MARKETING WORLDWIDE CORP - FORM 10-Q

Attached files

file	filename
EX-32.2 - MARKETING WORLDWIDE CORP	v174943_ex32-2.htm
EX-32.1 - MARKETING WORLDWIDE CORP	v174943_ex32-1.htm
EX-31.1 - MARKETING WORLDWIDE CORP	v174943_ex31-1.htm
EX-31.2 - MARKETING WORLDWIDE CORP	v174943_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended DECEMBER 31, 2009

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _____________

Commission File Number: 000-50586

MARKETING WORLDWIDE CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE		68-0566295
(State of incorporation)		(IRS Employer ID Number)

2212 GRAND COMMERCE DR.

HOWELL, MICHIGAN 48855

(Address of principal executive offices)

631-444- 8090

(Registrant's telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	¨	Accelerated filer ¨

Non-accelerated filer	¨	Smaller reporting company x
(Do not check if a smaller reporting
company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. February 18, 2010: 18,415,091

MARKETING WORLDWIDE CORPORATION

Form 10-Q for the Quarter ended December 31, 2009

Table of Contents

	PAGE

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS		F-1

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION		2

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		7

ITEM 4 - CONTROLS AND PROCEDURES		8

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS		8

ITEM 2 - RECENT SALES OF UNREGISTERED SECURITIES AND USE OF PROCEEDS		8

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES		8

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		8

ITEM 5 - OTHER INFORMATION		8

ITEM 6 - EXHIBITS		9

SIGNATURES		11

Page 1

MARKETING WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			September 30,
	2009			2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	222,145		$	114,482
Accounts receivable, net		529,018			844,679
Inventories, net		561,222			615,910
Other current assets		28,744			28,034
Total current assets		1,341,129			1,603,105

Property, plant and equipment, net		2,954,989			3,052,522

Other assets:
Other intangible assets		72,500			80,000
Capitalized finance costs, net		304,405			337,750
Other assets, net		47,189			48,750

Total assets	$	4,720,212		$	5,122,127

LIABILITIES AND DEFICENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credits	$	610,461		$	739,832
Notes payable and capital leases, current portion		1,900,725			1,919,692
Accounts payable		1,535,649			1,109,207
Warranty liability		66,216			66,216
Other current liabilities		358,460			407,834
Total current liabilities		4,471,511			4,242,781

Long term debt:
Derivative liability		5,632,072			-
Notes payable, long term		-			-
Capital leases, long term		15,387			21,247

Total liabilities		10,118,970			4,264,028

Interest in non-controlling entity		-			-

Series A convertible preferred stock, $0.001 par value; 3,500,000 shares issued and outstanding		3,499,950			3,499,950

Deficiency in Stockholders' Equity
Series B convertible preferred stock, $0.001 par value, 10,000,000 authorized; 1,192,308 shares issued and outstanding as of December 31, 2009 and September 30, 2009		1,192			1,192
Common stock, $0.001 par value, 100,000,000 shares authorized; 18,415,091 and 17,835,091 shares issued and outstanding as of December 31, 2009 and September 30, 2009, respectively		18,415			17,835
Additional paid in capital		7,760,608			9,639,388
Deficit		(16,579,660	)		(12,154,087	)
Accumulated other comprehensive loss		(80,473	)		(107,929	)
Total Marketing Worldwide Corporation stockholders' equity (deficiency)		(8,879,918	)		(2,603,601	)
Non controlling interest		(18,790	)		(38,250	)
Total deficiency in stockholders' equity		(8,898,708	)		(2,641,851	)

Total Liabilities and Deficiency in Stockholders' Equity	$	4,720,212		$	5,122,127

See the accompanying notes to the unaudited condensed consolidated financial statements

F-1

MARKETING WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(unaudited)

	2009			2008
Revenue:
Sales, net	$	1,257,127		$	1,143,994
Services		251,149			252,166
Total revenue		1,508,276			1,396,160

Cost of sales:
Cost of goods sold		760,509			794,145
Cost of services provided		211,885			126,129
Total cost of sales		972,394			920,274

Gross profit		535,882			475,886

Operating expenses:
Selling, general and administrative expenses		1,063,793			1,155,115

Loss from operations		(527,911	)		(679,229	)

Loss on change in fair value of derivative liability		(3,660,957	)		-
Financing expenses		(114,558	)		(153,897	)
Loss on disposal of equipment		(7,567	)		-
Other income (expense), net		21,880			17,307

Loss before provision for income taxes		(4,289,113	)		(815,819	)

Provision for income taxes (benefit)		-			-

Net Loss		(4,289,113	)		(815,819	)

Net income (loss) applicable to non controlling interest		(19,460	)		36,298

Net (loss) applicable to Marketing Worldwide Corp		(4,308,573	)		(779,521	)

Preferred stock dividend		(78,750	)		(78,750	)

Net (loss) applicable to Marketing Worldwide Corp common shareholders	$	(4,387,323	)	$	(858,271	)

Loss per share, basic	$	(0.24	)	$	(0.05	)

Loss per share, fully diluted	$	(0.24	)	$	(0.05	)

Weighted average common stock outstanding
Basic		18,358,352			16,698,352
Fully Diluted		18,358,352			16,698,352

Comprehensive loss:
Net Loss	$	(4,387,323	)	$	(858,271	)
Foreign currency translation (income (loss)		27,456			(2,038	)

Comprehensive loss		(4,359,867	)		(860,309	)
Comprehensive income (loss) attributable to non controlling interest		(19,460	)		36,298
Comprehensive loss attributable to Marketing Worldwide Corporation	$	(4,379,326	)	$	(824,011	)

See the accompanying notes to the unaudited condensed consolidated financial statements

F-2

MARKETING WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008

(unaudited)

	2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(4,308,573	)	$	(779,521	)
Adjustments to reconcile net loss to cash provided by (used in) operations:
Depreciation and amortization		97,466			107,035
Amortization of deferred financing costs		33,345			33,345
Loss on disposal of property, plant and equipment		7,567			-
Change in fair value of derivative liability		3,660,957			-
Fair value of vested employee options		1,965			65,704
Common stock issued for services rendered		12,000			-
Interest in non controlling entity		(18,790	)		(36,298	)
(Increase) decrease in:
Accounts receivable		315,661			77,192
Inventory		54,688			122,057
Other current assets		(710	)		88,539
Other assets		1,561			(167	)
Increase (decrease) in:
Accounts payable		426,642			12,727
Other current liabilities		(49,374	)		(25,247	)
Net cash provided by (used in) operating activities:		234,405			(334,634	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		-			(12,178	)
Net cash used in investing activities:		-			(12,178	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution by non controlling entity		-			(98,000	)
Proceeds from (repayments of) lines of credit		(129,371	)		248,963
Repayments of notes payable and capital leases		(24,827	)		(28,391	)
Net cash (used in) provided by financing activities		(154,198	)		122,572

Effect of currency rate change on cash:		27,456			(2,038	)

Net increase (decrease) in cash and cash equivalents		107,663			(226,278	)
Cash and cash equivalents, beginning of period		114,482			1,003,071

Cash and cash equivalents, end of period	$	222,145		$	776,793

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for interest	$	87,173		$	30,345
Cash paid during year for taxes	$	-		$	-

NON-CASH TRANSACTIONS:
Common stock issued in settlement of debt	$	78,950		$	80,000

See the accompanying notes to the unaudited condensed consolidated financial statements

F-3

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three month period ended December 31, 2009, are not necessarily indicative of the results that may be expected for the year ended September 30, 2010. The unaudited condensed consolidated financial statements should be read in conjunction with the September 30, 2009 financial statements and footnotes thereto included in the Company's SEC Form 10K.

Business and basis of presentation

Marketing Worldwide Corporation (the "Company", "Registrant" or "MWW"), is incorporated under the laws of the State of Delaware in July 2003. The Company is engaged, through its wholly-owned subsidiary, Marketing Worldwide LLC ("MWWLLC"), in the design, import and distribution of automotive accessories for motor vehicles in the automotive aftermarket industry and provides design services for large automobile manufacturers. The Company operates its wholly owned subsidiary Colortek, Inc in Baroda Michigan and Modelworxx GmbH in Munich, Germany.

The unaudited condensed consolidated financial statements include the accounts of the Registrant and its wholly-owned subsidiaries, Marketing Worldwide LLC, Colortek, Inc., MW Global Limited which owns 100% of the outstanding ownership and economical interest in Modelworxx GmbH. Effective January 1, 2005, the consolidated financial Statements also include a variable interest entity (VIE) of which the Marketing Worldwide LLC is the primary beneficiary as further described in Note I. All significant inter-company transactions and balances, including those involving the VIE, have been eliminated in consolidation.

Revenue Recognition

For revenue from products and services, the Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”). ASC 605-10 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability 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/services rendered and the collectability of those amounts. Provisions for discounts and rebates to customers, 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 services has not been rendered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or services has been rendered or no refund will be required.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arrangements (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.

F-4

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

Revenues on the sale of products, net of estimated costs of returns and allowance, are recognized at the time products are shipped to customers, legal title has passed, and all significant contractual obligations of the Company have been satisfied. Products are generally sold on open accounts under credit terms customary to the geographic region of distribution. The Company performs ongoing credit evaluations of the customers and generally does not require collateral to secure the accounts receivable.

The Company generally warrants its products to be free from material defects and to conform to material specifications for a period of three (3) years. The cost of replacing defective products and product returns have been immaterial and within management's expectations. In the future, when the company deems warranty reserves are appropriate that such costs will be accrued to reflect anticipated warranty costs.

Cash and Cash Equivalents

For the purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Concentration of credit risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of applicable government mandated insurance limit. The Company periodically reviews its trade receivables in determining its allowance for doubtful accounts.

Accounting for bad debt and allowances

Bad debts and allowances are provided based on historical experience and management's evaluation of outstanding accounts receivable. Management evaluates past due or delinquency of accounts receivable based on the open invoices aged on due date basis. There was $131,458 allowance for doubtful accounts at December 31, 2009 and at September 30, 2009.

Inventories

The inventory consists of work in process and finished goods substantially ready for resale purposes. The Company purchases the merchandise on delivered duty paid basis. The amounts for cost of goods sold during the three month period ended December 31, 2009 and 2008 are removed from inventory on weighted average cost method.

Long lived assets

The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires those 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 undiscounted cash flows. Should 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. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

F-5

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Property, plant and equipment

Property, plant and equipment are carried at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets. Tools, office equipment, automobiles, furniture and fixtures, and building are depreciated over a 2-year to 40-year lives. Assets acquired under capitalized lease arrangements are recorded at the present value of the minimum lease payments. Gains and losses from the retirement or disposition of property and equipment are included in operations in the period incurred.

Advertising

The Company follows the policy of charging the cost of advertising to expenses as incurred. For the three month periods ended December 31, 2009 and 2008, advertising costs were not material to the statement of income.

Research and development costs

The Company accounts for research and development cost in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). ASC 730-10, 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. Total research and development costs charged to income were $-0- and $6,992 for the three month periods ended December 31, 2009 and 2008, respectively.

Basic and diluted income (loss) per share

Basic and diluted loss per common share is based upon the weighted average number of common shares outstanding during the fiscal year computed under the provisions of Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Common share equivalents totaling 1,430,000 and 1,100,000 at December 31, 2009 and 2008, respectively, were not considered as they would be anti-dilutive and had no impact on loss per share for any periods presented.

Income taxes

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

F-6

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

In accordance with 740-10, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting this standard, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Use of estimates

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

Functional currency

The functional currency of the Companies is U. S. dollar. When a transaction is executed in a foreign currency, it is re-measured into U. S. dollars based on appropriate rates of exchange in effect at the time of the transaction. At each balance sheet date, recorded balances that are denominated in a currency other than the functional currency of the Companies are adjusted to reflect the current exchange rate. The resulting foreign currency transactions gains (losses) are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

Fair value of financial instruments

In January 2008, the Company adopted the provisions of Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) which defines fair value for accounting purposes, establishes a framework for measuring fair value and expands disclosure requirements regarding fair value measurements. The Company’s adoption of ASC 820-10 did not have a material impact on its consolidated financial statements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company has categorized its financial assets and liabilities measured at fair value into a three-level hierarchy in accordance with ASC 820-10.

Comprehensive Income (Loss)

The Company adopted Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.

F-7

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Derivative financial instruments

On October 1, 2001, the Company adopted Accounting Standards Codification subtopic 815-10, Derivatives and Hedging (“ASC 815-10”), which requires that all derivative instruments be recognized in the financial statements at fair value. The adoption of ASC 815-10 did not have a significant impact on the results of operations, financial position or cash flows during the three month period ended December 31, 2009 and 2008.

The Company uses derivative financial instruments for trading purposes also. Credit risk related to the derivative financial instrument is managed by periodic settlements. Changes in fair value of derivative financial instruments are recorded as adjustments to the assets or liabilities being hedged in the statement of operations or in accumulated other comprehensive income (loss), depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction represented and the effectiveness of the hedge.

Effect of Related Prospective Accounting Pronouncement

Accounting Standards Codification subtopic 815-40, Derivatives and Hedging,; Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009. The Company’s Series A (convertible) Preferred Stock has certain reset provisions that require the Company to reduce the conversion price of the Series A (convertible) Preferred Stock if the Company issues equity at a price less than the conversion price. Upon the effective date, the provisions of ASC 815-40 required a reclassification to liability based on the reset feature of the agreements if the Company sells equity at a price below the conversion price of the Series A Preferred Stock.

Therefore, in accordance with ASC 815-40, the Company determined the fair value of the initial reset provision of $1,971,115 at October 1, 2009 using the Black-Scholes formula assuming no dividends, a risk-free interest rate of 1.36%, expected volatility of 265.79%, and expected life of 2.56 years. The net value of the reset provision at the date of adoption of ASC 815-40 was recorded as a reset derivative liability on the balance sheet in the amount of $1,971,115 and a reduction in equity. Changes in fair value are recorded as non-operating, non-cash income or expense at each reporting date.

The fair value of the reset provision of $5,632,072 at December 31, 2009 was determined using the Black Scholes Option Pricing Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	284.55	%
Risk free rate:	0.47	%

As of the date of the financial statements, the Company believes an event under the contract that would create an obligation to settle in cash or other current assets is remote and has classified the obligation as a long term liability.

The change in fair value of the derivative liability resulted in a current period non operating charge to operations of $3,660,957.

Reclassification

Certain reclassifications have been made to conform to prior periods' data to the current presentation. These reclassifications had no effect on reported net income (loss).

F-8

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Accounting for variable interest entities

Accounting Standards Codification subtopic 810-10, Consolidation (“ASC 810-10”) discusses certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity risk for the entity to finance its activities without additional subordinated financial support. ASC 810-10 requires the consolidation of these entities, known as variable interest entities, by the primary beneficiary of the entity. The primary beneficiary is the entity, if any, that will absorb a majority of the entities expected losses, receive a majority of the entity's expected residual returns, or both.

Pursuant to the effective date of a related party lease obligation, the Company adopted ASC 810-10. This resulted in the consolidation of one variable interest entity (VIE) of which the Company is considered the primary beneficiary. The Company's variable interest in this VIE is the result of providing certain secured debt mortgage guarantees on behalf of a limited liability company that leases warehouse and general offices located in the city of Howell, Michigan. As a result the Company recorded this VIE as a non controlling entity in the financial statements.

Segment information

Accounting Standards Codification subtopic 280-10, Segment Reporting (“ASC 280-10”) 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. ASC 280-10 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 therein materially represents all of the financial information related to the Company's principal operating segments.

Stock based compensation

Effective for the year beginning January 1, 2006, the Company has adopted Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”). The Company made no employee stock-based compensation grants before December 31, 2005 and therefore has no unrecognized stock compensation related liabilities or expense unvested or vested prior to 2006.

The Company did not grant any employee options during the three month period ended December 31, 2009. The Company recorded the fair value of the vested portion of previously issued employee options of $1,965 and $65,704 for the three month periods ended December 31, 2009 and 2008, respectively.

Implementation of Accounting Standards Codification subtopic 810-10, Consolation (“ASC 810-10”)

Effective October 1, 2009, the Company adopted the provisions of ASC 810-10. Pursuant to ASC 810-10, the following provisions were applied retrospectively to all periods presented in the financial statements:

The Company reclassified noncontrolling interests, formerly known as “minority interests,” from a separate caption between liabilities and stockholders’ equity (“mezzanine section”) to a component of equity Previously, minority interests generally were reported in the balance sheet in the mezzanine section.

Consolidated net income and comprehensive income include amounts attributable to both the Company and the noncontrolling interests. Previously, net income attributable to the noncontrolling interests was reported as a deduction in arriving at consolidated net income. This presentation change does not impact the calculation of basic or diluted earnings per share, which continue to be calculated based on Net income attributable to the Company.

F-9

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Pursuant to ASC 810-10, the following provisions were applied prospectively effective October 1, 2009:

ASC 810-10 provides that all earnings and losses of a subsidiary should be attributed to the parent and the noncontrolling interest, even if the losses attributable to the noncontrolling interest result in a deficit noncontrolling interest balance. Previously, any losses exceeding the noncontrolling interest’s investment in the subsidiary were attributed to the parent. This change did not have a significant impact on the Company’s financial statements for the three months ended December 31, 2009.

Recent accounting pronouncements

In March 2008, the Financial Accounting Standards Board (“FASB”) issued new accounting and reporting standards for Disclosures About Derivative Instruments and Hedging Activities. This standard is effective for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The Company’s Series A convertible preferred stock have reset provisions to the conversion price if the Company issues equity at a price less than the exercise prices. Upon the effective date this new standard, the Company recorded the fair value the resent provision as a derivative liability.

In December 2007, the FASB issued new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The new guidance also changes the way the consolidated financial statements are presented, establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation, requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and expands disclosures in the consolidated financial statements that clearly identify and distinguish between the parent’s ownership interest and the interest of the non-controlling owners of a subsidiary. The provisions are to be applied prospectively as of the beginning of the fiscal year in which the guidance is adopted, except for the presentation and disclosure requirements, which are to be applied retrospectively for all periods presented. The new guidance is effective for our financial statements for the fiscal year that began October 1, 2009. We have incorporated this new standard within these financial statements.Theadoption did not have a material impact on the Company’s consolidated results of operations or financial condition.

Effective July 1, 2009, the Company adopted the FASB Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

F-10

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (continued)

Effective January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value Measurements and Disclosures – Overall (“ASC 820-10”) with respect to its financial assets and liabilities. In February 2008, the FASB issued updated guidance related to fair value measurements, which is included in the Codification in ASC 820-10-55, Fair Value Measurements and Disclosures – Overall – Implementation Guidance and Illustrations. The updated guidance provided a one year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company adopted the provisions of ASC 820-10 for non-financial assets and non-financial liabilities effective January 1, 2009, and such adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.

Effective April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value Measurements and Disclosures – Overall – Transition and Open Effective Date Information (“ASC 820-10-65”). ASC 820-10-65 provides additional guidance for estimating fair value in accordance with ASC 820-10 when the volume and level of activity for an asset or liability have significantly decreased. ASC 820-10-65 also includes guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of ASC 820-10-65 did not have an impact on the Company’s consolidated results of operations or financial condition.

Effective April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial Instruments – Overall – Transition and Open Effective Date Information (“ASC 825-10-65”). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company’s consolidated results of operations or financial condition.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which is included in ASC Topic 855, Subsequent Events. ASC Topic 855 established principles and requirements for evaluating and reporting subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be disclosed in the financial statements. ASC Topic 855 also required disclosure of the date through which subsequent events are evaluated by management. ASC Topic 855 was effective for interim periods ending after June 15, 2009 and applies prospectively. Because ASC Topic 855 impacted the disclosure requirements, and not the accounting treatment for subsequent events, the adoption of ASC Topic 855 did not impact our results of operations or financial condition. See Note M for disclosures regarding our subsequent events.

Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s consolidated results of operations or financial condition.

F-11

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (continued)

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) (“ASU 2009-13”) and ASU 2009-14, Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985, Software) (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company’s consolidated results of operations or financial condition.

NOTE B - GOING CONCERN MATTERS AND TRIGGERING EVENTS

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements during the three month period ended December 31, 2009, the Company incurred a loss of $4,387,323.

On January 27, 2009, the primary secured lender notified the Company it was in default of its obligations under the commercial mortgage loan secured by first deed of trust on real property to JCMD Properties, LLC. The notification is declaring the debt obligations in default and is therefore entitling the lender to exercise certain rights and remedies, including but not limited to, increasing the interest rate to the default rate and demanding immediate repayment in full of the principal, interest and interest swap outstanding liability.

The Company has reduced cash required for operations by reducing operating costs and reducing staff levels. In addition, the Company is working to manage its current liabilities while it continues to make changes in operations to improve its cash flow and liquidity position.

The Company's existence is dependent upon management's ability to raise additional financing and develop profitable operations. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations. The accompanying unaudited condensed consolidated statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

NOTE C - LINE OF CREDIT

Summit Financial Resources, L.P.

In August 2009, Marketing Worldwide, LLC entered into a financing agreement with Summit Financial Resources L.P. (Summit) for a maximum borrowing of up to $750,000 maturing August 31, 2010. The arrangement is based on recourse factoring of the Company’s accounts receivables. Substantially all assets of Marketing Worldwide, LLC have been pledged as collateral for the Summit facility. Marketing Worldwide Corp has guaranteed the financing arrangement.

In September 2009, Marketing Worldwide, LLC entered into an addendum which increased the maximum borrowing amount to $1,000,000.

F-12

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE C - LINE OF CREDIT (continued)

Under the arrangement, Summit typically advances to the Company 85% of the total amount of accounts receivable factored. Summit retains 15% of the outstanding factored accounts receivable as a reserve, which it holds until the customer pays the factored invoice to Summit. The cost of funds for the accounts receivable portion of the borrowings with Summit includes: (a) a collateral management fee of 0.65% of the face amount of factored accounts receivable for each period of fifteen days, or portion thereof, that the factored accounts receivable remains outstanding until payment in full is applied and (b) interest charged at the Wall Street Journal prime rate plus 1% divided by 360. The Summit default rate is the Wall Street Journal prime rate plus 10%. The Company may be obligated to purchase the receivable back from Summit at the end of 90 days.

The interest rate at December 31, 2009 was 4.25%

Under the terms of the recourse provision, the Company is required to repurchase factored receivables if they are not paid in full or are deemed no longer acceptable. Accordingly, the Company has accounted for the financing agreement as a secured borrowing arrangement and not a sale of financial assets.

As of December 31, 2009, the advance balance due to Summit was $610,461.

Other

In addition, the Company has established a credit facility in Germany for a maximum borrowing limit of 35,000 Euro plus 10,000 Euro overdraft protections ($51,072 and $14,592 USD, respectively) with open expiry date. Interest is at 9.5% per year for the credit facility and 4.5% for overdraft protection. The Credit facility is guaranteed by the President of the Company's subsidiary, Modelworxx GmbH. As of December 31, 2009, there were no outstanding advances.

NOTE D - NOTES PAYABLE

As of December 31, 2009 and September 30, 2009, notes payable consists of the following:

	December 31, 2009		September 30, 2009
Guarantee for the JCMD Mortgage loan payable in monthly principal installments plus interest. Note secured by first deed of trust on real property and improvements located in Howell, MI. The JCMD General Partners personally guarantee the loan. The note is in default. (*)	$	677,367	$	683,165

Guarantee for the JCMD Mortgage loan payable in 240 monthly principal installments plus interest. The loan is secured by a second deed of trust on real property and improvements located in Howell, MI. The JCMD General Partners personally guarantee the loan The note is in default. (*)		546,305		551,850

Mortgage loan payable in monthly principal installments of $5,633 with a fixed interest rate of 5.98% per annum. Note based on a 20 year amortization. Note is secured by first priority security interest in the business property of Colortek, Inc, the Company's wholly owned subsidiary. The note is currently in default. (**)		637,196		644,129

Note payable in monthly payments of $1,857.54 per month including interest at 7.25% per annum, unsecured		22,386		24,218
		1,883,254		1,903,362
Less current portion		1,883,254		1,903,362
Long term portion	$	-0-	$	-0-

F-13

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE D - NOTES PAYABLE (continued)

(*) In accordance with the Forbearance Agreement, the secured lender of the JCMD Mortgage Loans increased the interest rate on unpaid balances to bear interest at a floating rate of two and quarter percent (2.25%) in excess of the Bank’s Prime Rate, and upon default shall bear interest at a rate of five and one quarter percent (5.25%) in excess of the Bank’s Prime Rate.

(**) In accordance with the mortgage loan agreement, the Company (as guarantor) is currently in default of certain loan covenants

Payments for notes payable, including the JCMD loans, for the next five years ending September 30, are as follows:

Year ended September 30,

2010	$	1,883,254
2011		-
2012		-
2013		-
2014 and thereafter		-
Total	$	1,883,254

NOTE E- CAPITAL LEASE OBLIGATIONS

Automobile and equipment includes the following amounts for capitalized leases at December 31, 2009:

Automobile and equipment	$	185,550
Less: Accumulated depreciation and amortization		129,704
Net book value:	$	55,846

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

Total minimum lease payments	$	35,670
Less: amount representing interest		2,812
Subtotal		32,858
Less current portion		17,471
Long term portion	$	15,387

Following is a schedule of the Company's future minimum capital lease obligations: Year ended September 30,

2010	$	9,590
2011		12,331
2012		10,937
2013		—
After		—
Total	$	32,858

F-14

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE F - CAPITAL STOCK

The Company is authorized to issue 110,000,000 shares of which stock 100,000,000 shares of par value of $.001 each shall be common stock and of which 10,000,000 shares of par value of $.001 each shall be preferred stock. As of December 31, 2009 and September 30, 2009, the Company has issued and outstanding 3,500,000 shares of Series A preferred stock and 18,415,091 and 17,835,091 shares of common stock, respectively.

Series A Preferred stock

On April 23, 2007, the Company filed a Certificate of Designation creating a $0.001 par value Series A Convertible Preferred stock for 3,500,000 shares.

Payment of Dividends. Commencing on the date of issuance of the Series A Preferred Stock, the holders of record of shares of Series A Preferred Stock shall be entitled to receive, out of any assets at the time legally available therefore and as declared by the Board of Directors, dividends at the rate of nine percent (9%) of the stated Liquidation Preference Amount (see below) per share PER ANNUM.., payable quarterly. At December 31, 2009 and September 30, 2009, a total of $236,250 and $157,500 has been accrued for dividends payable on the Series A Preferred stock.

RIGHT TO CONVERT. At any time on or after the Issuance Date, the holder of any such shares of Series A Preferred Stock may, at such holder's option, subject to certain limitations elect to convert all or any portion of the shares of Series A Preferred Stock held into a number of shares of Common Stock equal to the quotient of (i) the Liquidation Preference Amount (see below) of the shares of Series A Preferred Stock being converted plus any accrued but unpaid dividends thereon DIVIDED BY (ii) the Conversion Price of $0.50 per share, subject to certain reset provisions.

MANDATORY CONVERSION. Subject to certain restrictions and limitations, five years after the issuance date, the Series A Preferred Stock will automatically and without any action on the part of the holder thereof, convert into shares of Common Stock equal to the quotient of (i) the Liquidation Preference Amount of the number of shares of Series A Preferred Stock being converted on the Mandatory Conversion Date DIVIDED BY (ii) the Conversion Price in effect on the Mandatory Conversion Date.

LIQUIDATION RIGHTS. Series A Preferred Stock shall, with respect to distributions of assets and rights upon the occurrence of a Liquidation rank (i) senior to all classes of common stock of the Company and (ii) senior to each other class of Capital Stock of the Company hereafter created with does not expressly rank pari passu or senior to the Series A Preferred Stock. Holders of the Series A Preferred Stock are entitled, in the event of liquidation or winding up of the Company's affairs, to a liquidation payment of $1.00 per share plus any accrued and unpaid dividends before any distribution to any common or other junior classes of stock.

VOTING RIGHTS. The holders of Series A Preferred Stock shall have no voting rights with the exception relating to increasing the number of outstanding shares of Series A Preferred or modifying the rights of the Series A Preferred Stock.

REGISTRATION RIGHTS. The Company is required to file a registration statement with the SEC to affect the registration of the shares of its common stock underlying the Series A Preferred Stock and the warrants (see below) within 30 days. The Company also agreed to use its reasonable best efforts to cause the registration statement to be declared effective no later than 150 days after its filing. If the Registration Statement is not filed and declared effective as described above, the Company will be required to pay liquidated damages to the holders of the Series A Preferred Stock, in an amount equal to 2% of the initial investment. The registration statement for the shares of its common stock underlying the Series A Preferred Stock and the attached warrants has been declared effective by the SEC on July 20, 2007.

On April 23, 2007 the Company issued 3,500,000 shares of Series A Preferred Stock for gross proceeds of $3,500,000 resulting in net proceeds of $3,222,450.

F-15

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE F - CAPITAL STOCK (continued)

As additional consideration for the purchase of the Series A Preferred Stock, the Company granted to the holders warrants entitling it to purchase 11,000,000 common shares of the Company's common stock at the price of $0.70 per share, 6,000,000 at $0.85 per share and 6,000,000 at $1.20 per share. The underlying A, B & C warrants lapse if unexercised by April 23, 2012, while the J and D, E & F warrants have lapsed if unexercised by June 28, 2008. All warrants are subject to the registration rights agreement described above. 5,000,000 series J warrants and 2,500,000 of series F warrants were re-priced to $0.50 and $0.01 per share in September 2007.

In accordance with Accounting Standards Codification subtopic 470-20, Debt, Debt with Conversions and Other Options (“ASC 470-20”), the Company recognized an imbedded beneficial conversion feature present in the Convertible Series A Preferred Stock. The Company allocated a portion of the proceeds equal to the fair value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $3,500,000 of the proceeds, which is equal to the intrinsic value of the imbedded beneficial conversion feature, to additional paid-in capital and a charge as preferred stock dividend. The fair value of the warrants was determined using the Black-Scholes Option Pricing Model with the following assumptions: Dividend yield: $-0-; Volatility: 146.64%, risk free rate: 4.55%.

The Series A Preferred Stock includes certain redemption features allowing the holders the right, at the holder’s option, to require the Company to redeem all or a portion of the holder’s shares of Series A Preferred Stock upon the occurrence of a Major Transaction or Triggering Event. Major Transaction is defined as a consolidation or merger; sale or transfer of more than 50% of the Company assets or transfer of more than 50% of the Company’s common stock. A Triggering Event is defined as a lapse in the effectiveness of the related registration statement; suspension from listing; failure to honor for conversion or going private.

In accordance with ASC 470-20, the Company has classified the Series A Preferred Stock outside of permanent equity.

In addition, The Series A Preferred Stock has reset provisions to the exercise price if the Company issues equity at a price less than the exercise price and therefore, as described in Note A above, and in accordance with ASC 815-40 the Company the Company determined the fair value of the initial reset provision of $1,971,115 at October 1, 2009 and reclassified to liability.

The Company determined the fair value of the initial reset provision of $1,971,115 at October 1, 2009 using the Black-Scholes formula assuming no dividends, a risk-free interest rate of 1.36%, expected volatility of 265.79%, and expected life of 2.56 years. The net value of the reset provision at the date of adoption of ASC 815-40 was recorded as a reset derivative liability on the balance sheet in the amount of $1,971,115 and a reduction in equity. Changes in fair value are recorded as non-operating, non-cash income or expense at each reporting date.

The fair value of the reset provision of $5,632,072 at December 31, 2009 was determined using the Black Scholes Option Pricing Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	284.55	%
Risk free rate:	0.47	%

The change in fair value of the derivative liability resulted in a current period non operating charge to operations of $3,660,957.

F-16

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE F - CAPITAL STOCK (continued)

Series B Preferred stock

On July 10, 2008, the Company filed a Certificate of Designation creating a $0.001 par value Series B Convertible Preferred stock for 1,200,000 shares.

RANK. The Series B Preferred Stock shall rank pari passu as to liquidation rights and other matters to the Company's common stock, par value $0.001 per share (the "COMMON STOCK"). The Series B Preferred Stock shall be subordinate to and rank junior to all indebtedness of the Company now or hereafter outstanding.

PAYMENT OF DIVIDENDS. If declared by the Company, dividends on the Series B Preferred Stock shall be on a pro rata basis with the Common Stock and all other equity securities of the Company ranking pari passu with the Common Stock as to the payment of dividends.

VOTING RIGHTS. The holders of Series B Preferred Stock shall have no voting rights with the exception relating to increasing the number of outstanding shares of Series A Preferred or modifying the rights of the Series A Preferred Stock.

LIQUIDATION AMOUNT. In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to receive, out of the assets of the Company available for Distribution to its stockholders, an amount per share of Series B Preferred Stock equal to the amount distributable with respect to that number of shares of the Common Stock into which one share of the Series B Preferred Stock is then convertible, plus any accrued and unpaid dividends.

CONVERSION. At any time on or after the date of the initial issuance of the Series B Preferred Stock, the holder of any such shares of Series B Preferred Stock may, at such holder's option, elect to convert all or any portion of the shares of Series B Preferred Stock held into a number of fully paid and non-assessable shares of Common Stock for each such share of Series B Preferred Stock equal to the quotient of: (a) the Original Issue Price, plus any accrued and unpaid dividends thereon, divided by (b) the Conversion Price in effect as of the date of the delivery by such holder of its notice of election to convert. The initial Conversion Price is $16.90, subject to change for events such as stock splits.

On July 11, 2008, the Company entered an Exchange Agreement with holders of Series F Common Stock Purchase Warrants and Series J Common Stock Purchase Warrants. Under the Exchange Agreement, the Company issued 750,000 shares of Series B Convertible Preferred Stock for the cancellation of 3,500,000 Series A Common Stock Purchase Warrants, 3,500,000 Series B Common Stock Purchase Warrants, 3,500,000 Series C Common Stock Purchase Warrants, 2,500,000 Series D Common Stock Purchase Warrants, and 2,500,000 Series E Common Stock Purchase Warrants. In addition, holders exercised 1,000,000 Series J Warrants and 2,500,000 Series F Warrants for $525,000 in exchange for 442,308 shares of Series B Convertible Preferred Stock.

As of December 31, 2009, the Company has 1,192,308 shares of Series B Preferred Stock outstanding.

Common stock

On October 9, 2009, the Company issued 500,000 shares of common stock in settlement of outstanding accounts payable of $78,950.

On October 9, 2009, the Company issued an aggregate of 80,000 shares of common stock in exchange for services totally $12,000. These shares were valued at $0.15 per share which represents the fair value of services received with did not differ materially from the value of the stock issued.

F-17

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE F - CAPITAL STOCK (continued)

In March 2008, the Company issued 303,678 shares of common stock in payment of Series A Preferred Stock dividend (see above).

NOTE G - STOCK OPTIONS AND WARRANTS

Employee Stock 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 of the Company as of December 31, 2009:

						Options Exercisable
				Options Outstanding		Weighted
				Weighted Average		Average		Weighted
	Exercise	Number		Remaining Contractual		Exercise		Number		Average
	Price	Outstanding		Life (Years)		Price		Exercisable		Exercise Price
$	0.26		490,000		3.51	$	0.26		430,000	$	0.26
$	0.45		170,000		4.40	$	0.45		170,000	$	0.45
			660,000		3.75	$	0.31		600,000	$	0.32

Transactions involving options issued to employees are summarized as follows:

	Weighted Average Number of Shares		Price per Share
Outstanding at October 1, 2008		660,000	$	0.31
Granted		-		-
Exercised		-		-
Canceled or expired		-		-
Outstanding, September 30, 2009		660,000		0.31
Granted		-		-
Exercised		-		-
Canceled or expired		-		-
Outstanding, December 31, 2009		660,000	$	0.31

ASC 718-10 required the disclosure of the estimated fair value of employee option grants and their impact on net income using option pricing models that are designed to estimate the value of options that, unlike employee stock options, can be traded at any time and are transferable. In addition to restrictions on trading, employee stock options may include other restrictions such as vesting periods. Further, such models require the input of highly subjective assumptions, including the expected volatility of the stock price.

The Company recorded as current period expense the vested portions of the above employee options of $1,965 and $65,704 for the three month periods ended December 31, 2009 and 2008. As of December 31, 2009, total unrecognized stock-based compensation expense related to non-vested stock options was $10,894.

F-18

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE G - STOCK OPTIONS AND WARRANTS (continued)

Non employee 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 non- employees of the Company as of December 31, 2009:

Options Outstanding

Options Exercisable

Weighted Average

Remaining

Weighted

Average

Weighted

Number

Contractual

Exercise

Number

Average

Exercise Price

Outstanding

Life (Years)

Price

Exercisable

Exercise Price

0.10

1,000,000

2.75

0.10

1,000,000

0.10

Transactions involving options issued to non-employees are summarized as follows:

	Weighted Average Number of Shares			Price per Share
Outstanding at October 1, 2008		1,395,000		$	0.39
Granted		-			-
Exercised		-			-
Canceled or expired		(395,000	)		1.13
Outstanding, September 30, 2009		1,000,000			0.10
Granted
Exercised		-			-
Canceled or expired		-			-

Outstanding, December 31, 2009		1,000,000		$	0.10

Aggregate intrinsic value of options outstanding and exercisable at December 31, 2009 and 2008 was $189,800 and $219,800, respectively. Aggregate intrinsic value represents the difference between the Company's closing price on the last trading day of the fiscal period, which was $0.28 and $0.30 as of December 31, 2009 and 2008, respectively, and the exercise price multiplied by the number of options outstanding.

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 non-employees of the Company as of December 31, 2009:

Warrants Outstanding

Warrants Exercisable

Weighted Average

Remaining

Weighted

Average

Weighted

Number

Contractual

Exercise

Number

Average

Exercise Price

Outstanding

Life (Years)

Price

Exercisable

Exercise Price

0.30

100,000

1.69

0.30

100,000

0.30

F-19

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE G - STOCK OPTIONS AND WARRANTS (continued)

Transactions involving warrants are summarized as follows:

	Weighted Average Number of Shares			Price per Share
Outstanding at October 1, 2008		1,590,000		$	0.54
Granted		-			-
Exercised		-			-
Canceled or expired		(1,490,000	)		0.65
Outstanding, September 30, 2009		100,000			0.30
Granted		-			-
Exercised		-			-
Canceled or expired		-			-
Outstanding, December 31, 2009		100,000		$	0.30

NOTE H - CONSOLIDATION OF VARIABLE INTEREST ENTITIES

On June 6, 2005 and August 8, 2005, JCMD Properties LLC, an entity controlled by the Company's Chief Executive and Chief Operating officers respectively ("JCMD"), entered into a Secured Loan Agreement with a financial institution, in connection with the financing of real property and improvements ("property"). This agreement is guaranteed by the Company.

The property is leased to the Company under a long term operating lease beginning on January 1, 2005. Under the loan agreements, JCMD is obligated to make periodic payments of principal repayments and interest. The Company has no equity interest in JCMD or the property.

Based on the terms of the lending agreement with the above entity, the Company determined that JCMD was a variable interest entity ("VIE") and the Company was the primary beneficiary under ASC 810-10 since JCMD does not have sufficient equity at risk for the entity to finance its activities.

ASC 810-10 requires that an enterprise consolidate a VIE if that enterprise has a variable interest that will absorb a majority of the entity's expected losses if they occur. Accordingly, the Company adopted FIN No. 46 and consolidated JCMD as a VIE, regardless of the Company not having an equity interest in JCMD.

Included in the Company's unaudited condensed consolidated balance sheets at December 31, 2009 and September 30, 2009 are the following net assets of JCMD:

F-20

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE H - CONSOLIDATION OF VARIABLE INTEREST ENTITIES (continued)

	December 31, 2009			September 30, 2009
ASSETS (JCMD)
Cash and cash equivalents	$	21,984		$	17,616
Accounts receivable, prepaid expenses and other current assets		19,400			19,400
Total current assets		41,384			37,126
Property, plant and equipment, net		1,233,824			1,241,824
Total assets		1,275,208			1,278,840

LIABILITIES:
Current portion of long term debt		1,223,671			1,235,015
Accounts payable and accrued liabilities		70,327			82,075
Total current liabilities		1,293,998			1,317,090
Long term debt					-
Total liabilities		1,293,998			1,317,090
Net assets	$	(18,790	)	$	(38,250	)

Consolidated results of operations include the following for the three months ended December 31, 2009 and 2008:

	2009		2008
Revenues	$	51,000	$	39,636
Cost and expenses - real estate: Operating expenses		2,763		8,084
Depreciation		8,000		8,000
Interest, net		20,777		133,776
Total costs and expenses		31,540		149,860

Operating (loss) income-Real estate	$	19,460	$	(110,224	)

During the three month periods ended December 31, 2009 and 2008, JCMC Properties LLC issued cash distributions to its members totaling $-0- and $98,000, respectively.

NOTE I - DERIVATIVE FINANCIAL INSTRUMENTS

The Company periodically uses foreign exchange contracts for trading purposes. The Company's short term foreign currency contracts subject the Company to risk due to foreign exchange rate fluctuations, because gains and losses on these instruments may have significant impact on the results of operations.

NOTE J - SEGMENT INFORMATION

The Company has one reportable business segment which is operated in two geographic locations. Those geographic segments are:

* United States * Germany

Information for the three month periods ended December 31, 2009 and 2008 concerning principal geographic areas is presented below according to the area where the activity is taking place.

F-21

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE J - SEGMENT INFORMATION (continued)

	December 31, 2009			December 31, 2008
REVENUES:
United States	$	1,192,166		$	1,132,742
Germany		316,110			263,418
Total revenue		1,508,276			1,396,160
GROSS PROFIT (LOSS)
United States		486,328			480,775
Germany		49,554			(4,889	)
Total gross profit		535,882			475,886
OPERATING LOSS:
United States		(412,282	)		(502,974	)
Germany		(115,629	)		(176,255	)
Total operating (loss)	$	(527,911	)	$	(679,229	)

	December 31, 2009		September 30, 2009
ASSETS
United States	$	4,427,332	$	4,758,942
Germany		292,880		363,185
Total asset		4,720,212		5,122,127
CAPITAL EXPENDITURES
United States		-		-
Germany		-		12,178
Total capital expenditures	$	-	$	12,178

NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

F-22

MARKETING WORLDWIDE CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009

NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of December 31, 2009:

			Fair Value Measurements at December 31, 2009 Using:
	December31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Interest rate swap	$	70,327		$	70,327	$
Lines of credit		610,461			610,461
Notes payable and capital leases		1,900,725			1,900,725
Derivative liability		5,632,072					5,632,072

Level 3 Liabilities comprised of our bifurcated reset provision contained within our Series A stock and the fair value of issued reset provisions.

NOTE M - SUBSEQUENT EVENTS

Subsequent events have been evaluated through February 16 2010, a date that the financial statements were issued. All appropriate subsequent event disclosures, if any have been made in notes to our unaudited condensed consolidated financial statements.

F-23

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS. FORWARD-LOOKINGSTATEMENTS IN THIS REPORT ARE INDICATED BY WORDS SUCH AS "ANTICIPATES," "EXPECTS," "BELIEVES," "INTENDS," "PLANS," "ESTIMATES," "PROJECTS" AND SIMILAR EXPRESSIONS. THESE STATEMENTS REPRESENT OUR EXPECTATIONS BASED ON CURRENT INFORMATION AND ASSUMPTIONS. FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE WHICH ARE ANTICIPATED OR PROJECTED AS A RESULT OF CERTAIN RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO A NUMBER OF FACTORS, SUCH AS ECONOMIC AND MARKET CONDITIONS; THE PERFORMANCE OF THE AUTOMOTIVE AFTERMARKET SECTOR; CHANGES IN BUSINESS RELATIONSHIPS WITH OUR MAJOR CUSTOMERS AND IN THE TIMING, SIZE AND CONTINUATION OF OUR CUSTOMERS' PROGRAMS; THE ABILITY OF OUR CUSTOMERS TO ACHIEVE THEIR PROJECTED SALES; COMPETITIVE PRODUCT AND PRICING PRESSURES; INCREASES IN PRODUCTION OR MATERIAL COSTS THAT CANNOT BE RECOUPED IN PRODUCT PRICING; SUCCESSFUL INTEGRATION OF ACQUIRED BUSINESSES; PRODUCT LIABILITY, AS WELL AS OTHER RISKS AND UNCERTAINTIES, SUCH AS THOSE DESCRIBED

UNDER QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND THOSE DETAILED HEREIN AND FROM TIME TO TIME IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. THOSE FORWARD-LOOKING STATEMENTS ARE MADE ONLY AS OF THE DATE HEREOF, AND WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE THE FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS FORM 10-Q

BUSINESS OVERVIEW

Marketing Worldwide Corporation (the "Company", "Registrant" or "MWW"), was incorporated under the laws of the State of Delaware in July 2003. The Company is engaged, through its wholly-owned subsidiary, Marketing Worldwide LLC ("MWWLLC").

MWW is a full service design, engineering and manufacturing firm of original equipment manufacturer ("OEM") components in the automotive accessory market. MWW provides a number of large foreign and domestic automobile manufacturers' and independently owned vehicle processing and distribution centers in the US, Canada and Europe with MWW's components directly at their respective locations. At the instruction of MWW, the vehicle processing centers' technical teams install MWW's accessory products on new automobiles, as soon as these new vehicles arrive from foreign or domestic automobile manufacturers at their centers. From the vehicle processing or distribution centers the accessorized automobiles are then delivered into the domestic car dealer distribution systems throughout the Continental US, Canada and Europe. MWW's relationship is solely with the vehicle processing and/or distribution centers, which also pay for MWW's products.

Since its inception, the continuously increasing demand for the company's products and services has prompted an ongoing expansion of MWW's infrastructure and staff and warranted the diversification and expansion of its activities into the design and engineering of its products in the US and Europe. The company has also continued to increase vertical integration in manufacturing, in order to address newly arising market opportunities. Drawing from the experience of its principals, consultants and management team, strategically utilizing longstanding relationships in the industry, the company has steadily expanded its design services, product range, client and employees/contractor base and is currently aggressively pursuing the expansion of its client roster, in addition to its existing major clients such as South East Toyota, Gulf States Toyota and Toyota Canada. In its effort for more vertical integration, the Company has acquired Colortek, a "Class A" painting facility in Baroda, Michigan, Modelworxx GmbH in Munich Germany and has commenced operation with a new "Class A" painting facility in Elkhart, Indiana.

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The Company has established initial relationships with several new major foreign and domestic automobile manufacturers, has recently begun delivering accessory programs to KIA Motors America and has received additional Request for Quotes from Toyota's Scion Group, KIA Motors America, MOBIS (KIA and Hyundai Worldwide) and Nissan. MWW has been delivering product directly to the Toyota Motor Manufacturing Corporation assembly plant in Canada for nearly twenty six (26) months and has been awarded new programs to be delivered to Toyota Canada International. Through our wholly owned subsidiary Modelworxx in Germany wehave begun to manufacture and deliver products to Toyota Europe and are currently in the process to expand our design and logisticsservices in Germany. We have expanded the number of products designed in Germany for sale to other European automobile manufacturers and our large customers in the US. Through Modelworxx, we will also provide our US produced products for sale to European customers, currently supported by a very favorable Dollar exchange rate with the Euro. We are in various stages of seeking to provide our accessory programs to other major foreign and domestic automobile manufacturers such as Ford, GM, Nissan, Subaru and Hyundai in the US and several large manufacturers and distributors throughout Europe.

SEASONALITY. Historically, our operating results have fluctuated by quarter to quarter, with the greatest sales occurring in the quarters of the fiscal year with the largest number of automobile manufacturers new model releases. Revenues are generally being recognized at the time of product shipment. It is in these quarters of new model releases that demand for our products is typically the highest. As we expand our business globally, we expect to better able to mitigate these impacts.

The limited seasonality of our business offers significant operational challenges in our manufacturing and distribution functions, based on a partial dependency on manufacturing abroad. To limit these challenges and to provide a rapid turnaround time of customer orders, we traditionally keep somewhat higher inventory levels. New strategies to decrease inventory and improve inventory turns over rates are currently being implemented. Utilizing the synergies between our newly acquired companies and the utilization of the newly created manufacturing capacities here in the US that are now controlled by us, we are expecting to produce higher levels of efficiency over time.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. During the three months ended December 31, 2009, we provided $234,405 of cash flow in operations primarily from our net loss of $4,308,573; offset by non cash depreciation and amortization charges of $130,811, non cash change in fair value of derivative liability of $3,660,957, loss on disposal of equipment of $7,567 fair value of equity based compensation of $13,965, non controlling interest of $(18,490) and net changes in our operating assets and liabilities of $748,468.

INVESTING ACTIVITIES. During the three months ended December 31, 2009 we did not have any investing activities.

FINANCING ACTIVITIES. During the three months ended December 31, 2009, net cash flow used in financing activities amounted to $154,198. The net cash flow was used to pay down our credit line of $129,371 and our notes and leases payable by $24,827.

On August 31, 2009, Marketing Worldwide, LLC entered into a financing agreement with Summit Financial Resources L.P. (Summit) for a maximum borrowing of up to $750,000 maturing August 31, 2010. The arrangement is based on recourse factoring of the Company’s accounts receivables. Substantially all assets of Marketing Worldwide, LLC have been pledged as collateral for the Summit facility. Marketing Worldwide Corp., has guaranteed the financing arrangement.

In September, Marketing Worldwide, LLC entered into an addendum which increased the maximum borrowing amount to $1,000,000.

Page 3

MWW expects its regular capital expenditures to be approximately $160,000 for fiscal 2010. Further, MWW expects approximately $140,000 in additional capital expenditures during fiscal 2010 for Modelworxx GmbH. These anticipated expenditures are for continued investments in property, tooling, and equipment used in our business.

The independent auditors report on our September 30, 2009 financial statements states that our difficulty in generating sufficient cash flow to meet our obligations and sustain operations raise substantial doubts about the our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

The Company's existence is dependent upon management's ability to develop profitable operations. In addition, at December 31, 2009, the Company was in default on certain secured credit facilities.

As of December 31, 2009, we had a working capital deficit of approximately $3,130,382.

INTERIM RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2009 TO THE THREE MONTHS ENDED DECEMBER 31, 2008.

SALES. Net sales during the first quarter 2010 (three months ending December 31, 2009) were $1,508,276 an increase of $112,116, or 8.0 %, compared to $1,396,160 during the first quarter 2009. This increase was due to an increase in sales of certain product categories.

GROSS MARGINS. Gross margins for the first quarter 2010 increased to 35.5 % from 34.1 % in the same period of 2009 due to better pricing and reduced fixed costs embedded in our cost of sales line.

OPERATING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

Selling, general and administrative expenses decreased by $91,322 to $1,063,793 in the first quarter of 2010, compared to $1,155,115 in the first quarter of 2009. The decrease was attributable to operating costs reductions we put into place with the auto industry downturn.

OPERATING LOSS. Operating loss decreased by $151,318 to a loss of ($527,911) in the first quarter of 2010, compared to a net operating loss of ($679,229) in the first quarter of 2009. This decrease was attributable to operating costs reductions we put into place with the auto industry downturn.

Page 4

FINANCING EXPENSE. For the three months ended December 31, 2009, our financing expense decreased to $114,558 from $153,897, a decrease of 26 % over the same period prior year. The decrease was primarily related to the mark to market adjustment to our interest swap agreement associated with the JCMD Properties, LLC mortgages and lower costs of borrowing.

LOSS ON CHANGE IN FAIR VALUE OF DERVIATIVE LIABILITY. As described in our accompanying financial statements, our Series A Preferred Stock can certain reset provisions. On October 1, 2009; we became subject to Accounting Standards Codification subtopic 815-40, Derivatives and Hedging; Contracts in Entity’s Own Equity (“ASC 815-40”)whereby we are required to record the initial fair value of the reset provision as a liability with an offset to equity at October 1, 2009 and subsequently mark to market the reset provision liability at each reporting cycle.

At December 31, 2009, the reset provision liability fair value increased from $1,971,115 at October 1, 2009 to $5,632,072 resulting in a noncash charge to current period operations of $3,660,957.

NET LOSS increased by $3,529,052 to a loss of ($4,387,323) from a loss of ($858,271).

CRITICAL ACCOUNTING POLICIES

The preparation of our 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 others 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:

	o	Accounting for variable interest entities
	o	Revenue recognition

	o	Inventories
	o	Allowance for doubtful accounts

	o	Stock based compensation
	o	Derivative liability

ACCOUNTING FOR VARIABLE INTEREST ENTITIES

Pursuant to the effective date of a related party lease obligation, the Company adopted ASC 810-10. This resulted in the consolidation of one variable interest entity (VIE) of which the Company is considered the primary beneficiary. The Company’s variable interest in this VIE is the result of providing certain secured debt mortgage guarantees on behalf of a limited liability company that leases warehouse and general offices located in the city of Howell, Michigan.

Page 5

REVENUE RECOGNITION

For revenue from products and services, the Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”). ASC 605-10 requires that four basic criteria must be met before revenue can be recognized; (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability 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/services rendered and the collectability of those amounts. Provisions for discounts and rebates to customers, 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 services has not been rendered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or services has been rendered or no refund will be required.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company’s financial position and results of operations was not significant.

INVENTORIES

We value our inventories, which consist primarily of automotive body components, at the lower of cost or market. Cost is determined on the weighted average cost method and includes the cost of merchandise and freight. A periodic review of inventory quantities on hand is performed in order to determine if inventory is properly valued at the lower of cost or market. Factors related to current inventories such as future consumer demand and trends in MWW's core business, current aging, and current and anticipated wholesale discounts, and class or type of inventory is analyzed to determine estimated net realizable values. A provision is recorded to reduce the cost of inventories to the estimated net realizable values, if required. Any significant unanticipated changes in the factors noted above could have a significant impact on the value of our inventories and our reported operating results.

ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

We are required to estimate the collectability of our trade receivables. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past due balances. In order to assess the collectability of these receivables, we perform ongoing credit evaluations of our customers' financial condition. Through these evaluations we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The reserve requirements are based on the best facts available to us and are reevaluated and adjusted as additional information is received.

Page 6

Our reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but are not limited to, current economic trends, historical payment and bad debt write-off experience. We are not able to predict changes in the financial condition of our customers and if circumstances related to our customers deteriorate, our estimates of the recoverability of our receivables could be materially affected and we may be required to record additional allowances. Alternatively, if we provided more allowances than are ultimately required, we may reverse a portion of such provisions in future periods based on our actual collection experience. There was $131,458 allowance for doubtful accounts at December 31, 2009 and at September 30, 2009.

STOCK-BASED COMPENSATION

Prior to January 1, 2006, we accounted for the Plans under the recognition and measurement provisions of APB Opinion No. 25, Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”). Consequently, no stock-based compensation cost relating to stock options was recognized in the consolidated statement of income for any period prior to 2006, as all options granted under the Plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Effective January 1, 2006, we adopted the fair value provisions for share-based awards pursuant to ASC 718-10, using the modified-prospective-transition method. Under that transition method, compensation cost recognized in 2006 includes (a) compensation cost for all share-based awards granted prior to, but not yet vested as of January 1, 2006, based on the attribution method and grant date fair value estimated in accordance with the original provisions of ASC 718-10, and (b) compensation cost for all share-based awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10, all recognized on a straight line basis as the requisite service periods are rendered. Results for prior periods have not been restated.

DERIVATIVE LIABILTY

Accounting Standards Codification subtopic 815-40, Derivatives and Hedging,; Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on January 1, 2010. The Company’s Series A Preferred Stock has reset provisions to the exercise price if the Company issues equity at a price less than the exercise prices. Upon the effective date, the provisions of ASC 815-40 required a reclassification to liability based on the reset feature of the agreements if the Company sells equity at a price below the exercise price of the Series A Preferred Stock.

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations," where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies see the Notes to the Financial Statements of our Report on Form 10K. Note that our preparation of this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and is not required to provide the information required under this item.

Page 7

ITEM 4. CONTROLS AND PROCEDURES

a) Evaluation of Disclosure Controls and Procedures. As of December 31, 2009, the Company's management carried out an evaluation, under the supervision of the Company's Chief Executive Officer and the Chief Financial Officer of the effectiveness of the design and operation of the Company's system of disclosure controls and procedures pursuant to the Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses previously found in our internal controls, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

b) Changes in internal controls. There were no changes in internal controls over financial reporting, known to the Chief Executive Officer or Chief Financial Officer that occurred during the period covered by this report that has materially affected, or is likely to materially effect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no current legal proceedings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

There were no matters submitted to a vote of the security holders during the quarter.

ITEM 5. OTHER INFORMATION

None.

Page 8

ITEM 6. EXHIBITS

(a) EXHIBIT(S) DESCRIPTION

(3)(i) Certificate of Incorporation * (3)(ii) Bylaws *

(4)(1) Form of Common Stock Certificate *

(4)(2) Common Stock Purchase Warrant with Wendover Investments Limited *

(4)(3) Stock Option Agreement with Richard O. Weed *

(5) Opinion on Legality *****

(10)(1) Consulting Agreement with Rainer Poertner ***

(10)(2) Fee Agreement with Weed & Co. LLP *

(10)(3) Purchase Agreement MWW and MWWLLC *

(10)(4) Amendment to Purchase Agreement between MWW and MWWLLC **

(10)(5) Employment Agreement with CEO Michael Winzkowski **

(10)(6) Employment Agreement with COO/CFO James Marvin **

(10)(7) Loan Agreement with Key Bank N.A. ***

(10)(8) Amendment to Consulting Agreement with Rainer Poertner ***

(10)(10) Real Property Lease Agreement for 11224 Lemen Road, Suite A ****

(10)(11) Real Property Lease Agreement for 11236 Lemen Road ****

(10)(12) Supplier and Warranty Agreement ****

(10)(13) Business Loan Agreement April 4, 2006 with KeyBank N.A. ******

(10)(14) Supplier and Warranty Agreement ****

(10)(15) Blanket Purchase Order, Non-Disclosure and Confidentiality Agreement ******

1(0)(16) Lease Agreement and Amendment to Lease Agreement with JCMD Properties, LLC ******

(10)(17) Consulting Agreement with Rainer Poertner dated July 1, 2006 ******

(10)(18) Waiver of Cashless Exercise Provisions in Warrant by Wendover Investments Ltd. *******

(10)(19) Waiver of Cashless Exercise Provisions in Stock Option by Richard O. Weed *******

(10)(20) Extension of Employment Agreement with Michael Winzkowski dated October 15, 2006

(10)(21) Extension of Employment Agreement with James Marvin dated (21) Subsidiaries of Registrant *

(31)(1) Certification of Chief Executive Officer pursuant to Section302 of the Sarbanes-Oxley Act of 2002.

(31)(2) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32)(1) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation S-K.

(32)(2) Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation S-K.

* Previously filed on February 11, 2005 as part of the Registration Statement on Form 10-SB12G of Marketing Worldwide Corporation SEC File 0-50586 Accession Number 1019687-4-279.

Page 9

** previously filed on August 10, 2005 as part of the Registration Statement on Form 10-SB12G/A Amendment No. 1 of Marketing Worldwide Corporation SEC File 0-50586 Accession Number 0001019687-04-001719.

*** previously filed on November 9, 2005 as part of the Registration Statement on Form 10-SB12G/A Amendment No. 2 of Marketing Worldwide Corporation SEC File 0-50586 Accession Number 0001019687-04-002436.

**** Previously filed on January 31, 2006 as part of the Form 10-KSB for the year ended September 30, 2005 of Marketing Worldwide Corporation SEC File 0-50586 Accession Number 0001019687-05-000207.

***** previously filed on March 17, 2006 as part of the Form SB-2 of Marketing Worldwide Corporation SEC File 333-123380 Accession Number 0001019687-05-000728.

****** previously filed on September 15, 2006 as part of the Form SB-2 of Marketing Worldwide Corporation SEC File 333-123380 Accession Number 0001019687-05-002649.

******* previously filed on December 7, 2006 as part of the Form SB-2 of Marketing Worldwide Corporation SEC File 333-123380 Accession Number 0001019687-05-003367.

(31)(1) Certification of Chief Executive Officer pursuant to Section302 of the Sarbanes-Oxley Act of 2002.

(31)(2) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32)(1) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation S-K.

(32)(2) Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation S-K.

Page 10

SIGNATURES

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

MARKETING WORLDWIDE CORPORATION

BY:	/s/ MICHAEL WINZKOWSKI
	NAME: MICHAEL WINZKOWSKI
	TITLE: CHIEF EXECUTIVE OFFICER
	Date: February 19, 2010

Pursuant to requirements of 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.

BY:	/s/ MICHAEL WINZKOWSKI
	NAME: MICHAEL WINZKOWSKI
	TITLE: CHIEF EXECUTIVE OFFICER,
	SECRETARY AND DIRECTOR
	Date: February 19, 2010

BY:	/s/ JAMES E. DAVIS
	NAME: JAMES E. DAVIS
	TITLE: CHIEF FINANCIAL OFFICER
	AND DIRECTOR
	Date: February 19, 2010

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