MARKET CENTRAL, INC.
6701 CARMEL ROAD
SUITE 205
CHARLOTTE, NC 28226
September 8, 2005
VIA FAX AND EDGAR
Ms. Christine Davis
Division of Corporate Finance
U.S. Securities & Exchange Commission
Washington, D.C. 20549
Re: Market Central, Inc.
File No. 000-22969
Form 10-KSB for Year Ended August 31, 2004
------------------------------------------
Forms 10-QSB for quarter ended May 31, 2005
-------------------------------------------
Dear Ms. Davis:
The purpose of this letter to is supplement our response to our letter
dated August 24, 2005 with regard to the above referenced filings in accordance
with our telephone conference call of September 1, 2005. Our responses reference
your comment numbers as follows:
Comment 3
The Registrant agrees to make the following changes to its presentation of cash
flows in its future filings:
o reclassify the change in restricted cash balances to cash flows used
in operations
o remove both disclosures of the $875,000 of Series B preferred
accrued stock dividend as amounts reconciling net income to cash
used in operations.
Comment 4
In connection with its acquisition of Pliant, the Company concluded the
acquisition qualified as a business as defined under EITF 98-3, as a result of
the following facts and circumstances:
o The Company acquired long-lived assets in the form of computers,
peripherals, and office furniture
o The Company acquired intellectual property in the form of patents
and copy-righted software (all related to current projects)
o The Company retained Pliant employees and contractors
o The Company assumed all processes in connection with management of
the business (accounting, personnel, marketing, etc.)
o The Company retained the Pliant customer base
Based upon the above facts and circumstances, the Registrant believes the
acquisition of Plaint includes all the material elements necessary for Plaint to
conduct normal operations subsequent to its acquisition by the Registrant, and
therefore qualifies as a business.
Comment 7
The Company acknowledges that as a result of the default, the Factor had a
secured interest in the amounts in excess of the accounts receivable sold , and
the right to collect and withhold the $120,898 described as "Due from Factor".
Subsequent to the date of the financial statements, the Company received the
amount in full and terminated its relationship with the Factor.
Comment 9
The Company acknowledges the certifications under 302 were not technically in
compliance with Item 601 (b) (31) of Regulation SB and should have stated:
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) [language intentionally omitted
pursuant to SEC exemptive order in SEC Release No. 34-50754] for the small
business issuer and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) [Omitted pursuant to SEC Release no. 33-8238];
(c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting.
The Registrant shall correct the disclosure in its future filings
Comment 10
We have recalculated the allocation of the fair value of the warrants and the
beneficial conversion feature in accordance with EITF 00-27, Issue 1 and has
enclosed the Company's working paper summarizing the recalculation. Based upon
the revised computation, the Registrant's interest costs for the three months
ended May 31, 2005 was understated by $2,641, an amount considered to be
immaterial. The Registrant shall correct the computation in its future filings
The Company acknowledges that:
The Company is responsible for the adequacy and accuracy of the disclosure
in the filing:
Staff comments or changes to disclosure in response to staff comments do
not foreclose the commission from taking any action with respect to the filing;
and
The Company may not assert staff comments as a defense in any proceedings
initiated by the commission or any person under the federal securities laws of
the United States.
We thank you in advance for your assistance in this matter. Since we are
in the process of preparing our Proxy Statement, we respectfully request an
expedited review of our responses. If you have any questions or additional
comments, please do not hesitate to contact me at (704) 837-0502.
Yours truly,
MARKET CENTRAL, INC.
By: /s/ Clifford A. Clark
----------------------------
Clifford A. Clark
Chief Financial Officer
Scientigo - 6.4% Senior Convertible Notes
Average
Stock
Warrants Expiration Price Exercise
From (Issued to) # Issued Issue Date Date # in Days (FMV) Price Volatility
---- ----------- -------- ---------- ---- --------- ----- ----- ----------
inception Noteholders 2,080,313 05/15/05 06/30/10 1,872 $ 1.54 $ 1.00 102%
- --------- ----------- --------- -------- -------- ----- ------ ------ ----
2,080,313
Interest Additional
Rate Call Cost
---- ---- ----
2.03% 1.2522 $ 2,604,967
----- ------ -----------
$ 2,604,967
Convertible FV of
Note into # FV of Common
Date Amount of Shares Stock stock
---- ------ --------- ----- -----
05/15/05 4,160,625 3,122,420 1.65 5,151,993
- -------- --------- --------- ---- ---------
4,160,625 3,122,420 $ 5,151,993
Ratio of
EITF 00-27 Issue 1: relative values
- ------------------- ---------------
Fair value of convertible debt on commitment date: $ 4,160,625 0.61
Fair value of warrants on commitment date: $ 2,604,967 0.39
Allocation of proceeds:
- -----------------------
detached warrants: $ 1,601,972
convertible debt: $ 2,558,653
------------
$ 4,160,625
Debt Discounts - detached warrants:
Dr. Debt Discount - warrant $ 1,601,972
Cr. APIC $ 1,601,972
Effective conversion price:
- ---------------------------
Allocated Proceeds $ 2,558,653
Number of shares to be received upon conversion: 3,122,420
Effective conversion price: $ 0.82
Intrinsic value of conversion option (beneficial conversion feature) $ 2,249,875
Debt Discounts - BCF:
Dr. Debt Discount - BCF $ 2,249,875
Cr. APIC $ 2,249,875
TOTAL debt discount $ 3,851,847
EITF 00-27 Issue 15:
- --------------------
fair value of common stock on commitment date: $ 5,151,993
proceeds allocated to common stock conversion option: 2,763,391 ***
------------
beneficial conversion feature: 2,388,603
upon conversion, the warrants would be recognized at: 1,397,234
To record Debt Discount:
Debt Discounts were calculated per EITF 00-27 Item 15: Issue 15 Issue 1
-------- -------
Dr. Debt Discount - beneficial conversion feature $ 2,388,603 $ 2,249,875
Dr. Debt Discount - warrant $ 1,397,234 $ 1,601,972
Cr. APIC $ 2,388,603 $ 2,249,875
Cr. APIC $ 1,397,234 $ 1,601,972
------------ ------------
TOTAL debt discount $ 3,785,837 $ 3,851,847
------------ ------------
Amortize interest expense (over 25 months):
Dr. Interest Expense $ 151,433 $ 154,074
Cr. Debt Discount - beneficial conversion feature $ 95,544 $ 89,995
Cr. Debt Discount - warrant $ 55,889 $ 64,079
***
(total proceeds received x fair value of the common stock at the commitment date
/ total fair value of all instruments received by the holder upon conversion at
the commitment date).