127,987
            
            
            -
            
            
            -
            
            
            127,987Beneficial
                conversion feature of 6.4% Senior Convertible Notes and related Warrants
                (Note I)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            5,901,885
            
            
            -
            
            
            -
            
            
            5,901,885Common
                stock issued to Directors in exchange for compensation (Note
                K)
            
            
            35,000
            
            
            35
            
            
            
            
            
            
            
            
            -
            
            
            -
            
            
            
            
            
            48,765
            
            
            -
            
            
            -
            
            
            48,800Issuance
                of common stock to employees in exchange for compensation (Note
                K)
            
            
            31,064
            
            
            31
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            44,485
            
            
            
            
            
            
            
            
            44,516Warrants
                issued to lender in exchange for cancellation of financing agreement
                (Note
                L)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            64,019
            
            
            
            
            
            
            
            
            64,019Warrants
                issued to officers in exchange for salary deferrals (Note
                L)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            21,123
            
            
            
            
            
            
            
            
            21,123Issuance
                of common stock in conjunction with exercise of warrants issued with
                6.4%
                Senior Convertible Notes and with Series A Preferred Stock exchange
                offer
                and payment of preferred stock dividend (Note K)
            
            
            461,300
            
            
            461
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            412,743
            
            
            
            
            
            
            
            
            413,204Common
                stock issued in conjunction with Series A Preferred Stock exchange
                offer
                (Note K)
            
            
            5,923,335
            
            
            5,923
            
            
            5,556,583
            
            
            5,556
            
            
            
            
            
            
            
            
            
            
            
            488,101
            
            
            
            
            
            (427,401
            )
            
            61,067Warrants
                issued as commissions for Senior Convertible Note Sales (Note
                L)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            270,784
            
            
            
            
            
            
            
            
            270,784Warrants
                issued with Series A exchange offer (Note L)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,145,521
            
            
            
            
            
            
            
            
            4,145,521Stock
                subscription payable (Note K)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            102,064
            
            
            
            
            
            
            
            
            
            
            
            102,064Net
                loss
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (11,189,992
            )
            
            (11,189,992
            )Balance
                at August 31, 2005
            
            
            13,320,992
            
            $
            13,321
            
            
            -0-
            
            $
            -0-
            
            
            350,000
            
            $
            350
            
            $
            102,064
            
            $
            43,278,143
            
            $
            -0-
            
            $
            (44,580,201
            )
            $
            (1,186,323
            )




See
      accompanying notes to the consolidated financial statements





F-7


**MARKET
        CENTRAL, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED AUGUST 31, 2005 AND
        2004**
  Cash
                  flows from operating activities:
              
              **2005**
              
              **2004**Net
                  loss
              
              $
              (11,189,992
              )
              $
              (7,683,167
              )Add
                  (deduct):Loss
                  on discontinued operations
              
              
              1,196,936
              
              
              6,831,687Gain
                  on disposal of discontinued operations
              
              
              (1,235,785
              )
              
              (2,784,370
              )Loss
                  from continuing operations
              
              
              (11,228,841
              )
              
              (3,635,850
              )Adustrnent
                  to reconcile net loss to net cash:Depreciation
                  and amortization
              
              
              55,028
              
              
              42,346Depreciation
                  and amortization - ecom subsidiary
              
              
              
              
              
              533,769Impairment
                  of goodwill discontinued operations
              
              
              
              
              
              4,062,003Warrants
                  issued in conjunction with conversion of Series A Preferred Stock
                  into
                  Common Stock
              
              
              4,145,521Discount
                  on Senior Convertible notes charged to operations
              
              
              2,090,495Common
                  stock issued in exchange for services rendered
              
              
              390,276
              
              
              190,752Stock
                  options and warrants issued in exchange for services rendered
              
              
              483,913
              
              
              1,033,518Other
                  income from settlement of accounts payable
              
              
              (235,661
              )Other
                  income from amortization of note receivable discount
              
              
              (58,344
              )Write-off
                  of inventory
              
              
              -
              
              
              9,678Write-off
                  of Convergion fixed assets
              
              
              -
              
              
              254,520(Increase)
                  decrease in:Restricted
                  cash
              
              
              109,617
              
              
              (109,617
              )Accounts
                  receivable and other receivable
              
              
              476,556
              
              
              266,344Costs
                  in excess of billings
              
              
              -
              
              
              50,446Other
                  assets
              
              
              47,289
              
              
              (30,210
              )Increase
                  (decrease) In:Cash
                  disbursed in excess of available funds
              
              
              -
              
              
              (111,581
              )Accounts
                  payable and accrued expenses
              
              
              (186,571
              )
              
              (215,257
              )Unearned
                  income
              
              
              
              
              
              (231,059
              )Net
                  cash provided by/(used in) continuing operations
              
              
              (3,910,722
              )
              
              2,109,802Net
                  cash (used in) discontinued operations
              
              
              (1,196,936
              )
              
              (6,831,687
              )Net
                  cash (used in) Operating Activities
              
              
              (5,107,658
              )
              
              (4,721,885
              )Cash
                  flows from investing activities:Cash
                  received from sale of ecom
              
              
              129,000Purchase
                  of property and equipment
              
              
              (112,027
              )
              
              (287,634
              )Net
                  cash provided by (used in) investing activities
              
              
              16,973
              
              
              (287,634
              )Cash
                  flows from financing activities:Issuance
                  of notes receivable, net of repayments
              
              
              (355,660
              )Proceeds
                  from sale of Senior Convertible Notes
              
              
              5,157,160Proceeds
                  from tale of Series A Preferred Stock, net of costs and fees
              
              
              2,969,350
              
              
              2,772,260Proceeds
                  from stock subscription payable
              
              
              102,064Proceeds
                  from common stock warrant exercises
              
              
              413,204Proceeds
                  from sale of Series B preferred stock, net of costs and fees
              
              
              -
              
              
              1,282,912Repayment
                  of capital leases
              
              
              (101,303
              )Net
                  proceeds (repayments) from notes payable
              
              
              (830,610
              )
              
              464,105Due
                  to factor
              
              
              (483,590
              )
              
              496,388Net
                  cash provided by financing activities
              
              
              6,870,615
              
              
              5,015,665Net
                  increase (decrease) in cash and cash equivalents
              
              
              1,779,930
              
              
              6,146Cash
                  and cash equivalents at beginning of year
              
              
              344,099
              
              
              337,953Cash
                  and cash equivalents at end of year
              
              $
              2,124,029
              
              $
              344,099


See
      accompanying notes to the consolidated financial statements




F-8




**MARKET
        CENTRAL, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED AUGUST 31, 2005 AND 2004**
  (continued)Supplemental
                    Disclosures of Cash Flow Information:Cash
                    paid during the period for interest
                
                $
                248,670
                
                $
                156,390Cash
                    paid during the period for income taxes
                
                
                -
                
                
                -Common
                    stock issued in exchange for services rendered
                
                
                390,276
                
                
                190,752Stock
                    options and warrants issued in exchange for services
                    rendered
                
                
                483,913
                
                
                1,033,518Preferred
                    stock issued in exchange for notes payable
                
                
                1,051,218
                
                
                -Accrued
                    preferred stock dividend
                
                
                427,401
                
                
                61,067Accounts
                    receivable net against notes payable to related
                    parties
                
                
                428,735
                
                
                -Beneficial
                    conversion feature on convertible notes
                
                
                3,419,797
                
                
                -Value
                    of warrants attached to convertible notes
                
                
                2,482,088
                
                
                -Disposal
                    of US Convergion, Inc.: (Note B)Sylvia
                    common stock received
                
                
                
                
                $
                500Assets
                    disposed of
                
                
                
                
                
                (68,211
                )Debts
                    assumed by Sylvia
                
                
                
                
                
                2,967,081Net
                    gain on disposal of segment
                
                
                
                
                
                (2,784,370
                )Disposition
                    costs
                
                
                -
                
                
                115.000Disposal
                    of ecommerce support centers, inc.: (Note B)Cash
                    received
                
                $
                130,000
                
                
                -Note
                    received
                
                
                971,000Assets
                    disposed of
                
                
                (1,511,977
                )
                
                -Debts
                    assumed by CustornerLinx and Lion Development
                
                
                1,746,762
                
                
                -Net
                    gain on disposal of segment
                
                
                (1,235,785
                )
                
                -Disposition
                    costs
                
                $
                100,000
                
                
                -


See
        accompanying notes to the consolidated financial
        statements


F-9


MARKET
        CENTRAL, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
        31, 2005 AND 2004




**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. (the "Company") is a software and intellectual property enterprise
      with products which provide a platform to build a suite of software for
      Enterprise Content Management (ECM) needs. The Company holds multiple patents
      and patent-pending technologies and have developed the suite of products that
      provides solutions for managing the significant quantities of electronic
      information available today. The Company’s software includes next generation ECM
      capabilities. ECM includes; intelligent search for the internet and each
      enterprise, classification and intelligent document recognition.





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries, Convey Systems International, Inc. (“CSI”), Tigo
      Search, Inc., ecommerce support centers, inc. (“ecom”) and U.S. Convergion, Inc.
      ("Convergion"). All significant inter-company transactions and balances have
      been eliminated in consolidation. The Company sold its ecom and Convergion
      subsidiaries in August 2005 and May 2004, respectively. The ecom and Convergion
      business segments are accounted for as discontinued operations, and accordingly,
      amounts in the financial statements, and related notes for all periods shown
      have been restated to reflect discontinued operations accounting. Summarized
      results of the discontinued businesses and information relating to the sale
      of
      these subsidiaries are further described in Note B.





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.





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.





For
      revenue from product sales, the Company recognizes revenue in accordance with
      Staff Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which
      superceded Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN
      FINANCIAL


STATEMENTS
      ("SAB101").





SAB
      101
      requires that four basic criteria must be met before revenue can be recognized:
      (1) persuasive evidence of an arrangement exists; (2) delivery has occurred;
      (3)
      the selling price is fixed and determinable; and (4) collectibility is
      reasonably assured. Determination of criteria (3) and (4) are based on
      management's judgments regarding the fixed nature of the selling prices of
      the
      products delivered and the collectibility of those amounts. Provisions for
      discounts and rebates to customers,





F-10


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (Continued)**




estimated
      returns and allowances, and other adjustments are provided for in the same
      period the related sales are recorded. The Company defers any revenue for which
      the product has not been delivered
      or is subject to refund until such time that the Company and the customer
      jointly determine that the product has been delivered or no refund will be
      required.





SAB
      104
      incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
      MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. This issue addresses determination
      of
      whether an arrangement involving more than one deliverable contains more than
      one unit of accounting and how the arrangement consideration should be measured
      and allocated to the separate units of accounting. EITF 00-21 became effective
      for revenue arrangements entered into in periods beginning after June 15,
      2003. For revenue arrangements occurring on or after August 1, 2003,
      the
      Company revised its revenue recognition policy to comply with the provisions
      of
      EITF 00-21.




For
      those
      contracts which contain multiple deliverables, management must first determine
      whether each service, or deliverable, meets the separation criteria of EITF
      00-21. In general, a deliverable (or a group of deliverables) meets the
      separation criteria if the deliverable has standalone value to the customer
      and
      if there is objective and reliable evidence of the fair value of the remaining
      deliverables in the arrangement. Each deliverable that meets the separation
      criteria is considered a “separate unit of accounting.” Management allocates the
      total arrangement consideration to each separate unit of accounting based on
      the
      relative fair value of each separate unit of accounting. The amount of
      arrangement consideration that is allocated to a unit of accounting that has
      already been delivered is limited to the amount that is not contingent upon
      the
      delivery of another separate unit of accounting. After the arrangement
      consideration has been allocated to each separate unit of accounting, management
      applies the appropriate revenue recognition method for each separate unit of
      accounting as described previously based on the nature of the arrangement.
      All
      deliverables that do not meet the separation criteria of EITF 00-21 are combined
      into one unit of accounting, and the appropriate revenue recognition method
      is
      applied.





Advertising





The
      Company follows the policy of charging the costs of advertising to expenses
      incurred. The Company incurred no advertising costs during the years ended
      August 31, 2005 and 2004.





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 years ended August 31, 2005
      and
      2004.





F-11


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (Continued)**





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 24 to 60 months using the straight-line method (Note D).





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.





Capitalized
      Computer Hardware and Software





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.





F-12


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (Continued)**





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. There
      was
      no allowance for doubtful accounts at August 31, 2005 and 2004.





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 change 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, 2005 and 2004 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 L):





2005
            
            2004Net
                loss - as reported
            
            $
            (11,189,992
            )
            $
            (7,683,167
            )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)
            
            
            (2,170,548
            )
            
            (752,517
            )Net
                loss - Pro forma
            
            $
            (13,360,540
            )
            $
            (8,435,684
            )Net
                loss attributable to common stockholders - Pro forma
            
            $
            (13,787,941
            )
            $
            (9,371,751
            )Basic
                (and assuming dilution) loss per share - as reported
            
            $
            (0.90
            )
            $
            (0.65
            )Basic
                (and assuming dilution) loss per share - Pro forma
            
            $
            (1.07
            )
            $
            (0.70
            )




F-13


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (Continued)**





Liquidity





As
      shown
      in the accompanying financial statements, the Company incurred a net loss of
      $11,228,841 and $3,635,850 from continuing operations during the year ended
      August 31, 2005 and 2004, respectively. The Company's current assets exceeded
      its current liabilities by $47,840 as of August 31, 2005.





Net
      Earnings (Loss) 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 years ended August
      31,
      2005 and 2004, 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.





Reclassifications





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





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.





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-14


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (Continued)**





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
      November 2004, the Financial Accounting Standards Board (FASB) issued
      SFAS 151, Inventory Costs— an amendment of ARB No. 43, Chapter 4. This
      Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory
      Pricing,” to clarify the accounting for abnormal amounts of idle facility
      expense, freight, handling costs, and wasted material (spoilage).
      Paragraph 5 of ARB 43, Chapter 4, previously stated that “. . . under
      some circumstances, items such as idle facility expense excessive spoilage,
      double freight, and rehandling costs may be so abnormal as to require treatment
      as current period charges. . . .” This Statement requires that those items be
      recognized as current-period charges regardless of whether they meet the
      criterion of “so abnormal.” In addition, this Statement requires that allocation
      of fixed production overheads to the costs of conversion be based on the normal
      capacity of the production facilities. This Statement is effective for inventory
      costs incurred during fiscal years beginning after June 15, 2005.
      Management does not believe the adoption of this Statement will have any
      immediate material impact on the Company.




In
      December 2004, the FASB issued SFAS No.152, “Accounting for Real Estate
      Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67” (“SFAS
      152) The amendments made by Statement 152 This Statement amends FASB Statement
      No. 66, Accounting for Sales of Real Estate, to reference the financial
      accounting and reporting guidance for real estate time-sharing transactions
      that
      is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
      Estate Time-Sharing Transactions. This Statement also amends FASB Statement
      No.
      67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
      to state that the guidance for (a) incidental operations and (b) costs incurred
      to sell real estate projects does not apply to real estate time-sharing
      transactions. The accounting for those operations and costs is subject to the
      guidance in SOP 04-2. This Statement is effective for financial statements
      for
      fiscal years beginning after June 15, 2005. with earlier application encouraged.
      The Company does not anticipate that the implementation of this standard will
      have a material impact on its financial position, results of operations or
      cash
      flows.




On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”)
      published Statement of Financial Accounting Standards No. 123 (Revised
      2004), Share-Based Payment (“SFAS 123R”). SFAS 123R requires that compensation
      cost related to share-based payment transactions be recognized in the financial
      statements. Share-based payment transactions within the scope of SFAS 123R
      include stock options, restricted stock plans, performance-based awards, stock
      appreciation rights, and employee share purchase plans. The provisions of SFAS
      123R are effective as of the first interim period that begins after
      June 15, 2005. Accordingly, the Company will implement the revised standard
      in the first quarter of fiscal year 2006. Currently, the Company accounts for
      its share-based payment transactions under the provisions of APB 25, which
      does
      not necessarily require the recognition of compensation cost in the financial
      statements. Management is assessing the implications of this revised standard,
      which may materially impact the Company’s results of operations in the first
      quarter of fiscal year 2006 and thereafter.





F-15


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004


**NOTE
      A - SUMMARY OF ACCOUNTING POLICIES (Continued)**




On
      December 16, 2004, FASB issued Statement of Financial Accounting Standards
      No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion
      No. 29, Accounting for Nonmonetary Transactions (“ SFAS 153”). This
      statement amends APB Opinion 29 to eliminate the exception for nonmonetary
      exchanges of similar productive assets and replaces it with a general exception
      for exchanges of nonmonetary assets that do not have commercial substance.
      Under SFAS
      153,
      if a nonmonetary exchange of similar productive assets meets a
      commercial-substance criterion and fair value is determinable, the transaction
      must be accounted for at fair value resulting in recognition of any gain or
      loss. SFAS
      153
      is effective for nonmonetary transactions in fiscal periods that begin after
      June 15, 2005. The Company does not anticipate that the implementation
      of
      this standard will have a material impact on its financial position, results
      of
      operations or cash flows.




In
      March
      2005, the FASB issued FASB Interpretation (FIN) No. 47, “Accounting for
      Conditional Asset Retirement Obligations, an interpretation of FASB Statement
      No. 143,” which requires an entity to recognize a liability for the fair value
      of a conditional asset retirement obligation when incurred if the liability’s
      fair value can be reasonably estimated. The Company is required to adopt the
      provisions of FIN 47 no later than the second quarter of its fiscal 2006. The
      Company does not expect the adoption of this Interpretation to have a material
      impact on its consolidated financial position, results of operations or cash
      flows.





In
      May
      2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
      154,
“Accounting Changes and Error Corrections, a replacement of APB Opinion No.
      20
      and FASB Statement No. 3.” SFAS 154 requires retrospective application to prior
      periods’ financial statements for changes in accounting principle, unless it is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. SFAS 154 also requires that retrospective application
      of a
      change in accounting principle be limited to the direct effects of the change.
      Indirect effects of a change in accounting principle, such as a change in
      non-discretionary profit-sharing payments resulting from an accounting change,
      should be recognized in the period of the accounting change. SFAS 154 also
      requires that a change in depreciation, amortization, or depletion method for
      long-lived, non-financial assets be accounted for as a change in accounting
      estimate effected by a change in accounting principle. SFAS 154 is effective
      for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. Early adoption is permitted for accounting changes
      and
      corrections of errors made in fiscal years beginning after the date this
      Statement is issued.
      The Company does not expect the adoption of this SFAS to have a material impact
      on its consolidated financial position, results of operations or cash flows.





**NOTE
      B - DIVESTITURES AND DISCONTINUED OPERATIONS**





U.S.
      Convergion, Inc.





In
      May
      2004, the Company sold Convergion to Sylvia Holding Co., Inc. ("Sylvia") through
      a Stock Purchase Agreement (“Purchase Agreement”). Pursuant to the Purchase
      Agreement, Sylvia acquired certain assets and assumed certain liabilities of
      Convergion and agreed to issue to the Company a total of 500,000 shares of
      its
      common stock valued at $0.001 per share. As a result of the sale of the Convergion
      business segment, the Company accounted for the segment as a discontinued
      operation, and accordingly, the amounts in the financial statements and related
      notes for the year ended August 31, 2004 have been restated to reflect
      discontinued operations accounting.




F-16


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004


NOTE
      B - DIVESTITURES AND DISCONTINUED
      OPERATIONS (Continued)





The
      following summarizes the disposition of the Convergion business
      segment:





Sylvia
                common stock
            
            $
            500Debts
                assumed by Sylvia
            
            
            2,967,081Net
                assets disposed of
            
            
            (68,211
            )Disposition
                costs
            
            
            (115,000
            )Net
                gain on disposal of Convergion
            
            $
            2,784,370





The
      Company has adopted Statement of Financial Accounting Standards No. 142
      "Goodwill and Other Intangible Assets" (SFAS No. 142) effective August 1, 2002.
      SFAS No. 142 addresses how intangible assets that are acquired individually
      or
      with a group of other assets should be accounted for in financial statements
      upon their acquisition. This statement requires goodwill amortization to cease
      and for goodwill to be periodically reviewed for impairment.





In
      February 2004, the Company completed a test for goodwill in connection with
      acquisition of Convergion, and the result indicated that the recorded book
      value
      of this reporting unit exceeded its fair value, as determined by discounted
      cash
      flows. The decrease in fair value is a result of:





o
            Significant
                operating losses since the date of
                acquisition


o
            Unanticipated
                decline in revenues and
                profitability


o
            Loss
                of key personnel





As
      a
      result of these events and circumstances, Company management believes that
      more
      likely than not the fair value of the reporting unit's goodwill has been reduced
      below its carrying value. As a result, management performed an evaluation of
      the
      reporting unit's tangible and intangible assets for purposes of determining
      the
      implied fair value of goodwill. Upon completion of the assessment, the Company
      recorded a non-cash impairment charge of $4,062,003, net of tax, or $0.31 per
      share in February 2004 to reduce the carrying value of goodwill in this
      reporting unit to its estimated value of


$0.
      This
      charge, as well as all other financial results relating to Convergion, has
      been
      reflected in the loss from discontinued operations for fiscal 2004.





F-17


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      B - DIVESTITURES AND DISCONTINUED OPERATIONS (Continued)**





U.S.
      Convergion, Inc.





The
      financial statements reflect the operating results and balance sheet items
      of
      the discontinued operations separately from continuing operations. Prior years
      have been restated. Operating results for the Convergion discontinued operations
      for the year ended August 31, 2004 were:





2004Revenues
            
            $
            2,249,354Costs
                and Expenses
            
            
            (3,390,884
            )Impairment
                of goodwill
            
            
            (4,062,003
            )Net
                loss before tax
            
            
            (5,203,533
            )Income
                tax provision (benefit)
            
            
            -Net
                loss
            
            
            (5,203,533
            )Net
                gain on sale of Convergion, before tax
            
            
            2,784,370Income
                tax provision (benefit)
            
            
            -Gain
                on sale, net of tax
            
            
            2,784,370Loss
                on discontinued operations , net of tax
            
            $
            (2,419,163
            )





In
      connection with the Stock Purchase Agreement, the Company issued to Sylvia
      a
      promissory note (“Note”) in the amount of $500,000 to serve as security for the
      obligations of the Company under the Stock Purchase Agreement. The Note shall
      only become due and payable upon the demand of Sylvia upon an event of default
      of the Stock Purchase Agreement. Additionally, the Company entered into a
      Security Agreement with Sylvia. Pursuant to the Security Agreement, the Company
      granted Sylvia a security interest in any and all existing or after acquired
      assets of the Company, up to $3,000,000, securing the Company’s obligations to
      Sylvia under the Note (collectively the “Escrow Document”). The Note and the
      Security Agreement matured and expired in fiscal 2005. Additionally, the Company
      management believes that more likely than not the fair value of the Sylvia
      common stock has been reduced below its carrying value at August 31, 2004.
      As a
      result, the Company recorded a non-cash impairment charge of $500 to reduce
      the
      carrying value of Sylvia common stock to its estimated value of $0.





ecommerce
      support centers, inc.





On
      May
      23, 2005, the Company sold substantially all the assets that comprise its call
      center operations. The assets sold were included in the Company's ecom
      subsidiary and the sale provided for a sale price of $1,100,000 and the
      assumption of certain liabilities, which approximated $85,000. The purchase
      price was payable $129,000 at closing and a $971,000 5% note due $25,000 per
      month including interest until the balance is paid. The
      financial statements reflect the operating results and balance sheet items
      of
      the discontinued operations separately from continuing operations. Prior years
      have been restated.





F-18


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      B - DIVESTITURES AND DISCONTINUED OPERATIONS (Continued)**





The
      following summarizes the gain on the disposition of the assets of the call
      center business segment on May 23, 20005:





CustomerLinx
                promissory note
            
            $
            971,000Cash
                received
            
            
            129,000Debts
                assumed by CustomerLinx
            
            
            85,234Net
                assets disposed of
            
            
            (563,319
            )Disposition
                costs
            
            
            (70,000
            )Net
                gain on disposal of segment
            
            $
            551,915





On
      August
      31, 2005, the Company entered into an agreement to sell all of the outstanding
      capital stock of ecommerce support centers, inc. (“ecom”) to Lion Development
      Group II, Inc. The purchase price for the assets was the sum of $1,000, and
      the
      assumption of all liabilities of ecom. Additionally, the Company and the
      Purchaser agreed that on or before one year from the date of the closing, they
      would in good faith complete a reconciliation of claims against ecom and the
      payment of such claims in order to compute the deferred portion of the purchase
      price. Such deferred purchase amount is 70% of the amount by which the cash
      received from a note owned by ecom and the remaining balance of such note
      exceeds liabilities paid or agreed to be paid from the proceeds of the note.
      Such amount is due to the Company either in the form of cash or assignment
      of a
      portion of such note. At closing, the note had a principal balance of $929,004
      and is payable over a remaining term of 40 months together with simple interest
      at an annual rate of five percent (5%), and is secured by certain assets of
      the
      obligor.





The
      following summarizes the gain on the disposition of the call center business
      segment on August 31, 2005:





Cash
            
            $
            1,000Debts
                assumed by Lion Development Group II, Inc.
            
            
            1,661,528Net
                assets disposed of
            
            
            (948,658
            )Disposition
                costs
            
            
            (30,000
            )Net
                gain on disposal of segment
            
            $
            683,870








The
      financial statements reflect the operating results and balance sheet items
      of
      the discontinued operations separately from continuing operations. Prior years
      have been restated. Operating results for the ecommerce
      support centers, inc. discontinued operations for the year ended August 31, 2005 and 2004
      were:





F-19


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      B - DIVESTITURES AND DISCONTINUED OPERATIONS (Continued)**





2005
            
            2004Revenues
            
            $
            3,977,112
            
            $
            7,707,742Costs
                and Expenses
            
            
            5,174,048
            
            
            (9,335,896
            )Net
                loss before tax
            
            
            (1,196,936
            )
            
            (1,628,154
            )Income
                tax provision (benefit)
            
            
            -
            
            
            -Net
                loss
            
            
            (1,196,936
            )
            
            (1,628,154
            )Net
                gain on sale of ecom, before tax
            
            
            1,235,785Income
                tax provision (benefit)
            
            
            -Gain
                on sale, net of tax
            
            
            1,235,785Gain
                on discontinued operations,
                net of tax
            
            $
            38,849







The
        year
        ended August 31, 2005 included costs related to U.S. Convergion, Inc. of
        $186,700 which have been included in loss from discontinued
        operations.
  Net
      assets and liabilities from discontinued operations at August 31, 2004 consists
      of:





**Assets**
              
              August
                  31, 2004Property
                  and Equipment
              
              $
              4,029,160Patents
                  and Trademarks
              
              
              25,101Accumulated
                  depreciation and amortization
              
              
              (3,183,434
              )$
              870,827**Liabilities**Accounts
                  payable and accrued liabilities
              
              $
              885,234Capital
                  lease obligations
              
              
              713,200$
              1,598,434


**NOTE
      C - RESTRICTED CASH**





In
      June
      2004, the Onslow County Tax Office, North Carolina requested to garnish the
      Company’s bank balance in the amount of $109,617 for outstanding property taxes
      owed by the Company’s wholly-owned subsidiary, ecom. The Company has included
      the amount of taxes due in its accrued liabilities at August 31, 2004 and
      accounted restricted cash in the amount of $109,617. The taxes were paid fiscal
      2005 and restrictions on cash were removed.





**NOTE
      D - PROPERTY AND EQUIPMENT**





Major
      classes of property and equipment at August 31, 2005 and 2004 consist of the
      following:





2005
            
            2004Furniture
                and Fixtures
            
            $
            69,526
            
            $
            42,273Computer
                Equipment and Software
            
            
            185,985
            
            
            101,211255,511
            
            
            143,484Less:
                Accumulated Depreciation
            
            
            (120,349
            )
            
            (97,761
            )Net
                Property and Equipment
            
            $
            135,162
            
            $
            45,723





F-20


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004





**NOTE
      D - PROPERTY AND EQUIPMENT (Continued)**





Total
      depreciation expense charged to operations for the year ended August 31, 2005
      and 2004 are $22,588 and $9,906, respectively.





**NOTE
      E - PATENTS AND TRADEMARKS**





The
      Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby
      the Company periodically tests its intangible assets for impairment. On an
      annual basis, and when there is reason to suspect that their values have been
      diminished or impaired, these assets will be tested for impairment, and
      write-downs to be included in results from operations may be necessary.





The
      costs
      and accumulated amortization of patents and trademarks at August 31, 2005 and
      2004 are summarized as follows:





2005
            
            2004Patents
                and trademarks
            
            $
            97,218
            
            $
            97,218Less:
                accumulated amortization
            
            
            (64,880
            )
            
            (32,440
            )Intangible
                assets, net
            
            $
            32,338
            
            $
            64,778





Total
      amortization expense charged to operations for the year ended August 31, 2005
      and 2004 was $32,440 in each year.





Estimated
      amortization expense as of August 31, 2005 is as follows:




Fiscal
                Year 2006
            
            $
            32,338Total
            
            $
            32,338





**NOTE
      F - NOTES RECEIVABLE - RELATED PARTIES**





At
      August
      31, 2005, the Company has a note receivable from one its largest shareholders
      with a balance of $378,003. This note, which had an original balance of
      $400,000, matures on May 31, 2006 and is secured by approximately 1,100,000
      shares of the Company’s common stock. The note does not provide for interest
      except that the Company received 159,630 shares of its common stock as an
      inducement to make this loan. These shares were valued at $239,445 and this
      amount is being amortized over the one year life of the note. At August 31,
      2005, unearned income includes $181,101of unamortized value of these shares,
      other income includes $58,344 related to this share value. This note originated
      in conjunction with the return of shares by this shareholder discussed in Notes
      K and M.





F-21


MARKET
        CENTRAL, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
        31, 2005 AND 2004





**NOTE
      G - NOTES PAYABLE**





Notes
      Payable at August 31, 2005 and 2004 are as follows:





2005
            
            2004Note
                payable to a related party in monthly installments of $20,429 plus
                interest at LIBOR monthly floating rate plus 2.75%; unsecured maturity
                date is May 2008
            
            $
            1,039,069Note
                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.
                The Company was in default under the terms of the note agreement
                at August
                31, 2004. The note was settled and paid in full during the year ended
                August 31, 2005. The Company accounted for $235,661 as other income
                in
                connection with the settlement of the note.
            
            
            
            
            $
            501,134Note
                payable in monthly installments of $1,919 including interest at 7.34%
                per
                annum; unsecured; maturity date is in May 2005.
            
            
            
            
            
            18,975Note
                payable in monthly installments of $2,813 including interest at 6%
                per
                annum; unsecured; maturity date is in February 2005.
            
            
            
            
            
            19,180Note
                payable to Bank in monthly installments of interest only at LIBOR
                daily
                floating rate plus 3.5%; original maturity date was in July 2004,
                the
                Company has requested and the bank has agreed to extend the maturity
                date
                every 30 days; current maturity date is in January 2005; personally
                guaranteed by Company shareholders. This note was assumed by one
                of the
                Company's shareholders during the year ended August 31, 2005. (Note
                M)
            
            
            
            
            
            1,250,000Note
                payable on demand to a related party, interest payable at 6% per
                annum on
                repayment date; unsecured. (Note K and M)
            
            
            
            
            
            237,569Note
                payable on demand to a related party, interest payable at 6% per
                annum on
                repayment date; unsecured. (Note K and M)
            
            
            
            
            
            852,905Note
                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. The Company is currently in default under the
                terms
                of the note agreement. (Note M)
            
            
            120,000
            
            
            120,000Note
                payable; liabilities assumed pursuant to Assets Purchase Agreement
                with
                Pliant, interest payable at 12% per annum, interest due and principal
                due
                in March 2004; unsecured. The Company was in default under the terms
                of
                the note agreements at August 31, 2004. The note and all unpaid accrued
                interest was paid in full during the year ended August 31, 2005.
            
            
            
            
            41,1331,159,069
            
            
            3,040,896Less:
                current portion
            
            
            (365,148
            )
            
            (3,040,896
            )$
            793,921
            
            $
            -





Aggregate
      maturities of long-term debt as of August 31, 2005 are as follows:





2006
            
            $
            365,1482007
            
            
            245,1482008
            
            
            548,7732009
            
            
            -2010
            
            
            -Total
            
            $
            1,159,069





F-22


MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004


**NOTE
      H - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**





Accounts
      payable and accrued liabilities at August 31, 2005 and 2004 are as
      follows:





2005
            
            2004Accounts
                payable
            
            $
            1,533,596
            
            $
            2,323,439Accrued
                interest
            
            
            -0-
            
            
            2,462Accrued
                payroll, payroll expenses and taxes
            
            
            450,214
            
            
            816,561Other
                accrued expenses in connection with litigation (Note Q)
            
            
            140,000
            
            
            300,000Total
            
            $
            2,123,810
            
            $
            3,442,462





**NOTE
      I - SENIOR CONVERTIBLE NOTES PAYABLE**





The
      Company began offering a 6.4% convertible note (“Convertible Note”) in April
      2005 with an aggregate face value of $6,250,000 and a maturity of May 2007.
      Subsequent to April 2005, the Company authorized offering up to $7,187,500
      aggregate face value of the notes. The Convertible Note was offered with a
      20%
      discount, resulting in net proceeds before commissions of $5,000,000 to the
      Company of the initial offering amount and up to $5,750,000 if fully subscribed.
      The Convertible Note was initially offered only to holders of the Company’s
      Series A Preferred Stock. Included with the Convertible Notes were warrants
      to
      purchase one share of the Company’s common stock for each $2 of face value of
      Convertible Notes sold at an exercise price of $1.00 per share and a term which
      expires in June 2010. The Convertible Notes provide for conversion of the face
      amount of the notes into the Company’s common stock at $1.3325 per share and
      they provide for interest to be paid quarterly. The repayment of the Convertible
      Notes is secured by a first priority security interest in the Company’s
      intellectual property granted pursuant to a security agreement to be entered
      into by the Company. Upon the payment or conversion of $5,000,000 of the total
      Principal Amount of the Notes, the XML patents owned by Scientigo will be
      released from such security interest.





As of August 31, 2005, the Company
      sold Convertible Notes with a face value of $6,446,450 and received net proceeds
      of $5,157,160. In connection with issuance of the Convertible Notes, the Company
      issued warrants to its placement agent in exchange for services and commissions.
      The exercise prices of these warrants were below the fair market value of the
      Company's common stock. The Company has charged an aggregate of $640,364 to
      operations during 2005 in connection with the warrants issued to its placement
      agent (Note L). Additionally, the Company accounted for and charged to
      operations $1,289,290 of interest expense during the year ended August 31,
      2005
      in connection with the original 20% discount on the Convertible Notes sold
      through August 31, 2005 (see Note Q and R).


F-23
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE
        I - SENIOR CONVERTIBLE NOTES PAYABLE (Continued)**
  A
        summary
        of convertible notes payable at August 31, 2005 and August 31, 2004 is as
        follows:
  August
                  31, 2005
              
              August
                  31, 2004Convertible
                  notes payable; 6.4% per annum; payable quarterly due May 2007;
                  noteholders
                  have the option to convert unpaid note principal into the Company’s common
                  stock at $1.3325 per share. The noteholders are secured by a first
                  priority security interest in the Company’s intellectual
                  property
              
              $
              6,446,450
              
              
              -Debt
                  Discount - beneficial conversion feature, net of accumulated amortization
                  of $471,439 and $0 at August 31, 2005 and 2004,
                  respectively.
              
              
              (2,948,358
              )
              
              -Debt
                  Discount - value attributable to warrants attached to notes, net
                  of
                  accumulated amortization of $338,766 and $0 at August 31, 2005
                  and 2004,
                  respectively.
              
              
              (2,143,322
              )
              
              -Total
              
              $
              1,354,770
              
              
              -Less:
                  current portion
              
              
              -
              
              
              -$
              1,354,770
              
              
              -
 
 In
        accordance with Emerging
        Issues Task Force Issue 98-5, Accounting for Convertible Securities with
        a
        Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
        (“EITF 98-5”) ,
        the
        Company recognized an imbedded beneficial conversion feature present in the
        Convertible Note. The Company allocated a portion of the proceeds equal to
        the
        intrinsic value of that feature to additional paid-in capital. The Company
        recognized and measured an aggregate of $3,419,797 of the proceeds, which
        is
        equal to the intrinsic value of the imbedded beneficial conversion feature,
        to
        additional paid-in capital and a discount against the Convertible Note. The
        debt
        discount attributed to the beneficial conversion feature is amortized over
        the
        Convertible Note’s maturity period (22 to 25 months) as interest expense.
  In
        accordance with Emerging
        Issues Task Force Issue 00-27, Application of Issue No. 98-5 to Certain
        Convertible Instruments (“EITF - 0027”) ,
        the
        Company recognized the value attributable to the warrants in the amount of
        $2,482,088 to additional paid-in capital and a discount against the Convertible
        Note. The Company valued the warrants in accordance with EITF 00-27 using
        the
        Black-Scholes pricing model and the following assumptions: contractual terms
        of
        5 years, an average risk free interest rate of 2.03%, a dividend yield of
        0%,
        and volatility of 102%. The debt discount attributed to the value of the
        warrants issued is amortized over the Convertible Note’s maturity period (22 to
        25 months) as interest expense.
  The
        Company amortized the Convertible Note debt discount attributed to the
        beneficial conversion feature and the value of the attached warrants and
        recorded non-cash interest expense of $810,205 and $0 for the year ended
        August
        31, 2005 and 2004, respectively.
 
 F-24
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE
        I - SENIOR CONVERTIBLE NOTES PAYABLE (Continued)**
  Aggregate
        maturities of senior convertible notes as of August 31, 2005 are as
        follows:
 
 2006
              
              $
              -2007
              
              
              6,446,450Total
              
              $
              6,446,450
 
 **NOTE
        J - DUE TO FACTOR**
 
 At
        August
        31, 2005, the Company’s arrangement with its factor had been terminated in
        conjunction with the sale of the stock of the ecommerce support centers,
        inc.
        subsidiary (Note B). At August 31, 2004, the factoring arrangement provided
        for
        a $2,000,000 factoring facility whereby the factor purchases eligible
        receivables and advances 80% of the purchased amount to the Company. Purchased
        receivables are bought at 96.25% of their face amount. The Company receives
        a
        rebate of 2.40% for invoices paid by customers between one to thirty days,
        and
        2.36% for invoices paid by customers after thirty days reduced by .04% per
        additional day such invoice remains outstanding. The arrangement is accounted
        for as a sale of receivables on which the factor has recourse to the 20%
        residual of aggregate receivables purchased and outstanding. Net charge to
        the
        Company is 1.35% of the invoices paid by customers between one to thirty
        days,
        and 1.39% after thirty days, increased by .04% per additional day such invoice
        remains outstanding. In connection with this agreement, the Company is required
        to maintain certain financial covenants. As of August 31, 2004, the Company
        is
        in default under the factor agreement.
 
 At
        August
        31, 2005 and 2004, balance due from factor (included in accounts
        receivable) was as follows:
 
 2005
              
              2004Accounts
                  Receivable - Factored
              
              $
              -
              
              $
              604,488Less:
                  Advance from Factor
              
              
              -
              
              
              (483,590
              )Net
                  Due from Factor
              
              $
              -
              
              $
              120,898
 
 **NOTE
        K - CAPITAL STOCK**
 
 The
        Company is authorized to issue 75,000,000 shares of common stock with $.001
        par
        value per share and 10,000,000 shares of preferred stock with $.001 par value
        per share. As of August 31, 2005 and 2004, the Company had 13,320,992 and
        13,391,693 shares of common stock issued and outstanding,
        respectively.
 
 In
        December 2003, the Company's Board of Directors designated 2,251,407 shares
        of
        Series A Convertible Preferred Stock, par value $.001 per share (the "Series
        A
        Preferred Stock") and 350,000 shares of Series B Convertible Preferred Stock,
        par value $.001 per share (the "Series B Preferred Stock "). Both Series
        A
        Preferred Stock and Series B Preferred Stock have a liquidation preference
        which
        is senior to the Company's Common Stock.
 
 In
        December 2003, the Company approved a private placement offering of up to
        $3,000,000 of its authorized Series A Preferred Stock at $1.3325 per share.
        The
        Series A Preferred Stock is convertible into one share of the Company's common
        stock after a one-year period from the date of issuance.
 
 F-25
 
 MARKET
              CENTRAL, INC.
 NOTES
              TO
              CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
              31, 2005 AND 2004
 **NOTE
        K - CAPITAL STOCK (Continued)**
 
 The
        Series A Preferred Stock provides for a 4% annual cumulative dividend, that
        is
        payable when declared by the Company's Board of Directors and is payable
        in
        shares of the Series A Preferred Stock. During fiscal 2005, the Company approved
        a private placement offering of up to an additional $4,750,000 of its authorized
        Series A Preferred Stock at $1.3325 per share. The Company had issued during
        fiscal 2004 and 2005 an aggregate of 2,251,407 and 2,516,270 shares of Series
        A
        Preferred Stock, in change for net proceeds of $2,772,260 and $2,969,350,
        respectively. The Company also issued an aggregate of 788,906 shares of Series
        A
        Preferred Stock to two significant shareholders in exchange
        for notes
        payable in the amount of $1,051,217 (Note M). In August 2005, pursuant
        to
        an exchange offer, the Company converted all of the Series A Preferred Stock
        and accrued unpaid dividends into Common Stock. This conversion
        resulted in the issuance of
        5,923,335 shares of the Company’s common stock in exchange for 5,556,583 shares
        of Series A Preferred Stock previously issued and 366,752 shares of common
        stock issued as payment for dividends related to the Series A Preferred
        stock in the amount of $488,468. The issuance of common stock settled
        in
        full the cumulative preferred stock dividends of $427,401 and
        $61,067 accrued during the year ended August 31, 2005 and 2004,
        respectively.
 
 During
        the year ended August 31, 2004 the Company issued an aggregate of 350,000
        shares
        of Series B Preferred Stock and received a total proceeds of $1,282,912,
        net of
        costs and fees of $367,339. The Series B Preferred Stock is convertible into
        common stock at the lesser of $1.75 per share or 80% of the lowest bid price
        for
        the common stock in the 10 business days preceding the conversion but it
        cannot
        be less than 50% of the $1.75 or $.875. This results in the conversion of
        a
        maximum of 4,000,000 shares and a minimum of 2,000,000 shares of the Company's
        common stock. The Series B Preferred Stock holders also have an option to
        acquire additional common shares in an amount to permit the conversion rights
        plus this option to result in a total of 4,000,000 shares of the Company's
        common stock. ****
 
 In
        accordance with Emerging Issues Task Force Issue 98-5, Accounting for
        Convertible Securities with a Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios ("EITF 98-5"), the Company recognized an imbedded
        beneficial conversion feature present in the Series B Convertible Preferred
        Stock. The Company recognized and measured an aggregate of $875,000, which
        equals to the intrinsic value of the imbedded beneficial conversion feature,
        to
        additional paid-in capital and a return to the Series B Preferred Stock holders.
        Since the preferred shares were convertible at the date of issuance, the
        return
        to the preferred shareholders attributed to the beneficial conversion feature
        has been recognized in full at the date the Series B Preferred Stock was
        issued.
 
 The
        2,000,000 shares of common stock held by the Escrow Agent pending any conversion
        of the Series B Convertible remain with the escrow agent. The shares were
        coded
        so as not be considered issued until the Series B Preferred Stock shareholders
        exercise the conversion right. As of August 31, 2005, none of the Series
        B
        Preferred Stock shareholders exercised the conversion right.
 
 In
        November 2004, the Company’s two significant shareholders agreed to return
        5,880,740 common shares to the Company’s treasury. In addition, these
        individuals cancelled a warrant that they owned which provided them with
        the
        right to purchase approximately 2,300,000 shares of common stock in the Company,
        they resigned from the Company’s Board of Directors and they converted a net of
        $1,051,217 in demand notes due them, net of accounts receivable due the Company
        into the Series A Preferred Stock. This transaction was completed in May
        2005
        when one of these shareholders returned an additional 159,630, valued at
        $239,445 (Note F), shares as inducement for the Company to make a
        $400,000
        loan to him which would facilitate the return of his portion of the 5,880,740
        shares. As of August 31, 2005, the 5,880,740 shares of common stock were
        returned and canceled by the Company.
 
 F-26
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
  **NOTE
        K - CAPITAL STOCK (Continued)**
 
 In
        March
        and May 2004, the Company issued an aggregate of 67,500 shares of its common
        stock to a consultant in exchange for stock options exercised at $0.01 per
        share. The Company received $68 of proceeds. The Company valued the stock
        options at the fair value of its common shares at the date the options were
        granted. Compensation costs of $91,800 were charged to operations during
        the
        year ended August 31, 2004 (Note L).
  In
        August 2004, the Company authorized to issue an
        aggregate of 55,224 shares of its common stock to four Board of Director
        members
        in exchange for compensation expenses totaling $98,884. The shares were valued
        at $1.79 per share, which approximated the fair value of the shares issued
        during the period the services were rendered. Additionally, in connection
        with
        the Settlement Agreement and Mutual Release the Company entered into in August
        2004 with the Company's former CEO and Board of Directors member ("Former
        CEO"),
        the Company accounted the 800,000 shares of the Company's common stock to
        be
        returned from Former CEO as common stock receivable and $356,334 of net cost
        in
        connection with the Settlement as a reduction in additional paid-in capital
        at
        August 31, 2005 (Note M). The Company received and canceled the 800,000 returned
        shares during fiscal year 2005.
  During
        the year ended August 31, 2005, the Company issued an aggregate of 149,064
        shares of common stock to employees, directors and consultants in exchange
        for
        services rendered. These shares were valued at approximately $1.20 to $1.85
        per
        share, which approximated the fair value of the shares issued during the
        period
        the services were rendered. Compensation costs of $201,216 were charged to
        discontinued operations during the year ended August 31, 2005.
 
 The
        Company also issued an aggregate of 235,970 shares of its common stock to
        consultants during the year ended August 31, 2005 upon the exercise of stock
        options at $0.01 per share. The Company received $2,059 of proceeds, net
        of
        costs and fees. The Company valued the stock options at the fair value of
        its
        common shares at the date the options were granted and compensation costs
        of
        $189,060 were charged to operations in prior period at the time the
        options
        were granted.
 
 Common
        stock totaling 461,300 shares were issued in August 2005 in conjunction with
        the
        exercise of warrants ranging in price from $.85 to $1.00. The Company
        received proceeds of $413,204 related to these warrants. As of August 31,
        2005,
        the Company had received $102,064 of warrant proceeds for which common shares
        had not yet been issued, this amount is included in stock subscription payable
        at year end and the shares purchased with these warrant exercises were issued
        subsequent to year end.
 
 **NOTE
        L - 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, 2005, after giving effect to 1:10
        reverse split in common stock in February 2003:
 
 
 Options
                  Outstanding
              
              Options
                  ExercisableExercise
                  Price
              
              NumberOutstanding
              
              Weighted
                  Average Contractual Life(Years)
              
              Weighted
                  AverageExercise
                  Price
              
              NumberExercisable
              
              Weighted
                  AverageExercise
                  Price$
                  .01- $3.16
              
              
              5,801,424
              
              
              4.60
              
              $
              2.03
              
              
              1,897,259
              
              $
              1.66
 
 Transactions
        involving the Company’s options issuance are summarized as follows:
 
 Number
                of
                  shares
              
              Weighted
                  Average
                Exercise
                  PriceOutstanding
                  at August 31, 2003
              
              
              302,210
              
              $
              5.22Granted
              
              
              844,092
              
              
              1.30Exercised
              
              
              (67,500
              )
              
              .01Cancelled
              
              
              (12,875
              )
              
              17.06Outstanding
                  at August 31, 2004
              
              
              1,065,927
              
              
              2.06Granted
              
              
              5,400,802
              
              
              2.03Exercised
                  (Note K)
              
              
              (235,970
              )
              
              .01Cancelled
              
              
              (429,335
              )
              
              2.88Outstanding
                  at August 31, 2005
              
              
              5,801,424
              
              $
              2.03
 
 F-27
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE
        L - STOCK OPTIONS AND WARRANTS (Continued)**
 
 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, 2005 after giving effect to 1:10
        reverse split in common stock in February 2003.
 
 Warrants
                  Outstanding
              
              Warrants
                  ExercisableExercise
                  Prices:
              
              NumberOutstanding
              
              Weighted
                  Average Contractual Life(Years)
              
              Weighted
                  AverageExercise
                  Price
              
              NumberExercisable
              
              Weighted
                  AverageExercise
                  Price$
                  .85 - $7.81
              
              
              12,082,809
              
              
              2.94
              
              $
              1.15
              
              
              12,082,809
              
              $
              1.15$11.06
                  - $11.88
              
              
              73,486
              
              
              0.08
              
              $
              11.45
              
              
              73,486
              
              $
              11.45$12.81
                  - $15.00
              
              
              16,350
              
              
              0.36
              
              $
              14.83
              
              
              16,350
              
              $
              14.8312,172,645
              
              
              3.09
              
              $
              1.29
              
              
              12,172,645
              
              $
              1.29
 
 Transactions
        involving the Company’s warrants issuance are summarized as
        follows:
 
 Number
                of
                  shares
              
              Weighted
                  Average
                Exercise
                  PriceOutstanding
                  at August 31, 2003
              
              
              4,135,176
              
              $
              3.43Granted
              
              
              692,452
              
              
              2.12Exercised
              
              
              -
              
              
              -Cancelled
              
              
              (80,631
              )
              
              16.89Outstanding
                  at August 31, 2004
              
              
              4,746,997
              
              $
              3.12Granted
              
              
              10,568,118
              
              
              1.23Exercised
              
              
              (461,300
              )
              
              0.89Cancelled
              
              
              (2,681,170
              )
              
              0.45Outstanding
                  at August 31, 2005
              
              
              12,172,645
              
              $
              1.29
 
 The
        weighted-average fair value of stock options and warrants granted to employees,
        consultants and shareholders during the years ended August 31, 2005 and 2004
        and
        the weighted-average significant assumptions used to determine those fair
        values, using a Black-Scholes option pricing model are as follows:
 
 2005
              
              2004Significant
                  assumptions (weighted-average):Risk-free
                  interest rate at grant date
              
              
              1.78
                  - 4.76
              %
              
              1.06
              %Expected
                  stock price volatility
              
              
              155
                  - 227
              %
              
              90
              %Expected
                  dividend payout
              
              
              -
              
              
              -Expected
                  option life-years (a)
              
              
              1.8
                  - 11.0
              
              
              3.0
                  to 4.0
  (a)The
        expected option/warrant life is based on contractual expiration
        dates.
 
 F-28
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE L
        - STOCK OPTIONS AND WARRANTS (Continued)**
 
 Warrants
        (Continued)
 During
          the year ended August 31, 2004, the Company charged to operations compensation
          expenses in connection with granting stock options and warrants to consultants
          a
          total of $323,739. Additionally, included in the total numbers of stock
          options
          outstanding at August 31, 2004 were 193,377 stock options the Company granted
          to
          consultants in exchange for accrued service fees and services rendered,
          exercisable at $0.01 per share. The Company valued those options at the
          fair
          market value of its common stock at the date the options were granted.
          The
          options granted settled $64,349 of accrued service fees, and additional
          compensation expenses of $261,851 were charged to operations during the
          year
          ended August 31, 2004. As of August 31, 2004, the Company received $68
          of
          proceeds or 67,500 stock options exercised at $0.01 per share, the Company
          valued those options at the fair market value of its common stock at the
          date
          the options were granted and $91,800 of compensation expense was charged
          to
          operations during the year ended August 31, 2004 (Note K). The Company
          also
          granted warrants to the consultant in exchange for one year of financing
          services. Financing costs of $383,579 was capitalized and amortized over
          twelve-month period. During the year ended August 31, 2005 and 2004, the
          Company
          charged to operations $63,931 and $319,648 of amortized financing costs.
  During
        the year ended August 31, 2005, the Company
        issued an aggregate of 235,970 shares of common stock to employees and
        consultants in exchange for stock options exercised at $0.01 per share. The
        Company received $2,059 of proceeds,
        net of costs and fees. The Company valued those options at the fair market
        value
        of its common stock at the date the options were granted. Compensation costs
        of
        $189,060 were charged to operations during the year ended August 31, 2005
        in
        connection with this transaction . The
        Company also issued options and warrants to suppliers, consultants and the
        placement agent which resulted in an aggregate charge of $483,913
        to
        continuing and discontinued operations during fiscal 2005.
 
 During
        the year ended August 31, 2005, the Company granted an aggregate of 3,223,225
        warrants in connection with issuance of Convertible Notes, the Company
        recognized the value attributable to the warrants in the amount of $2,482,088
        to
        additional paid-in capital and a discount against the Convertible Note (Note
        1).
        The Company also issued an aggregate of 5,923,335 warrants, exercisable at
        $.85
        per share, in connection with its Series A exchange offer (Note K). The market
        value per share of the Company's common stock exceeded the exercise price
        of
        these warrants at the time of the warrants were granted. The Company has
        accounted for and charged to operations an aggregate of $4,145,521 in connection
        with these in-the-money warrants during the year ended August 31,
        2005.
  F-29
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE
        L - STOCK OPTIONS AND WARRANTS (Continued)**
 
 If
        the
        Company recognized compensation cost for the non-qualified employee stock
        option
        plan in accordance with SFAS No. 123, the Company’s pro forma net loss
        attributable to common stockholders and net loss per share would have been
        $(13,787,941) and $(1.07), respectively for the year ended August 31, 2005
        and
        $(9,371,751) and $(0.70), respectively for the year ended August 31,
        2004.
 
 **NOTE
        M - RELATED PARTY TRANSACTIONS**
 
 Accounts
        receivable and other receivable-related parties at August 31, 2005
        of
        $81,090 are payments made on behalf of The Tag Group, Inc. in anticipation
        of
        the purchase of substantially all of their assets. These payments to various
        vendors will be deducted from the purchase price paid to The Tag Group, Inc.
        at
        closing of the purchase transaction. At August 31, 2004, the balance of $277,119
        is comprised of amounts due to the Company from J&C Nationwide, Inc. and
        Cheapseats, Inc., entities controlled by the Company's significant
        shareholder.
 
 During
        the years ended August 31, 2005 and 2004, the Company provided services through
        its ecom subsidiary to three companies owned by former directors and/or officers
        of the Company. All of the revenue from these services are now included in
        the
        loss from discontinued operations. The amount of revenue included in this
        loss
        from discontinued operations is $-0- and $1,162,691 from Gibraltar Publishing,
        Inc., for the years ended August 31, 2005 and 2004, respectively. J&C
        Nationwide, Inc. and Cheapseats, Inc. revenues of $151,616 and $613,774 were
        also included in this loss from discontinued operations for the years ended
        August 31, 2005 and 2004, respectively.
 
 The
        Company’s two largest shareholders agreed to return 5,880,740 common shares to
        the Company’s treasury in November 2004. In addition, these individuals
        cancelled a warrant that they owned which provided them with the right to
        purchase approximately 2,300,000 shares of common stock in the Company, they
        resigned from the Company’s Board of Directors and they converted a net of
        $1,051,218 in demand notes due them net of accounts receivable
        ($428,735) due the Company into the Series A Preferred Stock (Note K). This
        November 2004 transaction also resulted in one of these shareholders assuming
        $1,250,000 the Company’s bank debt that was secured by substantially all the
        assets of the Company (Note G). In exchange for this note assumption, the
        Company issued a $1,250,000 unsecured note to the shareholder which has a
        balance of $1,039,069 (Note G). This note assumption transaction also provided
        for the Company to make a $400,000 loan to the shareholder which has a one
        year
        term and is secured by approximately 1,100,000 shares of the Company’s common
        stock (Note F).
 
 Jones
        Byrd & Attkisson, Inc. (“JBA”) has acted as placement agent for the
        Company’s Series A Preferred Stock and the 6.4% Senior Convertible Notes Payable
        (See Note Q and R). One of JBA’s principals is a director of the Company. In
        connection with such offerings, the Placement Agent has received $803,207
        in
        cash commissions and warrants to purchase 1,817,887 shares of our Common
        Stock
        at cashless exercise prices ranging from $1.00 to $1.3325. JBA’s CFO is an
        investor in the Company’s 6.4% Senior Convertible Notes and joined the Company
        as its Chief Operating Officer in September 2005.
 
 In
        August
        2004, the Company entered into a Settlement Agreement and Mutual Release
        (“Settlement”) with the Company's former CEO and Board of Directors member
        (“Former CEO”). Pursuant to the Settlement, Former CEO agreed to sell to the
        Company 800,000 shares of the Company's common stock owned by him for an
        aggregate of $1.00 plus other good and valuable consideration. Former CEO
        and
        the Company agreed to certain releases of each other and certain
 
 F-30
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE
        M - RELATED PARTY TRANSACTIONS (Continued)**
 
 affiliates,
        including Gibraltar.
 
 In
        connection with the Settlement, the Company was legally released from its
        obligation of $176,146 of unpaid accrued salaries to Former CEO, and $203,770
        of
        accrued expenses due to Gibraltar and other entities controlled by Former
        CEO.
        The Company legally released Gibraltar from obligations of $656,297 (net
        of
        allowance for doubtful account of $60,000) of trade payable due to the Company,
        and $80,753 of other expenses Gibraltar and other entities controlled by
        Former
        CEO indebted to the Company. The Company received and canceled the 800,000
        shares of the Company’s common stock from Former CEO during the year ended
        August 31, 2005.
 
 During
        the years ended August 31, 2005 and 2004, one 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,
        2005
        and 2004, the amounts due to the shareholders are $-0- and $1,090,474 (Note
        G).
        These advances were repaid by conversion to Series A Preferred Stock as
        described in Note K above. Additionally, a Company principal shareholder
        advanced funds in the form of an unsecured, non-interest bearing note to
        the
        Company for working capital purposes. As of August 31, 2005 and 2004, the
        amount
        due to the shareholder is $120,000. The Company shall repay the note with
        common
        stock at the rate of 100,000 shares of common stock per $120,000 of advances.
        The Company is currently in default under the term of the note agreement
        (Note
        G)
 
 **NOTE
        N - BUSINESS CONCENTRATION**
 
 Revenue
        from continuing operations is not significant in fiscal 2004 or 2005. All
        of the
        revenue in 2004 came from one customer, while revenue in 2005 relates to
        four
        customers.
 
 **NOTE
        O - LOSSES PER COMMON SHARE**
 
 The
        following table presents the computation of basic and diluted losses per
        share:
 
 2005
              
              2004Net
                  loss available for common shareholders
              
              $
              (11,617,393
              )
              $
              (8,619,234
              )Basic
                  and fully diluted loss per share
              
              $
              (0.90
              )
              $
              (0.65
              )Continuing
                  operations
              
              $
              (0.90
              )
              $
              (0.34
              )Discontinued
                  operations
              
              $
              0.00
              
              $
              (0.31
              )Weighted
                  average common shares outstanding
              
              
              12,884,516
              
              
              13,293,655
 
 For
        the
        years ended August 31, 2005 and 2004, 10,682,677 and 3,477,436
        potential shares, respectively were excluded from shares used to calculate
        diluted earnings per share as their inclusion would reduce net losses per
        share.
 
 F-31
 MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004
 
 **NOTE
        P - 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 $11,900,000, which expire through 2026. The deferred tax
        asset related to the carryforward is approximately $4,046,000. 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.
        Significant changes in ownership may limit the Company's future use of its
        existing net operating losses.
 
 Components
        of deferred tax assets as of August 31, 2005 are as follows:
 
 Non-current:Net
                  operating loss carryforward
              
              $
              4,046,000Valuation
                  allowance
              
              
              (4,046,000
              )Net
                  deferred tax asset
              
              $
              –
 
 **NOTE
        Q - COMMITMENTS AND CONTINGENCIES**
 
 Operating
        Lease Commitments
 
 The
        Company leases office space under an operating lease in Charlotte, North
        Carolina for its corporate use. Commitments for minimum rentals under
        non-cancelable leases at August 31, 2005 are monthly payments averaging of
        $6,966 through September 2010. All operating leases in existence in fiscal
        2004
        have expired or been assigned to others in conjunction with the dispositions
        discussed in Note B..
 
 Commitments
        for minimum rentals under non-cancelable leases at August 31, 2005 are as
        follows:
 
 Year
              
              Amount2006
              
              $
              80,1572007
              
              
              80,7842008
              
              
              83,2322009
              
              
              85,6802010
                  and after
              
              
              95,492Total
              
              $
              425,325
 
 The
        Company incurred and charged to operations $67,684 and $15,097 in rental
        expense
        for the years ended August 31, 2005 and 2004, respectively.
 
 F-32
 MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004
 
 **NOTE
        Q - COMMITMENTS AND CONTINGENCIES (Continued)**
  Capital
        Lease Commitments
  All
        capital leases were included in the disposed ecom subsidiary discussed in
        Note
        B. At August 31, 2004, computer equipment and software includes the following
        amounts for capitalized leases. The capital leases and lease obligations
        were
        reclassified to net assets and net liabilities of discontinued operations
        in
        connection with the disposition of ecom during the year ended August 31,
        2005.
        At August 31, 2005, all capital leases and lease obligations were transferred
        to
        Customerlinx and Lion Development Group II, Inc. (Note B).
  Computer
                  equipment and software
              
              $
              1,234,202Less:
                  accumulated depreciation and amortization
              
              
              (
                  985,932
              )$
              248,270
  Consulting
        Agreements
 
 The
        Company has consulting agreements with outside contractors, certain of whom
        are
        also Company stockholders. The Agreements are generally month to month.
 
 Litigation
 
 In
        September 2004, an order requesting the U.S. Attorney for Eastern District
        of
        North Carolina to prosecute an alleged criminal contempt of court by the
        Company, that occurred in the case of Tweddle Litho Corp. vs. Gilbralter
        and
        Scientigo, Inc., or Tweddle Case, was entered by a judge in the U.S. District
        Court, Eastern District of North Carolina in the United States District Court
        for the Eastern District of North Carolina. The U.S. Attorney for the Eastern
        District of North Carolina issued a criminal information against the
        Company alleging contempt of court by virtue of the Company's violation
        of
        a court order entered on May 13, 2004 in the Tweddle Case when the Company
        sold
        its wholly-owned subsidiary, Convergion on June 2, 2004 in violation of the
        provisions of the order of May 13, 2004 enjoining the Company from
        transferring any of the Company's assets out of the ordinary
        course of
        business. In October 2004, the Company and the U.S. Attorney
        entered
        into a written plea agreement whereby the Company agreed to
        pay
        $50,000 for the alleged criminal contempt of court. The matter was ruled
        on and
        accepted in U.S. District Court for the Eastern District of North Carolina
        in
        May 2005. The Company was also placed on probation for
        one
        year.
 
 F-33
 MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004
 
 **NOTE
        Q - COMMITMENTS AND CONTINGENCIES (Continued)**
 
 Litigation
        (Continued)
 
 In
        April
        2004, iGate, Inc. (“iGate”) filed a complaint against Gilbralter Publishing,
        Inc. (“Gilbralter”) and the Company in the U.S. District of the Eastern District
        of North Carolina, Southern Division, claiming that the Company was liable
        to
        iGate in the amount of approximately $725,000. iGate asserts that Gilbralter
        owed this sum to iGate and by virtue of an alleged fraudulent conveyance,
        iGate
        asserts that a fraudulent conveyance occurred when Gilbralter forgave $5,000,000
        in liabilities of a wholly owned subsidiary of the Company which were guaranteed
        by the Company in exchange for the Company's issuing to Gilbralter shares
        of its
        Common Stock and warrants to purchase our Common Stock. In May 2004, default
        was
        entered against the Company. In November 2004, the court vacated the default
        and
        granted the Company leave to answer to the complaint. The
        Company filed its answer and asserted affirmative defenses alleging
        absolute defenses to the claims of iGate. The Company believes it has
        meritorious defenses to iGate’s claim and intends to vigorously defend itself
        against the claim. Management believes the ultimate outcome of this matter
        will
        not have a material adverse effect on the Company's consolidated financial
        position or results of operations.
  Edward
        Arthur Bohn vs. Terrence Jude Leifheit; E-Commerce Support Center, Inc.;
        Gibralter Publishing, Inc; Global Demand Publishing, Inc.; Sky Investments
        of
        Jacksonville, Inc.; Jan Kaster and Market Central, Inc.
  Edward
        Bohn filed a Complaint in June 2005 to initiate the above-captioned action,
        and
        obtained a Temporary Restraining Order on the same day. Subsequently, Edward
        Bohn modified the Temporary Restraining Order to limit its effort against
        the
        Company, to enjoin the Company from issuing its stock to Terrence Jude Leifheit.
        Subsequently, an Amended Complaint was filed by Edward Bohn to dismiss all
        counts against the Company and ecom., except for injunctive relief relating
        to
        the issuance of the Company’s stock. The Company has no liabilities asserted
        against either by Plaintiff or any of the Defendants. The Company believes
        it
        has meritorious defenses to the complaint and intends to vigorously defend
        itself against the claim. Management believes the ultimate outcome of this
        matter will not have a material adverse effect on the Company's consolidated
        financial position or results of operations.
  In
        May 2005, the Company was notified by a software
        licensed monitoring group that it was not in compliance with certain computer
        software licensing agreements. The Company believes that it has meritorious
        defenses to the allegations and intends to vigorously defend itself against
        the claims.
  In
        August 2005, the Company agreed to settle a claim
        from a consultant who had provided services to the Company during fiscal
        2004.  This claim was paid subsequent to year end with $60,000 in
        cash and
        the issuance of 60,000 shares of the Company's common stock.  The
        financial
        statements for the year ended August 31, 2005 contain a charge to operations
        of
        $140,000 relating to this transaction.
  
 F-34
 MARKET
          CENTRAL, INC.
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
          31, 2005 AND 2004
 
 **NOTE
        Q - COMMITMENTS AND CONTINGENCIES (Continued)**
 
 Litigation
        (Continued)
 
 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 should not have a material adverse effect on its financial position,
        results of operations or liquidity.
  Securities
        Law Issue
 Subsequent
          to the date of financial statements the Company determined that the 6.4%
          Senior
          Convertible Notes and Warrants that the Company issued to investors (Note
          I) may
          not have been exempt from the registration requirements under the Securities
          Act
          of 1933 or
          from
          the registration or qualification requirements under the securities laws
          of
          certain states. Consequently, the issuance of the Notes and Warrants may
          not
          have complied with the Securities Act of 1933 and the state securities
          laws of
          the states of Alabama, Georgia, Maryland, Mississippi, New
          Jersey,
          North Carolina, Ohio, South Carolina, Utah and Virginia. The Company may
          be
          subject to claims by federal and state regulators for any such violations.
          In
          addition, if any purchaser of the Company's Senior Convertible Notes were
          to
          prevail in a suit resulting from a violation of federal or applicable state
          securities laws, the Company could be liable to return the amount paid
          for such
          securities with interest thereon, less the amount of any income received
          thereon, upon tender of such securities, or for damages if the purchaser
          no
          longer owns the securities. As of the date of these financial statements,
          the
          Company is not aware of any alleged specific violation or the likelihood
          of any
          claim. There can be no assurance that litigation asserting such claims
          will not
          be initiated, or that the Company would prevail in any such litigation.
          The
          Company has elected to conduct a rescission offer to address these potential
          securities laws compliance issues by allowing the holders of the Notes
          and
          Warrants to rescind the purchase of such securities and sell those securities
          back to the Company if they so desire (see Note R).
  The
          Company is unable to predict the extent of its ultimate liability with
          respect
          to any and all future securities matters. The costs and other effects of
          any
          future litigation, government investigations, legal and administrative
          cases and
          proceedings, settlements, judgments and investigations, claims and changes
          in
          this matter could have a material adverse effect on the Company's financial
          condition and operating results.
 F-35
 MARKET
            CENTRAL, INC.
 NOTES
            TO
            CONSOLIDATED FINANCIAL STATEMENTS
 AUGUST
            31, 2005 AND 2004
 
 **NOTE
        R - SUBSEQUENT EVENTS**
 
 Subsequent
        to the date of financial statements the Company determined that the 6.4%
        Senior
        Convertible Notes and Warrants (Note I) that the Company issued to
        investors may not have been exempt from the registration requirements under
        the
        Securities Act of 1933 or from the registration or qualification requirements
        under the securities laws of certain states. Consequently, the issuance of
        the
        Notes and Warrants may not have complied with the Securities Act of 1933
        and the
        state securities laws of the states of Alabama, Georgia, Maryland,
        Mississippi, New Jersey, North Carolina, Ohio, South Carolina, Utah and Virginia
        (Note Q). The Company elected to conduct a rescission offer to address these
        securities laws compliance issues by allowing the holders of the Notes and
        Warrants to rescind the purchase of such securities and sell those securities
        back to the Company if they so desire. Generally, if the rescission
        offer is accepted, the Company will repurchase such Notes and
        Warrants
        at the price investors paid, plus interest at the current state statutory
        rate
        per year, if any, from the date of purchase through the date of payment pursuant
        to the rescission offer, less interest previously paid to Note holders. This
        rescission offer will be accompanied by an exchange offer to Note
        holders
        who do not accept the rescission offer pursuant to which such holders will
        be
        entitled to receive, at their election, new notes and new warrants with more
        favorable conversion and exercise terms, respectively. The rescission offer
        will
        be available for a thirty-day period which will begin upon the effectiveness
        of
        a registration statement which the Company has filed with the SEC with respect
        to the rescission offer and exchange offer. While the Company's management
        does
        not believe a significant number of holders of the convertible debt will
        accept
        the rescission offer, there can be no assurances as to the ultimate
        outcome
        of the offer. Accordingly, should the rescission offer be accepted by a
        significant number of note holders, this may have a materially adverse affect
        on
        the Company's consolidated financial condition.


F-36





ITEM8.
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None.





**ITEM
              8A.**
            **CONTROLS
                AND PROCEDURES**





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed by us in the reports that we file under the Exchange
      Act is accumulated and communicated to our management, including our principal
      executive and financial officers, as appropriate to allow timely decisions
      regarding required disclosure.





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(e) and 15d-15(e) of the Securities Exchange Act of
      1934)
      as of August 31, 2005 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.





As
      required by Rule 13a-15(d), the Company’s management, including the Chief
      Executive Officer and Chief Financial Officer , also conducted an evaluation
      of
      the Company’s internal controls over financial reporting to determine whether
      any changes occurred during the fourth fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, Market Central’s
      internal control over financial reporting. The
      registrant’s principal executive officers and principal financial officer have
      concluded that there were no changes in the registrant’s internal controls or in
      other factors that could significantly affect these controls subsequent to
      September 30, 2005, 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.





It
      should
      be noted that any system of controls, however well designed and operated, can
      provide only reasonable, and not absolute, assurance that the objectives of
      the
      system will be met. In addition, the design of any control system is based
      in
      part upon certain assumptions about the likelihood of future
      events.





**ITEM
              8B.**
            **OTHER
                INFORMATION**





None





**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
      September 30, 2005, our executive officers and directors were as
      follows:


**Name**
            **Age**
            **Director
                Since**
            **Position**
            **Term
                Expires**Doyal
                G. Bryant
            52
            2004
            Director,
                CEO
            2007Clifford
                A. Clark
            53
            2002
            Director,
                CFO, Secretary
            2005Ronald
                L. Attkisson*
            57
            2004
            Director
            2007Hoyt
                G. Lowder#
            63
            2004
            Director
            2007Stuart
                J. Yarbrough*#
            54
            2005
            Director,
                Chairman of the Board
            2006Paul
                Odom
            56
            
            Senior
                Vice President - Software Applications and SolutionsCynthia
                S. White
            58
            
            Vice
                President and Chief Operations Officer





22





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.





*
      member
      of Audit Committee





#
      member
      of Compensation Committee





Our
      Board
      of Directors has determined that Mr. Yarbrough qualifies as a financial expert
      as such term is defined by the SEC.





We
      do not
      have a nominating or corporate governance committee.




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





DOYAL
      G.
      BRYANT has served as our President and Chief Executive Officer since April
      2004,
      and as a Director since October 2004. Mr. Bryant has over 25 years experience
      in
      senior corporate management, product development, financing, operations and
      sales in all of Scientigo's combined product areas. He joined Scientigo when
      we
      entered into a letter of intent to acquire Convey Systems in which he was an
      owner and President and CEO. Prior to Convey, from 1991 to 2003 Mr. Bryant
      held
      senior management or ownership positions in companies that provided financial
      and technical due diligence services for major investment banking firms with
      transactions valued at over $300 million. He played an integral part in the
      growth and development of major telecommunication companies such as ZTEL,
      Premiere Technologies, CommSouth, Talk.Com, PrimeTec International, and ATMNet.
      His companies have developed international joint venture agreements and
      investment transactions for Voice, VoIP, and Internet related services in
      Canada, Mexico, Australia, Japan, Hong Kong, as well as several European and
      South American countries. Mr. Bryant holds a B.S. in business administration
      from Drury College in Missouri and has performed additional studies at Oxford
      University in England.





CLIFFORD
      A. CLARK has been our VP of Finance since February 2001 and a director since
      July 2002. Since October 2004, Mr. Clark has also served as Corporate Secretary
      for Scientigo. Mr. Clark also serves as V.P. of Finance for Insource Business
      Strategies, Inc., a payroll processing and PEO headquartered in Mooresville,
      NC.
      Mr. Clark has held this position since August 2004. Mr. Clark has continued
      to
      perform consulting and financial advisory services for a number of companies.
      From 1999 to 2002, Mr. Clark served as Vice President of Finance for Gilbralter
      and other entities comprising Gilbralter. 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.





23


HOYT
      G.
      LOWDER is senior vice president of FMI, Inc., a leading consulting company
      to
      the construction and contracting industry. Mr. Lowder is managing director
      of
      FMI’s southern regional office in Tampa. In addition to directing the management
      consulting activities for contractor clients, he also maintains primary
      responsibility for major manufacturers and suppliers of construction materials
      and equipment in North America. His current focus is on building value for
      selected major national and international construction-industry firms. As a
      specialist in strategic planning and marketing implementation, Mr. Lowder has
      extensive experience with the work acquisition process, in ascertaining the
      motives of major buyer groups and developing marketing and technology plans
      to
      help his clients gain a competitive advantage. Mr. Lowder holds bachelor of
      science and master of science degrees from North Carolina State
      University.





RONALD
      L.
      ATTKISSON has served as Chairman, Chief Executive Officer and President of
      Jones, Byrd & Attkisson, Inc. since its organization in 2003. Previously,
      Mr. Attkisson provided investment banking services through Attkisson, Carter
      & Company, which he founded in 1988 as Attkisson & Associates. Attkisson
& Associates grew to be one of the largest independent securities firms in
      Atlanta while providing investment brokerage, advisory and banking services
      to
      both individual and corporate clients in over 30 states. Mr. Attkisson sold
      most
      of his interest in the firm in January 2001, but retained an association with
      the firm until May 2003, when he resigned from the firm before starting Jones,
      Byrd & Attkisson, Inc. Prior to founding Attkisson & Associates, Mr.
      Attkisson was associated with Interstate Securities and Johnson, Lane, Space,
      Smith & Company, which were predecessor firms to Wachovia Securities. Prior
      to this, he was a vice president at The Robinson-Humphrey Company from 1978
      to
      1981. Mr. Attkisson graduated from the University of North Carolina at Chapel
      Hill in 1970. Mr. Attkisson is a director of Seawright Holdings, Inc., One
      Travel Holdings, Inc. and REIGNMAKER Communications, Inc.





STUART
      J.
      YARBROUGH is currently a principal in CrossHill Financial Group, a private
      equity funding, mezzanine financing and bridge financing company based in the
      Washington, D.C. area, which Mr. Yarbrough co-founded in 1994. His experience
      includes advising clients in the negotiation of mergers and acquisitions,
      including due diligence, loan restructuring and refinancing, capital raising
      options and strategies, and strategic planning. Prior to founding CrossHill,
      he
      served on the Board of Directors and as the Managing Partner of both the
      Washington, D.C. and Richmond offices of BDO Seidman, an international
      accounting and management consulting firm. Mr. Yarbrough serves as a board
      member of SBR, Inc. Mr. Yarbrough is a graduate of Duke University where he
      was
      named to the Atlantic Coast Conference Honor Roll for outstanding academic
      and
      athletic achievement. He is a member of the Economic Club of Washington and
      a
      member of Leadership Washington.





PAUL
      S.
      ODOM was formerly the Founder, President, and Chief Technology Officer of Pliant
      Technologies Inc. where he created a revolutionary information management
      technology. He joined Scientigo when the assets of Pliant were acquired by
      us in
      2003. Before forming Pliant Technologies Inc. in 1995, he was Vice President
      of
      Magisys Inc. where he led the design and implementation of software applications
      for oil field operations. As Manager of Process Systems Software for M. W.
      Kellogg from 1988 to 1994, he had responsibility for the development of software
      to automate engineering design processes. In addition, Mr. Odom has more than
      16
      years of experience in leading edge software applications development in the
      Oil
      and Gas industry, working with Dixie Corporation, ARCO Chemical Company, and
      The
      Standard Oil Company of Ohio. Mr. Odom has a Bachelor's degree in Chemical
      Engineering from the University of Arizona and currently holds five (5) patents
      in the area of information management and engineering.





CYNTHIA
      S. WHITE has
      served as our Chief Operations Officer since September 2005. During
      the last five years, Ms. White has been a consultant with Dover Holdings, LLC,
      Bisys and Strategic Foundations, LLC, most recently with Strategic Foundations,
      LLC. From August 2003 to the present, Ms. White has been the Financial and
      Operating Principal and CFO for Jones Byrd & Attkisson, Inc. Ms. White will
      end that consulting arrangement at such time that Jones Byrd & Attkisson
      transitions her position to her successor. Ms.
      White
      has over 25 years of experience in senior corporate management with emphasis
      on
      strategic planning, change management and systems/operations engineering.
      Focusing on the financial services industry including money center banks,
      investment banking firms, trading firms and brokerage companies she has
      developed and enhanced existing infrastructures to increase productivity while
      minimizing risk or regulatory exposure. Ms. White has provided corporate
      management services to such clients as Preferred Trade, FIMAT, Jones, Byrd
&
      Attkisson, Inc., TradeStation, E-trade, ING, GE Capital, SunTrust, and Bank
      of
      America. At Bank of America in San Francisco, California, Ms. White was
      responsible for the processing of $60 billion in transactions per day as
      Director of Securities Operations. During her tenure at Bank of America, she
      designed, implemented and managed self-clearing securities operations, and
      developed international securities distribution channels for the Capital Markets
      Section 20 Broker/Dealer with a full range of products including equities,
      U.S.
      Treasury securities, corporate debt securities, municipal bonds, commercial
      paper and repurchase agreements. While at Bank of America, Ms. White refined
      a
“production ready” process to be used for systems rollout that minimizes the
      risk of implementation. Ms. White holds a Bachelor of Science Degree in Applied
      Mathematics with a minor in Physics from North Carolina State University and
      holds the following securities licenses: a Series 7 - General Securities
      Registered Representative, a Series 24 - General Securities Principal, a Series
      27 - Financial and Operations Principal, and a Series 53 - Municipal Securities
      Principal.





24




Section
      16(a) of the Securities Exchange Act of 1934, as amended (the "Act"), requires
      our directors and executive officers, and persons who own more than 10% of
      our
      common stock, to file with the Securities and Exchange Commission certain
      reports of beneficial ownership of our common stock. We believe that such
      reports have been filed by our directors and executive officers, but with
      respect to all such directors and executive officers, not in a timely manner.
      We
      do not believe that certain 10% holders of our Common Stock have filed such
      reports. We adopted a code of ethics that applies to the senior financial
      officers which includes the CEO, COO, CFO and principle accounting
      officer.





**ITEM
              10.**
            **EXECUTIVE
                COMPENSATION**




Our
      directors who are not our employees (“outside directors”) receive an annual
      director’s fee of $20,000 ($25,000 for the Chairman of our Audit Committee). In
      addition, each outside director upon his first election as a member of our
      board
      receives a grant of nonqualified stock options with an exercise price of the
      fair market value of our Common Stock at the time of grant. These options vest
      one-third immediately, one-third on the first anniversary of grant and one-third
      on the second anniversary of grant provided that such outside director remains
      a
      director on such anniversaries. Directors who are employed by us do not receive
      additional consideration for serving as directors, except that all directors
      are
      entitled to reimbursement for travel and out-of-pocket expenses in connection
      with their attendance at board and committee meetings.




On
      September 22, 2005, we granted each of our three outside directors,
      Messrs. Yarbrough, Attkisson and Lowder options to
      purchase 300,000 shares of our Common Stock at an exercise price
      of
      $1.35 per share for a term of five years.





The
      following Summary Compensation Table sets forth all compensation actually paid
      or accrued by us for services rendered to us for the years ended August 31,
      2003, 2004 and 2005. to our Chief Executive Officer and former Chief Executive
      Officer and two other executive officers in fiscal 2005:




**Name
                and Principal Position**
            
            **Year**
            
            **Salary
                ($)**
            
            **Bonus
                ($)**
            
            **Other
                Annual Compensation ($)**
            
            **Securities
                Underlying Options**Doyal
                G. Bryant, CEO (1)
            
            
            2005
            
            $
            180,000
            
            
            None
            
            $
            13,026
            
            
            ________2004
            
            $
            -0-
            
            
            None
            
            
            None
            
            
            ________2003
            
            $
            -0-Paul
                S.Odom, Senior Vice President - Software Apps and Solutions
                (2)
            
            
            2005
            
            $
            120,000
            
            
            None
            
            
            None
            
            
            ________2004
            
            $
            120,000
            
            
            None
            
            
            None
            
            
            ________Clifford
                A. Clark, CFO (3)
            
            
            2005
            
            $
            120,000
            
            
            None
            
            $
            8,097
            
            
            ________2004
              2003
            
            $
              $
            55,000
              55,000
            
            
            None
              None
            
            
            None
              None
            
            
            ________





(1)
      Mr.
      Bryant became our CEO in April 2004 but was not compensated directly by us
      until
      October 2004. Payments to The  Tag
      Group, Inc. during fiscal 2004 which then compensated Mr. Bryant were $40,000.
      Mr. Bryant also received warrants in exchange for salary deferrals from October
      2004 through April 2005 that were priced below market at the time of issuance,
      the amount by which market value at issuance exceeded exercise price is included
      as compensation and shown as Other Annual Compensation of $13,026.





(2)
      Mr.
      Odom has been an employee since July 2004 and his title was changed in fiscal
      2005 to Senior Vice President - Software Applications and
      Solutions.





(3)
      Mr.
      Clark became our CFO in 2001. Mr. Clark also received warrants in exchange
      for
      salary deferrals from September 2004 through April 2005 that were priced below
      market at the time of issuance, the amount by which market value at issuance
      exceeded exercise price is included as compensation and shown as Other Annual
      Compensation of $8,097.





25




Employee
        Stock Option Plan


Our
      2003
      Amended and Restated Stock Plan (the "Plan"), assumed the 1996 Stock Option
      Plan, which was adopted in 1996 and amended in October 1997, July 2001, October
      2003 and December 2003 to increase the number of issuable shares under the
      Plan
      to 3,000,000 shares of common stock. The purpose of the Plan is to encourage
      stock ownership by our management and employees, to provide an additional
      incentive for those employees to contribute to our success and to provide us
      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 our 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 our 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 our shareholders.





A
      maximum
      of 3,000,000 shares of our 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,
      2005, 5,801,424 options were outstanding, 551,424 of which were issued inside
      the Plan. As of August 31, 2005, 518,092 shares are exercisable at an option
      price per share ranging from $.01 to $3.16 per share and with expiration dates
      from February 2005 through February 2009.





Profit
      Sharing Plan





We
      sponsor a qualified employee savings plan (commonly referred to as a “401K
      plan”) for all eligible employees, including all of our officers. Participants
      may make contributions from their gross pay (limited to 15% of the employee’s
      compensation, as defined up to $14,000 annually). We do not match any
      contributions. No other deferred compensation plan is currently in place.





Employment
      Agreements





We
      have
      employment agreements with three of our executive officers: Doyal G. Bryant,
      CEO, Clifford A. Clark, CFO and Paul S. Odom, Senior Vice President.





Mr.
      Bryant’s contract provides for an annual salary of $180,000 and will terminate
      on October 7, 2007. The contract provides for compensation in the case of a
      change of control of our Company which if Mr. Bryant elects to resign shall
      equal twice his annual salary and all unvested stock options immediately
      vesting. Compensation in the case of termination without cause provides for
      normal payout of the contract plus nine months additional compensation. The
      contract also provides for options for 4,000,000 shares of our common stock.
      These are divided into four equal traunches of 1,000,000 at prices of $1.60,
      $2.00, $2.25 and $2.50, respectively. The first 1,000,000, which are exercisable
      at $1.60, have vested; the remaining 3,000,000 options will vest upon achieving
      certain stock price goals.





Mr.
      Odom’s contract provides for an annual salary of $150,000 and terminates on
      January 14, 2009. The contract provides for compensation in the case of a change
      of control of our Company which if Mr. Odom elects to resign shall equal twice
      his annual salary and all unvested stock options immediately vesting.
      Compensation in the case of termination without cause provides for normal payout
      of the contract but must be no less than 24 months. The contract provides for
      options for 600,000 shares of our common stock. These are divided into three
      equal traunches of 200,000 at prices of $1.60, $2.00 and $2.25, respectively.
      The first 200,000, which are exercisable at $1.60, have vested; the remaining
      400,000 options will vest upon achieving certain stock price goals.





Mr.
      Clark’s contract provides for an annual salary of $120,000 and will terminate on
      August 30, 2007. The contract provides for compensation in the case of a change
      of control of our Company which if Mr. Clark elects to resign shall equal twice
      his annual salary and all unvested stock options immediately vesting.
      Compensation in the case of termination without cause provides for normal payout
      of the contract but must be no less than 24 months. The contract provides for
      options for 375,000 shares of our common stock. These are divided into three
      equal traunches of 125,000 at prices of $1.60, $2.00 and $2.25, respectively.
      The first 125,000, which are exercisable at $1.60, have vested; the remaining
      250,000 options will vest upon achieving certain stock price goals.  26


ITEM
                11.
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT****AND RELATED STOCKHOLDER
                MATTERS**





The
      following table sets forth information, to the best of our knowledge, as of
      October 17, 2005, with respect to each person known by us to own beneficially
      more than 5% of the outstanding Common Stock, each director and all directors
      and executive officers as a group.


NAME
                AND ADDRESS OF BENEFICIAL OWNER
            
            AMOUNT
                AND NATURE OF BENEFICIAL OWNERSHIP (1)
            
            PERCENT
                OF CLASS (2)Doyal
                G. Bryant*
            
            
            1,036,247
                (3
            )
            
            6.9
            %Paul
                S. Odom*
            
            
            275,308
                (4
            )
            
            1.9
            %Clifford
                A. Clark*
            
            
            178,949
                (5
            )
            
            1.3
            %Cynthia
                S. White*
            
            
            334,462
                (6
            )
            
            2.4
            %Ronald
                L. Attkisson*
            
            
            1,761,456
                (7
            )
            
            11.3
            %Hoyt
                G. Lowder*
            
            
            589,894
                (8
            )
            
            4.1
            %Stuart
                J. Yarbrough*
            
            
            317,529
                (9
            )
            
            2.2
            %Glen
                H. Hammer
            
            
            1,452,048
                (10
            )
            
            10.3
            %William
                A. Goldstein
            
            
            2,562,830
                (11
            )
            
            17.7
            %All
                directors and executive officers as a group (7 persons in
                group)
            
            
            4,493,844
            
            
            25.0
            %




Note:
            Unless
                otherwise noted, all persons address is 6701 Carmel Road, Suite 205
                Charlotte, NC 27226





*
            Director
                and/or executive officer





Note:
            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 optionsand
                stock warrants which are exercisable or convertible within sixty
                days from
                September 30, 2005.





(2)
            Based
                upon 13,884,071 shares of Common Stock outstanding on October 17,
                2005.
                Percentage ownership is calculated separately for each person on
                the basis
                of the actual number of outstanding shares as of October 17, 2005
                and
                assumes the exercise of certain stock options and warrants held by
                such
                person (but not by anyone else) exercisable within sixty
                days.





(3)
            Includes
                1,000,000 shares that may be acquired by Mr. Bryant pursuant to the
                exercise of stock purchase options exercisable within sixty days
                at
                exercise price of $1.60 and warrants issued for the purchase of 36,247
                shares at prices ranging from $.90 to $1.60.





(4)
            Includes
                36,749 shares owned by Mr. Odom and his spouse and 238,559 shares
                that may
                be acquired by Mr. Odom pursuant to the exercise of stock purchase
                options
                and warrants exercisable within sixty days at exercise prices of
                $1.60-$2.35.





27


(5)
            Includes
                (i) 20,826 shares owned directly and (ii) 148,123 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
                $.90 to
                $2.20 per share.





(6)
            Includes
                (i) 140,712 shares that may be obtained upon the conversion of the
                6.4%
                Convertible Notes owned by Ms. White and her spouse, which are convertible
                within sixty days at a conversion price of $1.3325 per share based
                upon
                the principal balance, and (ii) 100,000 options and 93,750 warrants
                exercisable within sixty days at exercise price of
                $1.00-$1.35.





(7)
            Includes
                10,000 shares owned directly by Mr. Attkisson or entities which he
                controls and 100,000 shares that may be acquired by Mr. Attkisson
                pursuant
                to the exercise of stock purchase options and 1,651,456 warrants
                exercisable within sixty days at exercise prices of $1.00 - $1.35.





(8)
            Includes
                (i) 249,947 shares owned directly and (ii) 100,000 shares that may
                be
                acquired by Mr. Lowder pursuant to the exercise of stock purchase
                options
                and 239,947 warrants exercisable within sixty days of October 17,
                2005 at
                an exercise price of $.85 - $1.35.





(9)
            Includes
                (i) 59,964 shares of the Company’s common stock, (ii) warrants to purchase
                96,589 shares of Company common stock within sixty days at an exercise
                price of $.85 - $1.00, (iii) 60,976 shares that may be obtained upon
                the
                conversion of the 6.4% Convertible Notes owned by Mr. Yarbrough,
                which are
                convertible within sixty days at a conversion price of $1.3325 per
                share
                based upon the undiscounted note balance and (iii) 100,000 shares
                that may
                be acquired by Mr. Yarbrough pursuant to the exercise of stock purchase
                options at $1.35. This does not include (i) 159,896 shares owned
                directly
                (ii) $750,000 principal amount of the Company’s 6.4% Senior Convertible
                Notes which are convertible within sixty days into 562,852 shares
                of the
                Company’s common stock, warrants to purchase 375,000 shares of Company
                common stock exercisable within sixty days at an exercise price of
                $1.00
                per share and (iii) 159,896 warrants exercisable within sixty days
                at
                exercise price of $.85 per share, all of which are owned by an investment
                limited partnership of which Mr. Yarbrough is partial owner of the
                limited
                liability company which is the general partner of such investment
                partnership. Mr. Yarbrough disclaims any beneficial ownership of
                such
                shares and warrants.





(10)
            Includes
                1,172,509 shares owned directly by Mr. Hammer and 279,539 shares
                that may
                be acquired by Mr. Hammer pursuant to the exercise of warrants exercisable
                within sixty days of October 17, 2005 at an exercise price of
                $.85.





(11)
            Includes
                2,001,415 shares owned directly by Mr. Goldstein or entities he controls
                and 561,415 shares that may be acquired by Mr. Goldstein pursuant
                to the
                exercise of warrants exercisable within sixty days at an exercise
                price of
                $.85 per share.





**ITEM
              12.**
            **CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS**





**Placement
      Agent Commissions**





The
      firm
      of Jones Byrd & Attkisson, Inc. has acted as Placement Agent for our prior
      offerings of Notes and Warrants and the Series A Preferred Stock. In connection
      with such offerings, the Placement Agent has received $803,207 in cash
      commissions and warrants to purchase 1,817,887 shares of our Common Stock at
      cashless exercise prices ranging from $1.00 to $1.3325. Additionally, we have
      agreed to pay fees to the Placement Agent, if allowed by applicable state law,
      in the event that holders convert certain notes or exercise certain warrants.
      Ronald L. Attkisson, one of our directors, is a principal of the Placement
      Agent. Cynthia White, our Vice President and Chief Operating Officer, has been
      the Financial and Operating Principal and CFO for the Placement Agent from
      August 2003 to the present. Ms. White will end that consulting arrangement
      at
      such time that the Placement Agent transitions her position to her
      successor.





28


**TAG/Convey
      Transaction**





Scientigo
      has entered into a non-binding letter of intent to purchase substantially all
      of
      the assets of The Tag Group, Inc., or TAG. These assets consist of cash,
      accounts receivable and certain proprietary products in the areas of web
      conferencing and collaboration and web-based PC support tools. Subject to the
      execution of definitive agreements, this transaction is now expected to be
      completed in late calendar year 2005. Audit issues relating to TAG caused the
      delays. TAG and its wholly-owned subsidiary, Convey Systems, Inc., or Convey,
      and Scientigo have executed an agreement whereby Scientigo is providing
      day-to-day management for Convey. Scientigo has received the net proceeds from
      sales of Convey products since April 15, 2004, and will continue to do so
      through the closing. The purchase price of these assets plus related expenses
      is
      expected to be up to approximately 1,180,488 shares of Scientigo's Common Stock.
      Doyal Bryant, President and Chief Executive Officer of Scientigo, is the
      beneficial owner of approximately 49% of the outstanding Common Stock of TAG.
      In
      such capacity, Mr. Bryant would have received a significant number of shares
      of
      our Common Stock in the event that the TAG/Convey transaction is consummated.
      Mr. Bryant has agreed to forego the receipt of any such shares and has no
      financial interest in the consummation of the TAG/Convey transaction. Mr. Thomas
      Gordy, a former director of Scientigo, received 300,000 warrants to purchase
      shares of Common Stock of Scientigo at $1.60 per share for providing services
      to
      Scientigo in connection with the transaction.





**Recapitalization
      Transactions**





In
      November 2004, after discussions with management regarding the capital structure
      of Scientigo, Scientigo's two largest beneficial stockholders (William A.
      Goldstein and Glen Hammer) notified Scientigo that they would return 5,880,740
      shares of Common Stock to Scientigo's treasury, cancel warrants that they owned
      which provided them with the right to purchase approximately 2,300,000 shares
      of
      Common Stock in Scientigo, resign from Scientigo's Board of Directors and seek
      to convert approximately $1,000,000 in demand notes due from Scientigo into
      shares of Scientigo's Series A Preferred Stock. The purpose of the proposed
      transactions was to restructure the capitalization of Scientigo so that it
      could
      more readily raise additional capital needed to continue management's efforts
      to
      monetize the value of Scientigo's intellectual property portfolio. Mr. Goldstein
      returned 2,940,370 shares of Common Stock, cancelled warrants to purchase
      2,300,000 shares of Common Stock (held jointly by Messrs. Goldstein and Hammer)
      and converted $701,786 of indebtedness into shares of Scientigo's Series A
      Preferred Stock effective April 22, 2005. Mr. Hammer was unable to return his
      shares of Common Stock to Scientigo because they were pledged as collateral
      for
      the repayment of his indebtedness. Therefore, Scientigo's bank debt of
      approximately $1,250,000 was assumed by Mr. Hammer in exchange for a note
      payable from Scientigo effective December 2004. At that time, Scientigo was
      released from such bank debt. This new note provided for interest only, at
      LIBOR
      plus 2.75%, through the earlier of when Mr. Hammer returned 2,940,370 shares
      of
      Common Stock to Scientigo, but no later than April 30, 2005. Effective April
      20,
      2005, Scientigo and Mr. Hammer entered into an agreement which terminated
      earlier agreements and provided for the contribution of 3,100,000 shares of
      Common Stock to Scientigo by Mr. Hammer. In return, Scientigo agreed to lend
      Mr.
      Hammer $400,000 of the proceeds of the Note Offering for the purpose of
      discharging indebtedness of Mr. Hammer, enter into a loan agreement with Mr.
      Hammer as previously agreed to including the payment of approximately $150,000
      of the $1,250,000 principal of such indebtedness and issue Mr. Hammer 262,238
      shares of the Series A Preferred Stock in payment of all other outstanding
      indebtedness of Scientigo to such stockholder. The $400,000 loan is being repaid
      out of the proceeds of the sale of a portion of the remaining shares of the
      Common Stock owned by Mr. Hammer and in any event is due not later than one
      (1)
      year from the date of such loan. All of such transactions were completed on
      May
      31, 2005. In connection with these transactions, Mr. Hammer provided management
      with a proxy to vote his shares of Common Stock at the 2005 annual meeting
      of
      our stockholders. Neither Mr. Goldstein nor Mr. Hammer have any continuing
      interest in Scientigo other than as holders of Common Stock and warrants to
      purchase Common Stock.







During
      the years ended August 31, 2005 and 2004, we provided services through
      our E-commerce subsidiary to three companies owned by former directors
      and/or officers of the Company. All of the revenue from these services are
      now
      included in the loss from discontinued operations. The amount of revenue
      included in this loss from discontinued operations is $-0- and $1,162,691 from
      Gibraltar Publishing, Inc., for the years ended August 31, 2005 and 2004,
      respectively. J&C Nationwide, Inc. and Cheapseats, Inc. revenues of $151,616
      and $613,774 were also included in this loss from discontinued operations for
      the years ended August 31, 2005 and 2004, respectively.





At
      August
      31, 2005, we had made payments totaling $81,090 on behalf of The Tag Group,
      Inc.
      in anticipation of the purchase of substantially all of their assets. These
      payments to various vendors will be deducted from the purchase price paid to
      The
      Tag Group, Inc. at the closing of the purchase transaction.





We
      previously leased office space to Gilbralter, owned by a former officer and
      director of Scientigo, in our former facility in Jacksonville, North Carolina.
      We no longer occupy the space and therefore no longer lease the space to
      Gilbralter.





29




**ITEM
      13.**  **EXHIBITS**




Exhibit
                Number
              Description
                  of Exhibit3.1
              Restated
                  Certificate of Incorporation of Market Central, Inc. filed in Delaware
                  on
                  November 2, 2005 (previously filed as Exhibit 3.1 to Form S-4
                  filed November 10, 2005)3.2
              By-Laws
                  of Market Central, Inc. (previously filed as Exhibit 3.2
                  to
                  Form S-4 filed November 10, 2005)4.1
              Specimen
                  of Common Stock Certificate (previously filed as Exhibit 4.1
                  to
                  Form 10-SB/A dated December 31, 1997)4.2
              Certificate
                  of Designations for Series A Convertible Preferred Stock
                  Certificate
                  (previously filed as Exhibit 4.2 to Form 10-QSB dated
                  April 15, 2004)4.3
              Certificate
                  of Designations for Series B Convertible Preferred Stock
                  Certificate
                  (previously filed as Exhibit 4.1 to Form 10-QSB dated
                  April 15, 2004)4.4
              Convertible
                  Preferred Stock Purchase Agreement dated March 25, 2004 between
                  Market
                  Central, Inc. and Armadillo Investments, Plc (previously filed
                  as
                  Exhibit 4.4 to Form S-4 filed November 10,
                  2005)4.5
              Registration
                  Rights Agreement dated March 25, 2004, between Market Central,
                  Inc. and
                  Armadillo Investments, Plc (previously filed as Exhibit 4.5
                  to
                  Form S-4 filed November 10, 2005)4.6
              Form
                  of 2005 6.4% Senior Convertible Note (previously filed as Exhibit 4.6
                  to Form S-4 filed November 10, 2005)4.7
              Form
                  of A 8% Senior Convertible Note (previously filed as Exhibit 4.7
                  to
                  Form S-4 filed November 10, 2005)4.8
              Form
                  of B 8% Senior Convertible Note (previously filed as Exhibit 4.8
                  to
                  Form S-4 filed November 10, 2005)4.9
              Security
                  Agreement dated as of September , 2005, between Market Central,
                  Inc. for
                  the benefit of the secured parties signatory hereto pursuant to
                  powers of
                  attorney granted to CrossHill Georgetown Capital, LP (previously
                  filed as
                  Exhibit 4.9 to Form S-4 filed November 10,
                  2005)4.10
              Form
                  of Preferred Stock Warrant to Purchase Common Stock (previously
                  filed as
                  Exhibit 4.10 to Form S-4 filed November 10,
                  2005)4.11
              Form
                  of Warrant to Purchase Common Stock (previously filed as Exhibit 4.11
                  to Form SB-2/S-4 filed November 10,
                  2005)
  30
 4.12
              Form
                  of A Warrant to Purchase Common Stock (previously filed as
                  Exhibit 4.12 to Form S-4 filed November 10,
                  2005)4.13
              Form
                  of B Warrant to Purchase Common Stock (previously filed as
                  Exhibit 4.13 to Form S-4 filed November 10,
                  2005)4.14
              Amendment
                  to Security Agreement dated November 7, 2005, between Market Central,
                  Inc.
                  and CrossHill Georgetown Capital, LP (previously filed as Exhibit
                  4.14 to
                  Form S-4 filed November 10, 2005)10.1
              Market
                  Central, Inc. 2003 Amended and Restated Stock Plan (previously
                  filed as
                  Appendix B to Definitive Proxy Statement dated December 19,
                  2003)10.2
              Settlement
                  Agreement and Mutual Release dated August 20, 2004, between
                  Market
                  Central, Inc. and Terrence J. Leifheit (previously filed
                  as
                  Exhibit 10.18 to Form 8-K dated August 30,
                  2004)10.3
              Employment
                  Agreement between Market Central, Inc. and Clifford Clark dated
                  September
                  1, 2004 (previously filed as Exhibit 10.3 to Form S-4
                  filed
                  November 10, 2005)10.4
              Employment
                  Agreement between Market Central, Inc. and Doyal Bryant dated October
                  8,
                  2004 (previously filed as Exhibit 10.4 to Form S-4
                  filed
                  November 10, 2005)10.5
              Employment
                  Agreement between Market Central, Inc. and Paul Odom dated January
                  15,
                  2005 (previously filed as Exhibit 10.5 to Form S-4
                  filed
                  November 10, 2005)10.6
              Asset
                  Purchase Agreement dated May 23, 2005, between E-Commerce Support
                  Centers,
                  Inc. and Customerlinx of North Carolina, Inc. regarding the sale
                  of
                  substantially all of the assets of E-Commerce (previously filed
                  as
                  Exhibit 10.1 to Form 8-K dated May 23, 2005)
                  .10.7
              Stock
                  Purchase Agreement dated August 31, 2005, between Market Central,
                  Inc. and
                  Lion Development Group II, Inc. with respect to the sale of all
                  of the
                  capital stock of E-Commerce Support Centers, Inc. (previously filed
                  as
                  Exhibit 10.1 to Form 8-K dated August 31, 2005)14.1
              Market
                  Central, Inc. Code of Business Conduct and Ethics (previously filed
                  as
                  Exhibit 14.1 to Form S-4 filed November 10,
                  2005)14.2
              Market
                  Central, Inc. Code of Ethics for Senior Financial Officers (previously
                  filed as Exhibit 14.2 to Form S-4 filed November
                  10,
                  2005)21.1
              Subsidiaries
                  of Market Central, Inc. (previously filed as Exhibit 21.1
                  to
                  Form S-4 filed November 10, 2005)23.1
              Consent
                  of Russell Bedford Stefanou Mirchandani LLP.*23.2
              Consent
                  of Russell Bedford Stefanou Mirchandani LLP.*31.1
              Rule
                  13a-14(a)/15d-14(a) Certification*31.2
              Rule
                  13a-14(a)/15d-14(a) Certification*32.1
              Section
                  1350 Certification*32.2
              Section
                  1350 Certification*





*Filed
      herewith





31





ITEM
              14
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





The
      following table discloses accounting fees and services which were paid to the
      Company’s independent auditors:




Fee
                Category
            
            Fiscal
                2005 Fees
            
            Fiscal
                2004 FeesAudit
                Fees
            
            $
            127,667
            
            $
            135,040Audit
                Related Fees
            
            
            -
            
            
            -Tax
                Fees
            
            
            19,250All
                Other Fees
            
            
            -
            
            
            -Total
                Fees
            
            $
            146,917
            
            $
            135,040





*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 2005 or 2004.





*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 2005 or
      2004.





32


**Policy
      on Audit Committee Pre-Aproval 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.





**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)Date:
              November 10, 2005
            By:
            /S/
              Doyal BryantDoyal
              G. BryantPresident,
              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/
                Doyal G. Bryant
            
            President,
                Director
            
            November
                10, 2005Doyal
                G. Bryant/S/Stuart
                J. Yarbrough
            
            Director
            
            November
                10, 2005Stuart
                J. Yarbrough/S/Hoyt
                G. Lowder
            
            Director
            
            November
                10, 2005Hoyt
                G. Lowder/S/Ronald
                L. Attkisson
            
            Director
            
            November
                10, 2005Ronald
                L. Attkisson/S/
                Clifford A. Clark
            
            Vice
                President Finance and Director
            
            November
                10, 2005Clifford
                A. Clark






33