Unassociated Document

10-Q/A 1 v186677_10qa.htm Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

(Mark one)

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

For the quarterly period ended MARCH 31, 2010

¨	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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

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. May 21, 2010: 21,010,091

Marketing Worldwide Corporation

Explanation of the Amended Form 10 Q, for the quarterly report ended March 31, 2010

Marketing Worldwide Corporation is amending the timely filing of its Form 10 Q for the quarterly period ended March 31, 2010 to correct some minor clerical errors in the document previously filed. These clerical corrections had no impact on the consolidated balance sheets, net income(loss), condensed consolidated statements of cash flows, or earnings per share.

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

Form 10-Q for the Quarter ended March 31, 2010

Table of Contents

	PAGE

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of March 31, 2010 (unaudited) and September 30, 2009		F-1
Condensed Consolidated Statements of Operations for the three and six month periods ended March 31, 2010 and 2009 (unaudited)		F-2
Condensed Consolidated Statements of Cash Flows for the six month periods ended March 31, 2010 and 2009 (unaudited)		F-3
Notes to unaudited Condensed Consolidated Financial Statements		F-4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		2

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		8

ITEM 4T - CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS		8

ITEM 1A – RISK FACTORS		8

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		8

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES		8

ITEM 5 - OTHER INFORMATION		9

ITEM 6 - EXHIBITS		9

SIGNATURES		11

Page 1

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			September 30,
	2010			2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	34,794		$	113,539
Accounts receivable, net		504,683			737,094
Inventories, net		374,339			543,075
Other current assets		20,115			24,564
Current assets of discontinued operations		-			184,833
Total current assets		933,931			1,603,105

Property, plant and equipment, net
Continuing operations		2,744,134			2,903,520
Discontinued operations		-			178,352
Total property, plant and equipment		2,744,134			3,081,872

Other assets:
Other intangible assets		65,000			80,000
Capitalized finance costs, net		271,785			337,750
Other assets, net		27,789			19,400
Total other assets		364,574			437,150

Total assets	$	4,042,639		$	5,122,127

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Bank line of credit	$	502,369		$	721,224
Notes payable and capital leases, current portion		1,859,434			1,919,692
Accounts payable		1,157,449			663,586
Warranty liability		66,216			66,216
Other current liabilities		482,635			325,759
Interest swap liabilities		80,751			82,075
Due to supplier		195,000
Current liabilities of discontinued operations		492,006			464,229
Total current liabilities		4,835,860			4,242,781

Derivative liability		2,015,310			-
Capital leases, long term		-			21,247

Total liabilities		6,851,170			4,264,028

Commitments and contingencies		-			-

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

Stockholders' Deficiency
Series B convertible preferred stock, $0.001 par value, 10,000,000 authorized; 1,192,308 shares issued and outstanding as of March 31, 2010 and September 30, 2009		1,192			1,192
Common stock, $0.001 par value, 100,000,000 shares authorized; 21,010,091 and 17,835,091 shares issued and outstanding as of March 31, 2010 and September 30, 2009, respectively		21,010			17,835
Additional paid- in- capital		8,182,185			9,639,388
Deficit		(14,375,351	)		(12,154,087	)
Accumulated other comprehensive (loss)		(80,473	)		(107,929	)
Total Marketing Worldwide Corporation stockholders' deficiency		(6,251,437	)		(2,603,601	)
Non controlling interest		(57,044	)		(38,250	)
Total stockholders' deficiency		(6,308,481	)		(2,641,851	)

Total Liabilities and Stockholders' Deficiency	$	4,042,639		$	5,122,127

See the accompanying notes to the unaudited condensed consolidated financial statements

F-1

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	Three months ended March 31,						Six months ended March 31,
	2010			2009			2010			2009
Revenues	$	980,261		$	573,939		$	2,172,427		$	1,706,681

Cost of sales		783,959			391,870			1,489,797			1,043,837

Gross profit		196,302			182,069			682,630			662,844

Operating expenses:
Selling, general and administrative expenses		1,208,890			760,535			2,107,501			1,744,280

Loss from operations		(1,012,588	)		(578,466	)		(1,424,871	)		(1,081,436	)

Other income (expense)
Gain (loss)s on change in fair value of derivative liability		3,616,762			-			(44,195	)		-
Financing expenses		(91,283	)		(27,578	)		(205,841	)		(181,475	)
Loss of disposal of equipment, other income and (expense), net		(2,995	)		5,721			7,827			19,718

Income (Loss) from continuing operations		2,509,896			(600,323	)		(1,667,080	)		(1,243,193	)



Loss from discontinued operations		(265,091	)		(262,645	)		(377,228	)		(435,594	)
Net Income (Loss)		2,244,806			(862,968	)		(2,044,307	)		(1,678,787	)
Income (Loss) attributable to Non- controlling interest		666			8,000			(18,794	)		44,298
Income (loss) attributable to Company		2,244,140			(870,968	)		(2,025,513	)		(1,723,085	)

Preferred stock dividend		(78,750	)		(78,750	)		(157,500	)		(157,500	)

INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS	$	2,165,390		$	(949,718	)	$	(2,183,013	)	$	(1880,585	)

Income (loss) per common stock, basic:
Continuing operations	$	0.13		$	(0.04	)	$	(0.10	)	$	(0.08	)
Discontinued operations		(0.01	)		(0.02	)		(0.02	)		(0.03	)
Total	$	0.12		$	(0.06	)	$	(0.12	)	$	(0.11	)

Income (loss) per common stock, fully diluted
Continuing operations	$	(0.06	)	$	(0.04	)	$	(0.09	)	$	(0.08	)
Discontinued operations		(0.01	)		(0.02	)		(0.02	)		(0.03	)
Total	$	(0.05	)	$	(0.06	)	$	(0.11	)	$	(0.11	)

Weighted average common stock outstanding
Basic		19,375,258			16,698,352			18,861,217			16,770,915
Fully Diluted		41,352,484			16,698,352			18,861,217			16,770,915

Comprehensive loss:
Net Income (Loss)	$	2,244,806		$	(862,968	)	$	(2,044,307	)	$	(1,678,787	)
Foreign currency translation, income (loss)		-			(7,056	)		27,456			(7,056	)

Comprehensive loss		2,244,806			(870,024	)		(2,016,851	)		(1,685,843	)
Comprehensive (income) loss attributable to non controlling interest		(666	)		(8,000	)		18,794			(44,298	)
Comprehensive income (loss) attributable to Marketing Worldwide Corporation	$	2,244,140		$	(878,024	)	$	1,998,057		$	(1,730,141	)

See the accompanying notes to the unaudited condensed consolidated financial statements

F-2

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2010 AND 2009
(unaudited)

	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to continuing operations	$	(1,667,080	)	$	(1,243,193	)
Loss from discontinued operations		(377,228	)		(435,594	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		210,892			208,474
Amortization of deferred financing costs		65,965			65,965
Loss on disposal of property, plant and equipment		10,617
Effect of adoption of Accounting Standards Codification 810-10		(38,250	)		-
Change in fair value of derivative liability		44,195			-
Fair value of vested employee options		3,887			92,583
Common stock issued for services rendered		434,250			-
Fair value of interest swap		(1,324	)
Changes in operating assets and liabilities
Accounts receivable		232,411			378,567
Inventory		168,736			156,312
Other current assets		4,449			141,187
Other assets		(8,389	)		19,420
Accounts payable		610,313			(544,822	)
Other current liabilities		156,876			(7,698	)
Net cash used in continuing operating activities		(149,679	)		(1,168,799	)
Net cash provided discontinued operating operations		241,960			421,211
Net cash provided by (used in) operating activities:		92,281			(747,588	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, continuing operations		(47,124	)		(26,329	)
Cash provided by (used) in discontinued investing activities		149,002			(23,665	)
Net cash provided by (used in) investing activities:		101,878			(49,994	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution by non controlling entity		-			(90,000	)
(Repayments of) proceeds from lines of credit		(218,855	)		200,000
Repayments of notes payable and capital leases		(81,505	)		(50,198	)
Cash (used in) provided by continuing financing activities		(300,360	)		59,802
Cash provided by discontinued financing activities		-			2,050
Net cash (used in) provided by financing activities		(300,360	)		61,852

Effect of currency rate change on cash:		27,456			(7,256	)

Net decrease in cash and cash equivalents		(78,745	)		(742,986	)
Cash and cash equivalents, beginning of period		113,539			1,003,071

Cash and cash equivalents, end of period	$	34,794		$	260,085

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	195,417		$	47,814

NON-CASH TRANSACTIONS:
Common stock issued in settlement of debt	$	78,950		$	-
Common stock issued for services rendered	$	434,250		$	80,000

See the accompanying notes to the unaudited condensed consolidated financial statements

F-3

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE A – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

Marketing Worldwide Corporation (the "Company"), is incorporated under the laws of the State of Delaware in July 2003. The Company is engaged in North America 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.

Basis of presentation

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 six month period ended March 31, 2010, 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. The Company has evaluated and included subsequent events through the filing date of this Form 10-Q.

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. The results of MW Global Limited including Modelworxx GmbH are shown as discontinued operations in the financial statements. All significant inter-company transactions and balances, including those involving the VIE, have been eliminated in consolidation.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

F-4

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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.

Inventories

The inventory are stated at the lower of cost (first in, first out) or net realizable value and majority of the inventory consist of work in process 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 and six month periods ended March 31, 2010 and 2009 are removed from inventory on weighted average cost method.

At March 31, 2010 and September 30, 2009, the Company had reserves for inventory of $290,767 and $290,767, respectively.

Net 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”). However, diluted net (loss) per share for the six month periods ended March 31, 2010 and 2009 do not reflect the effects of 20,772,226 and 18,335,091 shares potentially issuable upon conversion of our convertible preferred shares as of March 31, 2010 and 2009, respectively, and 1,000,000 and 1,490,000 shares potentially issuable upon the exercise of the Company's stock options and warrants (calculated using the treasury stock method) as of March 31, 2010 and 2009, respectively. These were not considered for the three and six month periods ended March 31, 2010 and 2009, respectively, as they would have been anti-dilutive.

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.

Effect of Related Prospective Accounting Pronouncement

Effective October 1, 2009 and in accordance with Accounting Standards Codification subtopic 815-40, Derivatives

F-5

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”), the Company initially recorded the derivative liability of $1,971,115 with respect to the reset provision of its Preferred Stock 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. 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 $2,015,310 at March 31, 2010 was determined using the Black Scholes Option Pricing Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	300.36	%
Risk free rate:	1.02	%

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 gain (charge) to operations of $3,616,762 and $(44,195) for the three and six month periods ended March 31, 2010.

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).

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.

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.

F-6

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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 condensed consolidated financial statements for the three and six month period ended March 31, 2010.

Recent accounting pronouncements

In June 2009, the FASB issued new accounting guidance under ASC Topic 810 on Consolidation to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. The guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual periods thereafter. Earlier adoption is prohibited. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2010 the FASB issued Update No. 2010-06 “Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements” (“2010-06”). 2010-06 requires new disclosures regarding significant transfers between Level 1 and Level 2 fair value measurements, and disclosures regarding purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair value measurements. 2010-06 also calls for further disaggregation of all assets and liabilities based on line items shown in the statement of financial position. This amendment is effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years. The Company is currently evaluating whether adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

In January 2010 the FASB issued Update No. 2010-05 “Compensation—Stock Compensation—Escrowed Share Arrangements and Presumption of Compensation” (“2010-05”). 2010-05 re-asserts that the Staff of the Securities

Exchange Commission (the “SEC Staff”) has stated the presumption that for certain shareholders escrowed share represent a compensatory arrangement. 2010-05 further clarifies the criteria required to be met to establish a position different from the SEC Staff’s position. The Company does not believe this pronouncement will have any material impact on its financial position, results of operations or cash flows.

In January 2010 the FASB issued Update No. 2010-04 “Accounting for Various Topics—Technical Corrections to SEC Paragraphs” (“2010-04”). 2010-04 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows. In January 2010 the FASB issued Update No. 2010-02 “Accounting and Reporting for Decreases in Ownership of a

F-7

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)

Subsidiary—a Scope Clarification” (“2010-02”) an update of ASC 810 “Consolidation.” 2010-02 clarifies the scope of ASC 810 with respect to decreases in ownership in a subsidiary to those of a subsidiary or group of assets that are a business or nonprofit, a subsidiary that is transferred to an equity method investee or joint venture, and an exchange of a group of assets that constitutes a business or nonprofit activity to a non-controlling interest including an equity method investee or a joint venture. Management, does not expect adoption of this standard to have any material impact on its financial position, results of operations or operating cash flows. Management does not intend to decrease its ownership in any of its wholly-owned subsidiaries.

In January 2010 the FASB issued Update No. 2010-01 “Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force” (“2010-03”) an update of ASC 505 “Equity.” 2010-03 clarifies the treatment of stock distributions as dividends to shareholders and their affect on the computation of earnings per shares. Management does not expect adoption of this standard to have any material impact on its financial position, results of operations or operating cash flows.

In January 2010, the FASB issued new accounting guidance, under ASC Topic 820 on Fair Value Measurements and Disclosures. The guidance requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement. The guidance requires a reporting entity to use judgment in determining the appropriate classes of assets and liabilities and to provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009. As this standard relates to disclosures, the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In February 2010 the FASB issued Update No. 2010-09 “Subsequent Events (Topic 855)” (“2010-09”). 2010-09 clarifies the interaction of Accounting Standards Codification 855 “Subsequent Events” (“Topic 855”) with guidance issued by the Securities and Exchange Commission (the “SEC”) as well as the intended breadth of the reissuance disclosure provision related to subsequent events found in paragraph 855-10-50-4 in Topic 855. This update is effective for annual or interim periods ending after June 15, 2010. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows.

In February 2010 the FASB issued Update No. 2010-08 “Technical Corrections to Various Topics” (“2010-08”). 2010-08 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows.

In March 2010, the FASB issued new accounting guidance, under ASC Topic 605 on Revenue Recognition. This standard provides that the milestone method is a valid application of the proportional performance model for revenue recognition if the milestones are substantive and there is substantive uncertainty about whether the milestones will be achieved. Determining whether a milestone is substantive requires judgment that should be made at the inception of the arrangement. To meet the definition of a substantive milestone, the consideration earned by achieving the milestone (1) would have to be commensurate with either the level of effort required to achieve the milestone or the enhancement in the value of the item delivered, (2) would have to relate solely to past performance, and (3) should be reasonable relative to all deliverables and payment terms in the arrangement. No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement. The standard is effective for interim and annual periods beginning on or after June 15, 2010. The Company is currently evaluating the impact the adoption of this guidance will have on its condensed consolidated financial statements.

F-8

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE C - 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 six month period ended March 31, 2010, the Company incurred a loss of $2,025,513.

On January 27, 2009, the primary secured lender notified the Company that the Company 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. An estimated $2,000,000 is needed over the next 12 months for operational and program development purposes.

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.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Accordingly, the accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. These unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE D - LINE OF CREDIT

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.

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.

F-9

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE D - LINE OF CREDIT (continued)

The interest rate at March 31, 2010 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 March 31, 2010, the advance balance due to Summit was $502,369.

NOTE E - NOTES PAYABLE

As of March 31, 2010 and September 30, 2009, notes payable consists of the following:

	March 31, 2010		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. (*)	$	671,285	$	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. (*)		540,688		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. (**)		630,301		644,129

Notes payable in monthly payments of $1,857.54 per month including interest at 7.25% per annum, unsecured		17,160		24,218
		1,859,434		1,903,362
Less current portion		1,859,434		1,903,362
Long term portion	$	-0-	$	-0-

(*) 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. At March 31, 2010, the effective rate of interest on these loans was 8.25%

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

F-10

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE F - CAPITAL STOCK

The Company is authorized to issue 110,000,000 shares of which stock 100,000,000 shares at par value of $.001 each shall be common stock and 10,000,000 shares at par value of $.001 each shall be preferred stock.

As of March 31, 2010 and September 30, 2009, the Company has issued and outstanding 3,500,000 shares of Series A preferred stock, 1,192,308 Series B preferred stock and 21,010,091 and 17,835,091 shares of common stock, respectively.

Series A Preferred Stock

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.

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 March 31, 2010 and September 30, 2009, a total of $315,000 and $157,500 has been accrued for dividends payable on the Series A Preferred stock.

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.

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 embedded 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 B above, and 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 and reclassified to liability 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 derivative liability. Changes in fair value are recorded as non-operating, non-cash income or expense at each reporting date.

F-11

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE F - CAPITAL STOCK (continued)

The fair value of the reset provision of $2,015,310 at March 31, 2010 was determined using the Black Scholes Option Pricing Model with the following assumptions:

Dividend yield:	-0-	%
Volatility	300.36	%
Risk free rate:	1.02	%

As of March 31, 2010, the change in fair value of the derivative liability resulted in a non operating charge to operations of $44,195.

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.

F-12

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE F - CAPITAL STOCK (continued)

As of March 31, 2010, 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 valued at $12,000. These shares were valued at $0.15 per share which represents the fair value of services received which did not differ materially from the value of the stock issued.

On February 17, 2010, the Company issued an aggregate of 1,520,000 shares of common stock in exchange for services valued at $304,000. These shares were valued at $0.20 per share which represents the fair value of services received which did not differ materially from the value of the stock issued.

On March 10, 2010, the Company issued an aggregate of 1,075,000 shares of common stock in exchange for services valued at $118,250. These shares were valued at $0.11 per share which represents the fair value of services received which did not differ materially from the value of the stock issued.

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 March 31, 2010:

						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		3.26	$	0.26		430,000	$	0.26
$	0.45		170,000		4.15	$	0.45		170,000	$	0.45
			660,000		3.50	$	0.31		600,000	$	0.32

Transactions involving options issued to employees are summarized as follows:

	Number of Options		Weighted Average Exercise Price per Share		Intrinsic Value Per Share
Outstanding, September 30, 2009		660,000		0.31	$	0.00
Granted		-		-
Exercised		-		-
Canceled or expired		-		-
Outstanding, March 31, 2010		660,000	$	0.31	$	0.00
Exercisable, March 31, 2010		600,000	$	0.32	$

The weighted average fair value of the options on the date of grant, using the fair value based methodology of the six months ended March 31, 2010 and 2009 was $-0- and $-0-.

F-13

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE G - STOCK OPTIONS AND WARRANTS

The Company recorded as current period expenses the vested portions of the above employee options of $1,922 and $26,879 or the three month periods ended March 31, 2010 and 2009, respectively, and $3,887 and $92,583 for the six month periods ended March 31, 2010 and 2009. As of March 31, 2010, total unamortized value of stock options held by employees was $8,972.

The unamortized portion will be expensed over a weighted average period of 1.17 years.

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 March 31, 2010:

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

2.50

0.10

1,000,000

0.10

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

	Number of Options		Weighted Average Exercise Price per Share		Intrinsic Value
Outstanding, September 30, 2009		1,000,000		0.10	$	0.00
Granted
Exercised		-		-
Canceled or expired		-		-

Outstanding, March 31, 2010		1,000,000	$	0.10		0.00
Exercisable, March 31, 2010		1,000,000	$	0.10

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 March 31, 2010:

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

1.44

0.30

100,000

0.30

F-14

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE G - STOCK OPTIONS AND WARRANTS (continued)

Transactions involving warrants are summarized as follows:

	Number of Warrants		Weighted Average Exercise Price per Share
Outstanding, September 30, 2009		100,000	$	0.30
Granted		-		-
Exercised		-		-
Canceled or expired		-		-
Outstanding, March 31, 2010		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 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 March 31, 2010 and September 30, 2009 are the following net assets of JCMD:

	March 31, 2010			September 30, 2009
ASSETS (JCMD)
Cash and cash equivalents	$	9,045		$	17,616
Accounts receivable, prepaid expenses and other current assets		19,000			19,400
Total current assets		28,045			37,016
Property, plant and equipment, net		1,245,224			1,241,824
Total assets		1,301,314			1,278,840

LIABILITIES:
Current portion of long term debt		1,211,974			1,235,015
Accounts payable and accrued liabilities		80,751			82,075
Total current liabilities		1,292,725			1,317,090
Long term debt					-
Total liabilities		1,292,725			1,317,090
Net assets	$	(8,589	)	$	(38,250	)

F-15

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE H - CONSOLIDATION OF VARIABLE INTEREST ENTITIES (continued)

Consolidated results of operations include the following for the three months ended March 31, 2010 and 2009:

	March 31, 2010			March 31, 2009
Revenues	$	51,000		$	43,686
Cost and expenses - real estate: Operating expenses		3,293			9,891
Depreciation		8,000			8,000
Interest, net		40,373			33,795
Total costs and expenses		51,666			51,686

Operating income-Real estate	$	(666	)	$	(8,000	)

Consolidated results of operations include the following for the six months ended March 31, 2010 and 2009:

	March 31, 2010		March 31, 2009
Revenues	$	102,000	$	83,322
Cost and expenses - real estate: Operating expenses		6,056		17,975
Depreciation		16,000		16,000
Interest, net		61,150		93,645
Total costs and expenses		83,206		127,620

Operating income-Real estate	$	18,794	$	(44,298	)

During the three and six month periods ended March 31, 2010 and 2009, JCMC Properties LLC issued cash distributions to its members totaling $-0- and $90,000, 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 - 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.

F-16

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

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.

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 March 31, 2010:

			Fair Value Measurements at March 31, 2010 using:
	March 31, 2010		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	$	80,751		$	80,751	$
Derivative liability		2,015,310					2,015,310

The following table provides a summary of changes in fair value of the Company’s Level 2 financial liabilities as of March 31, 2010 (in thousands):


	Interest Rate Swap			Derivative Liability
Balance, October 1, 2009	$	82,075		$	1,971,115
Change in fair value at March 31, 2010		(1,344	)		44,195

Balance, March 31, 2010	$	80,751		$	2,015,310

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

F-17

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE K – DISCONTINUED OPERATIONS

On January 1, 2010, the Company discontinued operations in Munich, Germany under its wholly owned subsidiary; MW Global Limited which owns 100% of the outstanding ownership and economical interest in Modelworxx GmbH. The financial results of MW Global are presented separately on the consolidated income statements as discontinued operations for all periods presented.

The assets and liabilities of the discontinued operations as of March 31, 2010 and September 30, 2009 were as follows:

Assets:

	As of		As of
	March 31, 2010		September 30, 2009
Cash	$	-	$	943
Accounts receivable		-		107,585
Inventories		-		72,835
Prepaid expenses and other assets		-		32,820
Property, plant and equipment, net		-		149,002
Assets of discontinued operations	$	-	$	363,185

Liabilities:

	March 31, 2010		September 30, 2009
Accounts payable	$	492,006	$	445,621
Line of credit		-		18,608
Liabilities of discontinued operations	$	492,006	$	464,229

The Results of Operations for the three month periods ended March 31, 2010 and 2009 are as follows:

	March 31, 2010			March 31, 2009
Sales	$	-		$	52,439
Cost of sales		-			173,264
Gross profit (loss)		-			(120,825	)

Operating expenses:
Selling, general and administrative		-			135,163
Depreciation and amortization		-			10,309
Total operating costs		-			145,472
Net loss from operations		-			(266,297	)

Other (loss) income		(265,091	)		3,652
Net loss	$	(265,091	)	$	(262,645	)

F-18

MARKETING WORLDWIDE CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

NOTE K – DISCONTINUED OPERATIONS (continued)

The Results of Operations for the six month periods ended March 31, 2010 and 2009 are as follows:

	March 31, 2010			March 31, 2009
Sales	$	316,110		$	315,857
Cost of sales		266,556			441,571
Gross profit (loss)		49,554			(125,714	)

Operating expenses:
Selling, general and administrative		153,543			296,392
Depreciation and amortization		11,639			20,450
Total operating costs		165,182			316,842
Net loss from operations		(115,628	)		(442,556	)

Other (loss) income		(261,600	)		6,962
Net loss	$	(377,228	)	$	(435,594	)

NOTE L – LINE OF CREDIT

On August 31, 2009, the Company 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 the Company have been pledged as collateral for the Summit facility. The Company has guaranteed the financing arrangement. The balance at March 31, 2010 and at September 30, 2009 was approximately $502,000 and 721,000, respectively.

F-19

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-LOOKING STATEMENTS 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"), 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, and Modelworxx GmbH in Munich Germany.

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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. 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.

CORPORATE DEVELOPMENTS

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 February, 2010, Modelworxx GmbH filed for insolvency. The final resolution of this matter has not been determined yet. The Company estimated the financial impact of this filing and included the impact in the financial statements as loss from discontinued operations.

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LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. During the six months ended March 31, 2010, we provided $92,281 of cash flow in operations primarily from our net loss of $2,044,307; offset by non cash depreciation and amortization charges of $276,857, non cash change in fair value of derivative liability of $44,195, loss on disposal of equipment of $10,617 fair value of equity based compensation of $434,250 and net changes in our operating assets and liabilities of $961,349 and discontinued operations of $241,960.

INVESTING ACTIVITIES. During the six months ended March 31 2010, net cash provided from investing was from discontinued operations of $149,002, net with property plant and equipment purchased of $47,124.

FINANCING ACTIVITIES. During the six months ended March 31, 2010, net cash flow used in financing activities amounted to $300,360. The net cash flow was used to pay down our credit line of $218,855 and our notes and leases payable by $81,505.

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. 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 March 31, 2010, the Company was in default on certain secured credit facilities.

As of March 31, 2010, we had a working capital deficit of approximately $3,901,929.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2010 TO THE THREE MONTHS ENDED MARCH 31, 2009.

SALES. Net sales during the second quarter 2010 (three months ending March 31, 2010) were $980,261 an increase of $406,322, or 71.0 %, compared to $573,939 during the second quarter 2009. This increase was due to an increase in sales of certain product categories.

GROSS MARGINS. Gross margins for the second quarter 2010 decreased to 20.0 % from 31.7 % in the same period of 2009 due to higher costs in the period.

OPERATING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

Selling, general and administrative expenses increased by $448,355 to $1,208,890 in the first quarter of 2010, compared to $760,535 in the first quarter of 2009. The increase was attributable to equity based compensation paid in 2009 of $434,250 to consultants and service providers.

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OPERATING (LOSS). Operating loss increased by $434,122 to a loss of ($1,012,588) in the second quarter of 2010, compared to a net operating loss of ($578,466) in the first quarter of 2009. This increase was primarily attributable to equity based compensation paid to service providers in 2010 and increased costs of materials..

FINANCING EXPENSE. For the three months ended March 31, 2010, our financing expense increased to $91,283 from $27,578, an increase of 229 % over the same period prior year. The increase was primarily related to the mark to market adjustment to our interest swap agreement associated with the JCMD Properties, LLC mortgages and higher costs of borrowing.

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

At March 31, 2010, the reset provision liability fair value decreased from $5,632,072 at December 31, 2009 to $2,015,310 resulting in a noncash income to current period operations of $3,616,762.

NET INCOME increased by $3,115,108 to income of $2,244,806 from a loss of ($862,968). The increase was primarily attributed to the gain on the change of fair value of the derivative liability during the three months ended March 31, 2010.

COMPARISON OF SIX MONTHS ENDED MARCH 31, 2010 TO THE SIX MONTHS ENDED MARCH 31, 2009.

SALES. Net sales during the six month period ended March 31, 2010 were $2,172,427 an increase of $465,746, or 27.3 %, compared to $1,706,681 during the same period last year. This increase was due to an increase in sales of certain product categories.

GROSS MARGINS. Gross margins for the second quarter 2010 decreased to 31 % from 39 % in the same period of 2009 due to higher costs of materials.

OPERATING EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.

Selling, general and administrative expenses increased by $363,221 to $2,107,501 during the six month period ended March 31,2010, compared to $1,744,280 in the same period last year. The increase was attributable to equity based compensation paid in 2009 of $434,250 to consultants and service providers.

OPERATING (LOSS). Operating loss increased by $343,435 to a loss of ($1,424,871) during the first six months of 2010, compared to a net operating loss of ($1,081,436) in the same period last year. This increase was primarily attributable to equity based compensation paid to service providers in 2010 and higher costs of materials.

FINANCING EXPENSE. For the six months ended March 31, 2010, our financing expense increased to $205,841 from $181,475, an increase of 13 % over the same period prior year. The increase was primarily related to the mark to market adjustment to our interest swap agreement associated with the JCMD Properties, LLC mortgages and higher costs of borrowing.

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

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At March 31, 2010, the reset provision liability fair value decreased from $1,971,115 at October 1, 2009 to $2,015,310 resulting in a noncash charge to current period operations of $44,195.

NET LOSS increased by $302,428 to a loss of ($2,044,307) from a loss of ($1,678,787).

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.

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.

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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.

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.

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 March 31, 2010 and at September 30, 2009.

STOCK-BASED COMPENSATION

The Company has 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.

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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.

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.

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ITEM 5. OTHER INFORMATION

None.

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.

** 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.

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***** 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.

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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: May 26, 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: May 26, 2010

BY:	/s/ JAMES E. DAVIS
	NAME: JAMES E. DAVIS
	TITLE: CHIEF FINANCIAL OFFICER
	AND DIRECTOR
	Date: May 26, 2010

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