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 reportingcompany)





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





PAGEPART
      I - FINANCIAL INFORMATIONITEM
      1 - FINANCIAL STATEMENTS
              
              
              F-1ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
              
              
              2ITEM
      3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              
              
              7ITEM
      4 - CONTROLS AND PROCEDURES
              
              
              8PART
      II - OTHER INFORMATIONITEM
      1 - LEGAL PROCEEDINGS
              
              
              8ITEM
      2 - RECENT SALES OF UNREGISTERED SECURITIES AND USE OF
      PROCEEDS
              
              
              8ITEM
      3 - DEFAULTS UPON SENIOR SECURITIES
              
              
              8ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              
              8ITEM
      5 - OTHER INFORMATION
              
              
              8ITEM
      6 - EXHIBITS
              
              
              9SIGNATURES
              
              
              11


Page
1





MARKETING
WORLDWIDE CORPORATION


CONDENSED
CONSOLIDATED BALANCE SHEETS





December 31,
                                                                      
                                                                      
                                                                      September 30,2009
                                                                      
                                                                      
                                                                      2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                                                      
                                                                      $
                                                                      222,145
                                                                      
                                                                      
                                                                      $
                                                                      114,482Accounts
      receivable, net
                                                                      
                                                                      
                                                                      529,018
                                                                      
                                                                      
                                                                      
                                                                      844,679Inventories,
      net
                                                                      
                                                                      
                                                                      561,222
                                                                      
                                                                      
                                                                      
                                                                      615,910Other
      current assets
                                                                      
                                                                      
                                                                      28,744
                                                                      
                                                                      
                                                                      
                                                                      28,034Total
      current assets
                                                                      
                                                                      
                                                                      1,341,129
                                                                      
                                                                      
                                                                      
                                                                      1,603,105Property,
      plant and equipment, net
                                                                      
                                                                      
                                                                      2,954,989
                                                                      
                                                                      
                                                                      
                                                                      3,052,522Other
      assets:Other
      intangible assets
                                                                      
                                                                      
                                                                      72,500
                                                                      
                                                                      
                                                                      
                                                                      80,000Capitalized
      finance costs, net
                                                                      
                                                                      
                                                                      304,405
                                                                      
                                                                      
                                                                      
                                                                      337,750Other
      assets, net
                                                                      
                                                                      
                                                                      47,189
                                                                      
                                                                      
                                                                      
                                                                      48,750Total
      assets
                                                                      
                                                                      $
                                                                      4,720,212
                                                                      
                                                                      
                                                                      $
                                                                      5,122,127LIABILITIES
      AND DEFICENCY IN STOCKHOLDERS' EQUITYCurrent
      liabilities:Bank
      line of credits
                                                                      
                                                                      $
                                                                      610,461
                                                                      
                                                                      
                                                                      $
                                                                      739,832Notes
      payable and capital leases, current portion
                                                                      
                                                                      
                                                                      1,900,725
                                                                      
                                                                      
                                                                      
                                                                      1,919,692Accounts
      payable
                                                                      
                                                                      
                                                                      1,535,649
                                                                      
                                                                      
                                                                      
                                                                      1,109,207Warranty
      liability
                                                                      
                                                                      
                                                                      66,216
                                                                      
                                                                      
                                                                      
                                                                      66,216Other
      current liabilities
                                                                      
                                                                      
                                                                      358,460
                                                                      
                                                                      
                                                                      
                                                                      407,834Total
      current liabilities
                                                                      
                                                                      
                                                                      4,471,511
                                                                      
                                                                      
                                                                      
                                                                      4,242,781Long
      term debt:Derivative
      liability
                                                                      
                                                                      
                                                                      5,632,072
                                                                      
                                                                      
                                                                      
                                                                      -Notes
      payable, long term
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -Capital
      leases, long term
                                                                      
                                                                      
                                                                      15,387
                                                                      
                                                                      
                                                                      
                                                                      21,247Total
      liabilities
                                                                      
                                                                      
                                                                      10,118,970
                                                                      
                                                                      
                                                                      
                                                                      4,264,028Interest
      in non-controlling entity
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -Series
      A convertible preferred stock, $0.001 par value; 3,500,000 shares issued
      and outstanding
                                                                      
                                                                      
                                                                      3,499,950
                                                                      
                                                                      
                                                                      
                                                                      3,499,950Deficiency
      in Stockholders' EquitySeries
      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
                                                                      
                                                                      
                                                                      
                                                                      1,192Common
      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
                                                                      
                                                                      
                                                                      
                                                                      17,835Additional
      paid in capital
                                                                      
                                                                      
                                                                      7,760,608
                                                                      
                                                                      
                                                                      
                                                                      9,639,388Deficit
                                                                      
                                                                      
                                                                      (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
                                                                                      
                                                                                      
                                                                                      2008Revenue:Sales,
      net
                                                                                      
                                                                                      $
                                                                                      1,257,127
                                                                                      
                                                                                      
                                                                                      $
                                                                                      1,143,994Services
                                                                                      
                                                                                      
                                                                                      251,149
                                                                                      
                                                                                      
                                                                                      
                                                                                      252,166Total
      revenue
                                                                                      
                                                                                      
                                                                                      1,508,276
                                                                                      
                                                                                      
                                                                                      
                                                                                      1,396,160Cost
      of sales:Cost
      of goods sold
                                                                                      
                                                                                      
                                                                                      760,509
                                                                                      
                                                                                      
                                                                                      
                                                                                      794,145Cost
      of services provided
                                                                                      
                                                                                      
                                                                                      211,885
                                                                                      
                                                                                      
                                                                                      
                                                                                      126,129Total
      cost of sales
                                                                                      
                                                                                      
                                                                                      972,394
                                                                                      
                                                                                      
                                                                                      
                                                                                      920,274Gross
      profit
                                                                                      
                                                                                      
                                                                                      535,882
                                                                                      
                                                                                      
                                                                                      
                                                                                      475,886Operating
      expenses:Selling,
      general and administrative expenses
                                                                                      
                                                                                      
                                                                                      1,063,793
                                                                                      
                                                                                      
                                                                                      
                                                                                      1,155,115Loss
      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
                                                                                      
                                                                                      
                                                                                      
                                                                                      17,307Loss
      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
                                                                                      )
                                                                                      
                                                                                      
                                                                                      36,298Net
      (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 outstandingBasic
                                                                                      
                                                                                      
                                                                                      18,358,352
                                                                                      
                                                                                      
                                                                                      
                                                                                      16,698,352Fully
      Diluted
                                                                                      
                                                                                      
                                                                                      18,358,352
                                                                                      
                                                                                      
                                                                                      
                                                                                      16,698,352Comprehensive
      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
                                                                                      )
                                                                                      
                                                                                      
                                                                                      36,298Comprehensive
      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
                                                    
                                                    
                                                    2008CASH
      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
                                                    
                                                    
                                                    
                                                    107,035Amortization
      of deferred financing costs
                                                    
                                                    
                                                    33,345
                                                    
                                                    
                                                    
                                                    33,345Loss
      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
                                                    
                                                    
                                                    
                                                    65,704Common
      stock issued for services rendered
                                                    
                                                    
                                                    12,000
                                                    
                                                    
                                                    
                                                    -Interest
      in non controlling entity
                                                    
                                                    
                                                    (18,790
                                                    )
                                                    
                                                    
                                                    (36,298
                                                    )(Increase)
      decrease in:Accounts
      receivable
                                                    
                                                    
                                                    315,661
                                                    
                                                    
                                                    
                                                    77,192Inventory
                                                    
                                                    
                                                    54,688
                                                    
                                                    
                                                    
                                                    122,057Other
      current assets
                                                    
                                                    
                                                    (710
                                                    )
                                                    
                                                    
                                                    88,539Other
      assets
                                                    
                                                    
                                                    1,561
                                                    
                                                    
                                                    
                                                    (167
                                                    )Increase
      (decrease) in:Accounts
      payable
                                                    
                                                    
                                                    426,642
                                                    
                                                    
                                                    
                                                    12,727Other
      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
                                                    )
                                                    
                                                    
                                                    248,963Repayments
      of notes payable and capital leases
                                                    
                                                    
                                                    (24,827
                                                    )
                                                    
                                                    
                                                    (28,391
                                                    )Net
      cash (used in)  provided by  financing
      activities
                                                    
                                                    
                                                    (154,198
                                                    )
                                                    
                                                    
                                                    122,572Effect
      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
                                                    
                                                    
                                                    
                                                    1,003,071Cash
      and cash equivalents, end of period
                                                    
                                                    $
                                                    222,145
                                                    
                                                    
                                                    $
                                                    776,793SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during year for interest
                                                    
                                                    $
                                                    87,173
                                                    
                                                    
                                                    $
                                                    30,345Cash
      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-controllinginterest 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,
                  2009Guarantee
      for the JCMD Mortgage loan payable in monthly principal installmentsplus
      interest. Note secured by first deed of trust on real property and
      improvementslocated
      in Howell, MI. The JCMD General Partners personally guarantee the loan.The
      note is in default. (*)
                
                $
                677,367
                
                
                $
                683,165Guarantee
      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
                
                
                
                551,850Mortgage
      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
                
                
                
                644,129Note
      payable in monthly payments of $1,857.54 per month including interest at
      7.25% per annum, unsecured
                
                
                22,386
                
                
                
                24,2181,883,254
                
                
                
                1,903,362Less
      current portion
                
                
                1,883,254
                
                
                
                1,903,362Long
      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
                          
                          $
                          1,883,2542011
                          
                          
                          -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
                        
                        $
                        185,550Less:
      Accumulated depreciation and amortization
                        
                        
                        129,704Net
      book value:
                        
                        $
                        55,846





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





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





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





2010
                    
                    $
                    9,5902011
                    
                    
                    12,3312012
                    
                    
                    10,9372013
                    
                    
                    —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 ExercisableOptions Outstanding
                                                          
                                                          
                                                          WeightedWeighted Average
                                                          
                                                          
                                                          Average
                                                          
                                                          
                                                          WeightedExercise
                                                          
                                                          Number
                                                          
                                                          
                                                          Remaining Contractual
                                                          
                                                          
                                                          Exercise
                                                          
                                                          
                                                          Number
                                                          
                                                          
                                                          AveragePrice
                                                          
                                                          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
                                                          
                                                          
                                                          $
                                                          0.45660,000
                                                          
                                                          
                                                          
                                                          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
                                      ShareOutstanding
      at October 1, 2008
                                    
                                    
                                    660,000
                                    
                                    
                                    $
                                    0.31Granted
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Exercised
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Canceled
      or expired
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Outstanding,
      September  30, 2009
                                    
                                    
                                    660,000
                                    
                                    
                                    
                                    0.31Granted
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -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 ExercisableWeighted Average
                                          Remaining
                                        
                                        
                                        Weighted
                                          Average
                                        
                                        
                                        WeightedNumber
                                        
                                        Contractual
                                        
                                        
                                        Exercise
                                        
                                        
                                        Number
                                        
                                        
                                        AverageExercise 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
                                  ShareOutstanding
      at October 1, 2008
                                
                                
                                1,395,000
                                
                                
                                $
                                0.39Granted
                                
                                
                                -
                                
                                
                                
                                -Exercised
                                
                                
                                -
                                
                                
                                
                                -Canceled
      or expired
                                
                                
                                (395,000
                                )
                                
                                
                                1.13Outstanding,
      September  30, 2009
                                
                                
                                1,000,000
                                
                                
                                
                                0.10GrantedExercised
                                
                                
                                -
                                
                                
                                
                                -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 ExercisableWeighted Average
                                Remaining
                              
                              
                              Weighted
                                Average
                              
                              
                              WeightedNumber
                              
                              Contractual
                              
                              
                              Exercise
                              
                              
                              Number
                              
                              
                              AverageExercise 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
                      ShareOutstanding
      at October 1, 2008
                    
                    
                    1,590,000
                    
                    
                    $
                    0.54Granted
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Canceled
      or expired
                    
                    
                    (1,490,000
                    )
                    
                    
                    0.65Outstanding,
      September  30, 2009
                    
                    
                    100,000
                    
                    
                    
                    0.30Granted
                    
                    
                    -
                    
                    
                    
                    -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,
                    2009ASSETS
      (JCMD)Cash
      and cash equivalents
                  
                  $
                  21,984
                  
                  
                  $
                  17,616Accounts
      receivable, prepaid expenses and other current assets
                  
                  
                  19,400
                  
                  
                  
                  19,400Total
      current assets
                  
                  
                  41,384
                  
                  
                  
                  37,126Property,
      plant and equipment, net
                  
                  
                  1,233,824
                  
                  
                  
                  1,241,824Total
      assets
                  
                  
                  1,275,208
                  
                  
                  
                  1,278,840LIABILITIES:Current
      portion of long term debt
                  
                  
                  1,223,671
                  
                  
                  
                  1,235,015Accounts
      payable and accrued liabilities
                  
                  
                  70,327
                  
                  
                  
                  82,075Total
      current liabilities
                  
                  
                  1,293,998
                  
                  
                  
                  1,317,090Long
      term debt
                  
                  
                  
                  
                  
                  
                  -Total
      liabilities
                  
                  
                  1,293,998
                  
                  
                  
                  1,317,090Net
      assets
                  
                  $
                  (18,790
                  )
                  
                  $
                  (38,250
                  )





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





2009
                
                
                2008Revenues
                
                $
                51,000
                
                
                $
                39,636Cost
      and expenses - real estate: Operating expenses
                
                
                2,763
                
                
                
                8,084Depreciation
                
                
                8,000
                
                
                
                8,000Interest,
      net
                
                
                20,777
                
                
                
                133,776Total
      costs and expenses
                
                
                31,540
                
                
                
                149,860Operating
      (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,
                    2008REVENUES:United
      States
                  
                  $
                  1,192,166
                  
                  
                  $
                  1,132,742Germany
                  
                  
                  316,110
                  
                  
                  
                  263,418Total
      revenue
                  
                  
                  1,508,276
                  
                  
                  
                  1,396,160GROSS
      PROFIT (LOSS)United
      States
                  
                  
                  486,328
                  
                  
                  
                  480,775Germany
                  
                  
                  49,554
                  
                  
                  
                  (4,889
                  )Total
      gross profit
                  
                  
                  535,882
                  
                  
                  
                  475,886OPERATING
      LOSS:United
      States
                  
                  
                  (412,282
                  )
                  
                  
                  (502,974
                  )Germany
                  
                  
                  (115,629
                  )
                  
                  
                  (176,255
                  )Total
      operating (loss)
                  
                  $
                  (527,911
                  )
                  
                  $
                  (679,229
                  )




December 31,
                      2009
                    
                    
                    September 30,
                      2009ASSETSUnited
      States
                    
                    $
                    4,427,332
                    
                    
                    $
                    4,758,942Germany
                    
                    
                    292,880
                    
                    
                    
                    363,185Total
      asset
                    
                    
                    4,720,212
                    
                    
                    
                    5,122,127CAPITAL
      EXPENDITURESUnited
      States
                    
                    
                    -
                    
                    
                    
                    -Germany
                    
                    
                    -
                    
                    
                    
                    12,178Total
      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
                
                
                
                
                
                
                
                610,461Notes
      payable and capital leases
                
                
                1,900,725
                
                
                
                
                
                
                
                1,900,725Derivative
      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.


Page
2





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





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.





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.





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 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 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 resetprovision 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 entitieso
            Revenue
      recognition


o
            Inventorieso
            Allowance
      for doubtful accounts


o
            Stock
      based compensationo
            Derivative
      liability





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.


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.





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.





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 CORPORATIONBY:
                /s/
      MICHAEL WINZKOWSKINAME:
      MICHAEL WINZKOWSKITITLE:
      CHIEF EXECUTIVE OFFICERDate:
      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 WINZKOWSKINAME:
      MICHAEL WINZKOWSKITITLE:
      CHIEF EXECUTIVE OFFICER,SECRETARY
      AND DIRECTORDate:
      February 19, 2010BY:
                    /s/
      JAMES E. DAVISNAME:
      JAMES E. DAVISTITLE:
      CHIEF FINANCIAL OFFICERAND
      DIRECTORDate:
      February 19,
2010





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11