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EX-32.2 - MARKETING WORLDWIDE CORPv208038_ex32-2.htm
EX-31.1 - MARKETING WORLDWIDE CORPv208038_ex31-1.htm
EX-31.2 - MARKETING WORLDWIDE CORPv208038_ex31-2.htm
EX-32.1 - MARKETING WORLDWIDE CORPv208038_ex32-1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

x Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended September 30, 2010

o Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period _______ to ________

COMMISSION FILE NUMBER 000-50586

MARKETING WORLDWIDE CORPORATION
(Name of small business issuer in its charter)
 
Delaware
 
68-0566295
State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization
   
 
2212 Grand Commerce Drive, Howell, MI 48855
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number) (517) 540-0045

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
$.001 PAR VALUE COMMON STOCK
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o. No x.

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

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. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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 o Accelerated filer o
Non-accelerated filer o Smaller reporting company x

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

The aggregate market value of the Registrant's common stock held by non-affiliates (as defined by Rule 12b-2 of the Exchange Act) computed by reference to the average bid and asked price of such common equity on March 31, 2010 was $1,225,818.

At January 13, 2011, there were 35,201,699 shares of $.001 par value common stock issued and outstanding.


 
TABLE OF CONTENTS
 
   
PAGE
 
       
PART I
     
ITEM 1.      BUSINESS
 
1
 
ITEM 1A.   RISK FACTORS
  4  
ITEM 1B.    UNRESOLVED STAFF COMMENTS
  8  
ITEM 2.      PROPERTIES
  8  
ITEM 3.      LEGAL PROCEEDINGS
  9  
ITEM 4.      REMOVED AND RESERVED
  9  
       
PART II
     
ITEM 5.    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY  SECURITIES
  9  
ITEM 6.    SELECTED FINANCIAL DATA
  10  
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  10  
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  13  
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  14  
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  15  
ITEM 9A. CONTROLS AND PROCEDURES
  15  
ITEM 9A(T). CONTROLS AND PROCEDURES
  15  
ITEM 9B. OTHER INFORMATION
  15  
       
PART III
     
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  16  
ITEM 11.  EXECUTIVE COMPENSATION.
  17  
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  18  
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  19  
ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.
  20  
       
PART IV
     
ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  20  
 

 
PART I

ITEM 1. BUSINESS

This Annual Report on Form 10-K (including the section regarding Management's Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements using terminology such as "can", "may", "believe", "designated to", "will", "expect", "plan", "anticipate", "estimate", "potential" or "continue", or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. You should read statements that contain these words carefully because they:

o discuss our future expectations;
o contain projections of our future results of operations or of our financial condition; and
o state other "forward-looking" information.

We believe it is important to communicate our expectations. However, forward looking statements involve risks and uncertainties and our actual results and the timing of certain events could differ materially from those discussed in forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this report. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to us as of the date thereof, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law.

Marketing Worldwide Corporation

Marketing Worldwide Corporation, a Delaware corporation ("MWWC” "We" "Us" "Our" or the "Company"), was incorporated on July 21, 2003. MWWC's headquarters are in Howell, Michigan. MWWC operates through the holding company structure and conducts its business operations through our wholly owned subsidiaries Colortek, Inc. (“CT”) and Marketing Worldwide, LLC (“MWW”).

In previous reporting periods, the Company had a 100 % German subsidiary, Modelworxx, GmbH (“MWX”).  As the direct result from the world-wide economic recession, MWX was forced to file insolvency in the German legal system.  This filing was done in February, 2010 and MWWC has not been provided any final determination from the German courts.  The Company reported this transaction as discontinued operations in the reported financial statements.

Marketing Worldwide, LLC (“MWW”)

MWW is a complete design, manufacturer and fulfillment business providing accessories for the customization of vehicles and delivers its products to large global automobile manufacturers and certain Vehicle Processing Centers primarily in North America.  MWW operates in a 23,000 square foot leased building in Howell Michigan.

The primary automotive accessory products provided by MWW are blow-molded spoilers (bridge and lip), extruded body-side moldings, and carbon-fiber seat heaters.  We have identified new business partners to drive more product sales and expect fiscal year 2011 to be greater than 2010.

MWW’s accessory programs are sold directly to vehicle processing centers and distributors located primarily in North America. These vehicle processing centers and distributors receive a continuous stream of new vehicles from the foreign and domestic automobile manufacturers for accessorization, customization, and subsequently, distribution into the domestic dealer distribution network. Distributors also sell MWW’s accessories directly to their dealers and end customers.

The vehicle processing centers and distributors submit purchase orders to MWW and/or its wholly owned subsidiaries for the delivery of accessories programs for specific types of vehicles. An accessory program refers to the complete package of goods and services related to a single accessory for a particular type of vehicle.

MWW's business model empowers its customers to make the selection of various accessories (sold by MWW) later in the production cycle, thus improving time to market for their automobiles and faster reaction to the dynamically changing demand of its customers. The principal MWW products sold during the last two fiscal years include Automotive Body Components such as:

* Rear Deck Spoilers
* Running Boards
* Body Side Moldings
* Stainless Steel Exhaust Systems
* Side skirts or front ends
* Carbon Fiber Seat Heater Systems
* Lights and Fixtures
 
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Several of the vehicles MWW currently provides accessories to are changing models next year and will provide additional growth opportunities.  MWW is also negotiating to provide fulfillment activities for new customers, meaning MWW will receive, store and ship products that are designed and manufactured by other unrelated companies.

Colortek, Inc. (“CT”)

CT is a Class A Original Equipment painting facility and operates in a 46,000 square foot owned building in Baroda, which is in South Western Michigan. We invested approximately $2 million into this paint facility and expect the majority of our future growth to come from this business.  We have restructured the management of this subsidiary and have successfully gained more business opportunities than ever before.  CT is aggressively beginning to diversify to non-automotive paint applications (household goods and construction equipment) which we believe will help stabilize the Company going forward.

RECENT DEVELOPMENTS

In September, 2009, the Company entered into a new loan agreement with Summit Financial to borrow up to $1,000,000. MWW pledged all of its inventory, equipment, accounts receivable, chattel paper, instruments, and letters of credit, documents, deposit accounts, investment property, money, rights to payment and general intangibles to secure the Loan. The financing arrangement expires on August 31, 2011, unless extended by both parties.

Effective February, 2010, the Company’s German subsidiary, ModelWorxx GmbH filed insolvency.  The Company has not received final resolution of this matter from the German courts.  The net liabilities of the 100 % owned subsidiary are included in the reported consolidated financial statements of the Company.  The income and expense accounts of ModelWorxx have been reclassified and its operations has been treated as a loss from discontinued operations in these consolidated financial statements.

As part of the continued restructuring of the Company, the Board hired a new Chief Executive Officer, Charles Pinkerton, to further and accelerate the turnaround efforts.  To date, the Company has reduced labor by 40 % and occupancy cost by 50 %.  Under the new leadership of Mr. Pinkerton, the Company has increased new revenue opportunities ten-fold.

PRODUCTS IN DEVELOPMENT

During 2010, MWW expanded its presence in color body side moldings and seat heaters, both of which can be installed either by the vehicle processing centers or the retail dealer. MWW expects that installation at the vehicle processing center and dealership level will increase the market penetration rates.

In January 2009 MWW was awarded the 4Runner running board program for Toyota Canada.  This program launched in September of 2009 and should continue through 2014.

In December of 2009 the new Yaris HB package was approved by Southeast Toyota which included a spoiler, interior trim, lighted door sills and the new Bongiovi Acoustics sound system embedded in a special built JVC stereo system.

During the spring and summer of 2009 a full line of newly designed carbon fiber seat heater systems was developed and launched in July 2009. This expands the product line to 7 configurations, expanding the spectrum of applications in different vehicles.

In addition to its internal development programs, MWW is in various stages of joint program developments on a number of new programs with several other suppliers. These development efforts were undertaken to expand our product offering and customer base, while reducing our development costs. These products are either currently being designed, prototyped or in various stages of tooling with expected launch dates in the second or third quarter of fiscal year 2011.

Colortek, Inc. is currently negotiating to provide painting services to the household goods and construction industry, along with the expansion into the domestic automakers offerings.  Colortek satisfies a niche market where low volume painting of Class A quality is necessary.

THE MARKET

The global automobile accessory market is highly fragmented and not dominated by a few large participants. Competitive pressures among vehicle manufacturers have evolved so that the manufacturers add options to their vehicles at the vehicle processing centers and not during the initial manufacturing process at the assembly line. In addition many manufacturers have switched to smaller vehicle production runs which can be accommodated by MWW’s business model. These options packages are commonly referred to as "port installed" or "dealer installed" option packages. MWW accessory programs are a crucial part of the option packages installed at the vehicle processing centers in North America. Accordingly, MWW receives its revenue directly from the vehicle processing centers and not from the automobile manufacturers or the automotive dealer.

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The vehicle processing centers, which MWW sells to, do not design or manufacture the option packages. Instead, they have well-trained employees who install virtually any accessory for all vehicles they distribute. As such, any vehicle received by the vehicle processing centers can be accessorized before it goes into the respective domestic retail dealer distribution network. MWW's accessory programs that are sold to the vehicle processing centers include the individual components, parts, installation instructions and training, fixtures, templates, and warranty.

Vehicle manufacturers and the vehicle processing centers rely on MWW to propose, design, manufacture and deliver the accessory programs. The vehicle processing centers operate under quality control programs similar or equal to the manufacturer's on-line production facilities. Therefore, process stability, quality control issues and other related procedures are a crucial component of a successful relationship with the processing centers. The vehicle processing centers that will market particular vehicles into the dealer network are responsible for requesting, approving, and ultimately paying for the accessory programs.

A large part of the fulfillment program is enhanced by the fact that MWW owns CT, the Class A paint facility.  MWW, through its relationship with CT, provides painted products to their customers at the Vehicle Processing Centers as well as through other customers.  CT has continued developing its own customers independent of MWW and MWW’s customers, hence providing more diversification.

MAJOR CUSTOMERS

MWW's major customers in North America are the Toyota Vehicle Processing Centers. Other customers include the foreign and domestic automobile manufactures, as well as a variety of tier 2 and tier 3 manufacturers to the auto industry.

Colortek paints for MWW as well as several tier one and two companies.  Continued growth is expected to be achieved from the Colortek niche Class A paint facility.
 
For the year ended September 2010, MWW was dependent upon four (4) customers for 99.5% of its revenue. Customer #1, Customer #2, Customer #3, and Customer #4 represented 35.3%, 24%, 20.4% and 19.8% of revenue, respectively. Moreover, 97.2% of our accounts receivable at September 30, 2010 were due from these four (4) customers. For the year ended September 30, 2009, MWW was dependent upon four customers for 87.5% of its revenue. Customer #1, Customer #2, Customer #3, and Customer #4 represented 28.4%, 28.4%, 17.4%, and 13.3% of revenue, respectively. Moreover, 84.1% of our accounts receivable at September 30, 2009 were due from four customers.
 
PRODUCT WARRANTIES

MWW generally warranties its products to be free from material defects and to conform to material specifications for a period of three (3) years. MWW has not experienced significant returns to date. MWW suppliers provide warranties for each product manufactured covering manufacturing defects for the same period that MWW offers to its customers. Therefore, a majority of the claims made under product warranties by MWW's customers are covered by our supplier partners and sub-suppliers.

TECHNOLOGY

MWW has an experienced design team whose members have launched successful programs with a variety of customers.  MWW applies the latest design tools and technologies during this process and covers the entire range of the design process from the initial sketch to computer aided design (“CAD”), full size clay modeling to fully functional show cars to finally preparing automobiles for production. This experience is expected to accelerate the development of accessory programs for sale in the European and North American markets.

PORTABLE DIGITIZING SYSTEM

In order to produce its products and at the same time expedite the design and development, MWW uses the latest in digital recognition and design technology. Digital recognition refers to the use of up to date digital imaging equipment to capture data for manipulation, using CAD programs to assist the process. MWW uses portable equipment to obtain surface and/or component data acceptable for CAD, either in the field or at the processing center's location. This allows MWW to create highly accurate full-scale parts that can be used for development, presentations and sales and marketing, should the CAD data for a particular vehicle not be available in advance.

SOURCING

All MWW contract suppliers and production facilities are original equipment manufacturers, approved and certified by the International Standards Organization ("ISO") with the ISO 9000 certification. ISO 9000 certification refers to the objectively measurable set of quality management standards and guidelines that form the basis for establishing quality management systems adopted by the ISO. The ISO is a non-governmental organization comprised of the national standards institutes of 146 countries. The facilities have been strategically selected to minimize transportation cost and logistics. Suppliers are required to participate in quality assurance audits and submit the appropriate documentation for the components it processes for MWW.
 
Page 3

 
SUPPLIERS

MWW has established relationships with a group of global suppliers that deliver quality materials for the production of add-on components to MWW.  MWW believes there are numerous sources for the raw materials used in its products and a loss of any of these suppliers would not impact MWW’s performance negatively.  For the year ended September 30, 2010, MWW had 5 suppliers that aggregating 60.64% represented greater than 10% of our total purchases.  Supplier 1, Supplier 2, Supplier 3, Supplier 4, Supplier 5 represented 13.11%, 12.63%, 12.09%, 12.08% and 10.74% of purchases made from suppliers respectively.  For the year ended September 30, 2009, MWW made 67.02% of its purchases from five suppliers; Supplier 1, Supplier 2, Supplier 3, Supplier 4, Supplier 5 represented 17.07%, 16.50%, 11.61%, 10.93%, and 10.91% respectively.
 
COMPETITION

The general aftermarket automotive industry is highly competitive. In MWW's market niche, defined as selling directly to the vehicle processing centers, competition is somewhat limited and is occasionally represented by smaller divisions of larger companies. MWW competes for a share of the overall global automotive aftermarket and potential new customers. In general, competition is based on proprietary product design capabilities and product quality, features, price and satisfactory after sale support. MWW's competitors include companies that offer a broad range of products and services, such as urethane molded parts, running boards, ground effects, and design.

The competitive landscape has changed during the last twelve months, the market is more fragmented than ever before, a number of competitors have ceased to exist and consolidation is ongoing. MWW has entered into several strategic alliances with Tier 1 companies. During the next twelve months a clearer picture of main competitors will emerge again.

MWW believes that its competitive edge lies in its extensive resources in design, engineering and sales. MWW focuses on the expansion of its internal capabilities and improved utilization of resources between its headquarters and its wholly owned subsidiaries and the careful cultivation of long-term relationships, in contrast to simply selling products to multiple anonymous customers. By making sure MWW customers will remain satisfied clients, MWW is not only stabilizing and growing its client roster and assuring revenue growth, but also simultaneously building and maintaining barriers of entry for competitors.

MWW spent many years cultivating the relationships that led to (i) the design work for BMW, Rolls Royce and Mini automobiles and (ii) the sale of accessory programs to the vehicle processing centers for Toyota, Hyundai and KIA vehicles. As part of the process, MWW built a strong commercial relationship with the automotive manufacturers that supply MWW with the advance data required to develop new products in a timely fashion for new Toyota, Hyundai and KIA vehicle models. With this information, MWW can prepare new programs for its customers and make those products available at the launch of new automobile models and have them correspond to the 3-5 year life cycles of each vehicle model. Moreover, as MWW manages its supplier and customer relationships effectively, it is creating significant barriers of entry for competitors. MWW expects to establish similar relationships with additional foreign and domestic manufacturers in future periods.

PROPRIETARY RIGHTS

MWW primarily relies upon a combination of trade secret laws, nondisclosure agreements and purchase order forms to establish and protect proprietary rights in the design of its products and in the products. However, it may be possible for third parties to develop similar products independently, provided they have not violated any contractual agreements or intellectual property laws.

COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

The Company currently has no costs associated with compliance with environmental regulations. However, there can be no assurances that we will not incur such costs with our paint facilities in the future.

EMPLOYEES

MWW has an elastic work-force, with as few as 15 employees, and as many as 50 employees, depending on the number of projects currently being worked on. Management believes that the structure of its workforce allows MWW to scale its overhead according to the scope of its design, tooling, assembly and manufacturing requirements throughout the year. MWW plans to add employees in the future.

ITEM 1A.  RISK FACTORS

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS AND THE MARKET PRICE OF OUR SECURITIES.

If any of the following material risks actually occur, our business, financial condition, or results of operations could be materially adversely affected, the trading prices and volume of our common stock could decline, and you could lose all or part of your investment. You should buy shares of Marketing Worldwide Corporation common stock only if you can afford to lose your entire investment.

Page 4

 
Our success is dependent on the creative, technical, financial, administrative, logistical, design, engineering, manufacturing and other contributions of the current employees and officers of the Company.  Founders of Marketing Worldwide Corporation, Michael Winzkowski and James Marvin have taken on different roles.  Winzkowski has relinquished the role of CEO and is now active as Chairman of the Board and President of MWW.  Mr. Marvin has resigned and no longer has any management activities at MWW.  These individuals originally established the relationships with our customers and suppliers and have turned this role over to the new CEO, Charles Pinkerton and CFO, James Davis. The loss of either Pinkerton or Davis could cause a disruption in our operations that could cause a decline in the level of revenue and the operating margins reported by the company. In the short term, it would be difficult to duplicate the relationships, industry experience, and creativity of Mr. Pinkerton and Mr. Davis. The loss of one or both might substantially reduce our revenues and growth potential.

OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY GLOBAL ECONOMIC AND FINANCIAL MARKETS CONDITIONS.

Current global economic and financial markets conditions, including severe disruptions in the credit markets and the prolonged global economic recession has materially and adversely affected our results of operations and financial condition. These conditions have also materially impacted our customers, suppliers and other parties with which we do business. Economic and financial market conditions that adversely affect our customers cause them to terminate existing purchase orders or to reduce the volume of products they purchase from us in the future. We have seen a decline in certain volumes over the last year, but are now seeing an increase due to what appears to be a strengthening economic environment. In connection with the sale of products, we normally do not require collateral as security for customer receivables and do not purchase credit insurance. We may have significant balances owing from customers that operate in cyclical industries and under leveraged conditions that may impair the collectability of those receivables.

Failure to collect a significant portion of amounts due on those receivables could have a material adverse effect on our results of operations and financial condition. Adverse economic and financial markets conditions may also cause our suppliers to be unable to meet their commitments to us or may cause suppliers to make changes in the credit terms they extend to us, such as shortening the required payment period for outstanding accounts receivable or reducing the maximum amount of trade credit available to us. Changes of this type could significantly affect our liquidity and could have a material adverse effect on our results of operations and financial condition. If we are unable to successfully anticipate changing economic and financial market conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.  We have been fortunate in that we have not had any significant negative effect from not being able to collect on our billings.

OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN, WHICH MAY HINDER OUR ABILITY TO OBTAIN FUTURE
FINANCING.

In their report dated January 13, 2011, our independent registered public accounting firm stated that our financial statements for the year ended September 30, 2010 were prepared assuming that we would continue as a going concern, and that they have substantial doubt about our ability to continue as a going concern. Our auditors' doubts are based on our recurring net losses, deficits in cash flows from operations and stockholders’ deficiency. We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary funding from outside sources, including by the sale of our securities, or obtaining loans from financial institutions, where possible. Our continued net operating losses and our auditors' doubts increase the difficulty of our meeting such goals and our efforts to continue as a going concern may not prove successful.
 
OUR BUSINESS DEPENDS ON OUR DESIGNS, BUT WE HAVE NOT SOUGHT COPYRIGHT OR PATENT PROTECTION FOR ALL OUR PRODUCTS. IF OUR UNPROTECTED ACCESSORY PROGRAMS BECOME WIDELY AVAILABLE BECAUSE WE FAILED TO USE CERTAIN LEGAL MEANS TO PROTECT OUR DESIGNS, IT MAY HURT OUR BUSINESS.

Our success is dependent, in part, upon the designs for our principal products such as our rear deck spoilers, body-side moldings, carbon fiber seat heaters, and expanding the paint shop business levels. We have not taken steps to obtain copyright or patent protection for all of our designs. Instead, we mostly rely on confidentiality agreements with our customers, employees, vendors and consultants to protect our proprietary technology. If our unprotected accessory programs become widely available because we did not adequately protect the designs, intellectual property and trade secrets, it may cause a material adverse change in our business, financial condition and results of operations.

WE DO NOT HAVE LONG-TERM WRITTEN AGREEMENTS WITH OUR KEY CUSTOMERS OR KEY SUPPLIERS; THEREFORE, OUR REVENUE STREAM AND OUR SUPPLY CHAIN ARE SUBJECT TO GREATER UNCERTAINTY.

The vehicle processing centers for Toyota, are all key customers. These customers issue short term contracts (12 months) or blanket purchase orders to us that remain open during the life of an accessory program or the extended term.

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The customer then places delivery releases against these blanket purchase orders or short term agreements generally in 30 day intervals. However, none of our key customers have any binding obligations beyond payment of our most recent purchase order and adherence to the terms and conditions of the blanket purchase order or short term agreement. The lack of long-term written agreements that specify a fixed dollar amount of the total purchase amount for our accessory programs or services means that we cannot predict with any certainty that these customers will generate a specific level of revenue in any specific accounting period. Our blanket purchase orders or short term agreements with customers provide for a fixed per unit cost, but do not contain any fixed purchase commitments for a specific dollar amount. A delivery release under the blanket purchase order does specify the dollar amount to be paid by our customer for that release. We record revenue when products are shipped, legal title has passed, and all our significant obligations have been satisfied.

We cannot predict with certainty that we will be able to replace a significant customer or significant supplier without a decline in our revenue and net income. Stated differently, we have to constantly justify our value proposition to our customers and our suppliers because even though the per unit price of our accessory programs is covered in the blanket purchase order, our customers are not obligated to buy the goods and services specified in the blanket purchase order. On the positive side their relative freedom to stop dealing with us keeps us in close contact with them. On the negative side, their freedom to stop dealing with us means that our revenue and our ability to generate revenue is in constant jeopardy, as well as difficult to predict with certainty.

WE USE PAINT AND PLASTIC MATERIALS.  OUR BUSINESS COULD BE AFFECTED BY ENVIROMENTAL RISKS.

Colortek, Inc. is a paint company using abrasives and paint solvents.  Although we have approval from the governmental agencies to paint, there is no guaranty that laws won’t change to adversely affect us, nor is there absolute certainty we will continue to operate without interference from governmental agencies or environmental groups.

We have not experienced any issues as yet, however the potential exists we may in the future.

LOSS OF FACILITIES COULD IMPAIR OUR ABILITY TO PROVIDE PRODUCTS TO OUR CUSTOMERS.

As in most businesses, if we lost both our facilities in Howell and Baroda Michigan, we would be in a short term bind.  The Howell facility would cause less disruption, as we could easily move our offices and the fulfillment activities elsewhere in quick fashion.

Loss of the Baroda facility would require us to rebuild, which we could do with the insurance coverage we maintain.  In the short term, we would transfer painting to one of our strategic partners until we got the facility back up and running.

Although the Baroda facility is more critical, we feel the likelihood of a total disaster is remote.  Our insurance and strategic relationships with other paint facilities should provide continuity of the supply chain to our customers.

ADVERSE RULING FROM THE BANKRUPTCY JUDGE IN GERMANY COULD NEGATIVELY IMPACT OUR BUSINESS AND CASH FLOW.

As mentioned throughout this filing, our German subsidiary filed for insolvency in February, 2010.  We have not received any adverse notifications from the bankruptcy court or judge and have no reason to believe we will, but the possibility exists that we could receive an adverse ruling.

If we were to receive an adverse ruling, we would challenge it through the legal systems available to us.

LOSS OF MAJOR SUPPLIERS COULD AFFECT OUR ABILITY TO GET PRODUCT.

We have a concentration of risk with a few suppliers providing most of our product requirements.  If we were to lose anyone of them, this could negatively impact our ability to get product on a timely basis.  We have an internal policy to have back-up suppliers to our major product offerings, and are moving in the direction of having a back-up for each of our suppliers.

WARRANTY CLAIMS COULD ADVERSLY IMPACT OUR FINANCIAL POSITION IF OUR CUSTOMERS REQUIRE A RECALL OF VEHICLES DUE TO PRODUCTS WE PROVIDE.

We review warranty reserves on a regular basis and record expense as deemed appropriate for the products sold to our customers.  We also purchase product liability insurance to cover large claims.

We believe the risk, although it exists, is minimal as the primary products we sell (plastic rear-deck spoilers, plastic body-side moldings and electric seat heaters) are not likely to give birth to a large massive recall.  In any event, we do provide a reserve in our financial statements plus we feel we would have a claim against the actual manufacturer of the product should a massive recall initiative be instituted, which we believe would reduce our financial risk.

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CONTINUED INCREASES IN PETROLEUM COSTS COULD ADVERSELY IMPACT OUR COST STRUCTURE.

Considering we use paint, which is petroleum based, and ship products via trucks that use gasoline for power, we are at risk of seeing higher costs as petroleum costs increase.  Although we have not seen this as yet, we recognize this as a possible risk.
 
WE ARE VULNERABLE BECAUSE OF OUR CUSTOMER CONCENTRATION, BUT THERE IS NO GUARANTY THAT WE CAN ADD CUSTOMERS. FAILURE TO ADD NEW CUSTOMERS MAY LIMIT OUR REVENUE IN FUTURE PERIODS.

Our revenue depends on a few key customers, the loss of which would have a negative impact on our revenues and results from operations.

Our annual operating results are likely to fluctuate significantly in the future as a result of our dependence on our four or five major customers.

Moreover, the actual purchasing decisions of our customers are often outside our control. Consequently, our customer's purchase decisions are influenced by factors beyond our control, like general economic conditions and economic conditions specific to the automobile industry.

Further, since the majority of our revenue is from four or five key customers instead of from a multitude of individual customers, a significant change in the amount or timing of purchase decisions by a single customer creates a wider fluctuation in our operating results for any given accounting period.

WE HAVE PLEDGED ALL OF OUR ASSETS TO ONE CREDITOR. OUR BUSINESS COULD BE AFFECTED BY OUR RELATIONSHIP WITH THIS CREDITOR.

In September, 2009, we entered into a new loan agreement with Summit Financial to borrow up to $1,000,000. MWW pledged all of its inventory, equipment, accounts receivable, chattel paper, instruments, and letters of credit, documents, deposit accounts, investment property, money, rights to payment and general intangibles to secure the Loan. If we are unable to renew the Loan when it comes due or find other sources of capital, the lender could foreclose on all of our assets. This would have a material adverse effect on our financial condition and results from operations.

MANAGEMENT INTENDS TO INCREASE REVENUE THROUGH ACQUISITIONS FINANCED WITH EQUITY WHICH WILL DECREASE THE EQUITY PERCENTAGE OF THE COMPANY OWNED BY EXISTING STOCKHOLDERS.

Management may consider increasing the Company's revenues through additional acquisitions of other operations in the automotive accessory industry. We have no plans for a reverse merger, change in control or spin off. The Company currently has no plans to engage in a transaction with an entity outside the automotive industry. Management is aware of several operating companies in the automotive accessory market that are candidates for additional merger or acquisition. While we may consider financing any business combination with common stock, we do not expect any business combination to result in a change in control or constitute a reverse merger.

WE LACK INDEPENDENT DIRECTORS WHICH LIMITS THE NATURE AND TYPE OF GUIDANCE GIVEN BY THE BOARD TO THE MANAGEMENT TEAM AND MAY AFFECT THE PRICE OF OUR STOCK.

Shareholders should be aware of and familiar with the recent issues concerning corporate governance and lack of independent directors as a specific topic. Our two directors are not independent because they are employed by the Company. The OTC Bulletin Board does not have any listing requirements concerning the independence of a company's board of directors.
 
THREE STOCKHOLDERS WITH 21% OF THE COMMON STOCK ARE THE CONTROLLING OFFICERS AND DIRECTORS. THEREFORE, INVESTORS WILL HAVE LITTLE OR NO CONTROL OVER MANAGEMENT OR MATTERS THAT REQUIRE STOCKHOLDER APPROVAL.

Our Chairman of the Board owns 13% of the issued and outstanding shares of common stock of the Company.  Moreover, because of the voting power, several key stockholders can effectively elect the board of directors and vote to amend the Company's certificate of incorporation. Investors should be aware that the voting power of these two stockholders can be exercised in a manner that delivers economic benefit of all stockholders or may be exercised in a manner that does not deliver the same economic benefit to all stockholders.

Page 7

 
THERE IS A GRADUALLY EMERGING PUBLIC MARKET FOR MWW'S SECURITIES AND YOU MAY HAVE DIFFICULTIES TO LIQUIDATE YOUR INVESTMENT.

Trading volume of MWW stock (MWWC.OB) has been increasing, with a closing ask price of $0.02 on December 31, 2010. If a market for MWW's common stock continues to develop slowly; the stock price may be volatile. No assurance can be given that any market for MWW's common stock will be maintained. The sale of "unregistered" and "restricted" shares of common stock pursuant to Rule 144 of the Securities Act Rules by members of management or others may have a substantial adverse impact on any such market.
 
WE HAVE IDENTIFIED WEAKNESSES IN OUR INTERNAL CONTROLS.

Our management has concluded that our internal control over financial reporting was not effective as of September 30, 2010, as a result of several material weaknesses in our internal control over financial reporting. Descriptions of the material weaknesses are included in Item 9A (T), "Control and Procedures", in this Form 10-K.

As a result of these material weaknesses, we performed additional work to obtain reasonable assurance regarding the reliability of our financial statements, have hired a CPA as our new CFO to manage the financial department and financial statement process.  However, the remaining material weaknesses could result in a misstatement of substantially all accounts and disclosures, which would result in a misstatement of annual or interim financial statements that would not be prevented or detected. Errors in our financial statements could require a restatement or prevent us from timely filing our periodic reports with the Securities and Exchange Commission ("SEC"). Additionally, ineffective internal control over financial reporting could cause investors to lose confidence in our reported financial information.

Our inability to remediate all weaknesses or any additional material weaknesses that may be identified in the future could, among other things, cause us to fail to timely file our periodic reports with the SEC and require us to incur additional costs and divert management resources. Additionally, the effectiveness of our or any system of disclosure controls and procedures is subject to inherent limitations, and therefore we cannot be certain that our internal control over financial reporting or our disclosure controls and procedures will prevent or detect future errors or fraud in connection with our financial statements.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

We have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our 2010 fiscal year and that remained unresolved.

ITEM 2. PROPERTIES

MWW's principal executive office is located at 2212 Grand Commerce Dr., Howell, MI 48855. The facility has three truck wells, two ground doors, a technical development enclosure, 20 foot ceilings, additional office space and more parking. The land for the executive office consists of 2.3 acres. The building is approximately 24,000 square feet.

The facility was built to suit MWW's requirements and specifications. JCMD, the Limited Liability Company owned by the previous two founders of MWW, built the facility and leased the property to MWW under the terms of a three year lease agreement.  JCMD borrowed funds to build the facility, and due to the downturn in the overall economic environment and MWW’s inability to remain current on the rent payments to JCMD, JCMD was not able to continue making its mortgage payments and defaulted on the loan.  JCMD negotiated the sale of the real estate to a third party, whom has entered into a lease agreement with MWW.   The Company entered into a three (3) year lease with the buyer of the property described above.  The general terms of the lease calls for monthly payments beginning December 1, 2010 of $6,666.67 ($80,000 annually) for the first year; $7,083.34 ($85,000 annually) per month for the second year; $7,416.67 ($89,000 annually) per month for the third, or final, year of the lease.  The total rent due over the three year period is $254,000. The Company is responsible for all property taxes, maintenance and utilities associated with the property.
 
Page 8

 
Our subsidiary, Colortek, Inc. has a 42,000 square foot facility on 20 acres located in Baroda, Michigan. The facility is owned by MWW and is financed by Edgewater Bank. The mortgage is scheduled for a balloon payment in July of 2013. The Mortgage note balance at September 30, 2010 was $620,595 with a 180 month term and a fixed interest rate of 6.75%. The current monthly payment is $5,962. In accordance with the mortgage loan agreement, we are currently in default.

We believe that our current office space and facilities are sufficient to meet our present and near term expansion needs and do not anticipate any difficulty securing alternative or additional space, as needed, on terms acceptable to us.

ITEM 3. LEGAL PROCEEDINGS.

The Company is sometimes subject to certain legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.

On October 19, 2010, the Company was served a Complaint from one of its suppliers that a loan in the amount of $217,000 was due and payable.  The Company has this recorded in their accounts as of September 30, 2010 and expects to continue negotiations to settle this outside the legal system.
 
ITEM 4. REMOVED AND RESERVED

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

At January 13, 2011, there were 35,201,699 shares of common stock issued and outstanding. There are 1,690,000 shares of common stock that are subject to outstanding options and warrants to purchase common stock. On December 31, 2010 the closing ask price of our common stock was $0.02 per share.

The common stock of MWW commenced trading on the OTCBB on September 14, 2006. The following table sets forth, for the calendar quarters indicated, the reported high and low bid quotations per share of the Common Stock as reported on the OTCBB.  Such quotations reflect inter-dealer quotations without retail mark-up, markdowns or commissions, and may not necessarily represent actual transactions.
 
   
High
   
Low
 
FISCAL YEAR ENDED SEPTEMBER 30, 2010
           
             
Fourth Quarter
  $ 0.13     $ 0.02  
Third Quarter
    0.12       0.02  
Second Quarter
    0.28       0.06  
First Quarter
    0.30       0.08  
                 
FISCAL YEAR ENDED September 30, 2009
               
                 
Fourth Quarter
    0.55       0.06  
Third Quarter
    0.30       0.05  
Second Quarter
    0.30       0.05  
First Quarter
    0.45       0.05  
 
At January 4, 2011 MWW had 51 common stockholders of record and the share price was $0.02. MWW has not declared any cash dividends on its common equity for the last two years. It is unlikely that MWW will pay dividends on its common equity in the future and is likely to retain earnings and issue additional common equity in the future.
 
Page 9

 
ITEM 6.  SELECTED FINANCIAL DATA

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

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

GENERAL OVERVIEW

MWW operates in a niche market of the supply chain for new passenger motor vehicles primarily in the United States and Canada. MWW participates in the design of new automobiles and the building of show cars and is a designer and manufacturer of accessories for the customization of cars, sport utility vehicles and light trucks.

MWW's revenues are derived through the sales of its products and services to large automotive companies. As a consequence, MWW is dependent upon the acceptance of its products in the first instance by the automotive industry. As a result of this dependence MWW's business is vulnerable to actions which impact the automotive industry in general, including but not limited to, current fuel costs, and new environmental regulations. Growth opportunities for the Company include expanding its geographical coverage and increasing its penetration of existing markets through internal growth and expanding into new product markets, adding additional customers and acquiring companies in its core industry that supplement and compliment the currently existing capabilities.

Challenges currently facing the Company include managing its growth and controlling costs. Escalating costs of audits, Sarbanes-Oxley compliance, health care and commercial insurance are also challenges for the Company at this time.

The following specific factors could affect our revenues and earnings in a particular quarter or over several quarterly or annual periods:

·      Ability to continue increasing sales opportunities
·      Ability to convert sales opportunities to actual revenue
·      Ability to continue controlling our selling, general and administrative costs
·      Ability to obtain funding adequate to satisfy past obligations and grow future opportunities

The requirements for our products are complex, and before buying them, customers spend a great deal of time reviewing and testing them. Our customers' evaluation and purchase cycles do not necessarily match our report periods, and if by the end of any quarter or year we have not sold enough new products, our orders and revenues could fall below our plan for a period of time. Like many companies in the automotive accessory industry, a large proportion of our business is attributable to our largest customers. As a result, if any order, and especially a large order, is delayed beyond the end of a fiscal period, our orders and revenue for that period could be below our plan.

The accounting rules we are required to follow permit us to recognize revenue only when certain criteria are met.

CRITICAL ACCOUNTING POLICIES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various others assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions.  While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

o      Accounting for variable interest entities
o      Revenue recognition
o      Inventories
o      Allowance for doubtful accounts
o      Stock based compensation
o      Derivative liabilities

Page 10

 
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.

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.

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.

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 $20,000 and $131,000 allowance for doubtful accounts at September 30, 2010 and 2009, respectively.
 
Page 11

 
STOCK BASED COMPENSATION

At times we issue stock in exchange for payment of certain liabilities or payment of services, including employees in the form of compensation or professional service providers in the form of consulting or other fees.  We value the stock issued at the price in which it is trading on the open market.

DERIVATIVE LIABILITIES

The Company has issued 3,500,000 Series A Preferred Stock.  The Preferred Stock includes a reset provision to the exercise price whereby the Company periodically has to determine the value and include such adjustments in the financial statements. This reset provision is essentially an anti-dilution feature protecting the Series A Preferred Stockholders.  The Company utilized The Black-Scholes formula for determining the value, which approximates the fair value using the Binomial Lattice Model.

COMPARISON OF THE YEAR ENDED SEPTEMBER 30, 2010 TO THE YEAR ENDED SEPTEMBER 30, 2009

Revenues

Net revenues were approximately $4.0 million for the year ended September 30, 2010. Our revenues increased approximately $300,000 from the year ended September 30, 2009. This 8% increase is attributable to the fact we are focusing on our core business, which includes painting, seat heaters, spoilers and body-side moldings.   The Company is quoting on numerous paint projects and working on new Toyota programs for the 2011 and 2012 programs that are expected to provide continued revenue growth.

GROSS PROFIT

Management improved MWW's gross profit margin as a percentage of revenues by .68% compared to the prior year. For the fiscal year ended September 30, 2010, MWW's gross profit was $1,142,616 (28.39%) compared to $ 1,030,180 (27.71%) for the fiscal year ended September 30, 2009.  MWW sold a greater percentage of its higher margin products in 2010 than in 2009. Further, our successful efforts to reduce manufacturing costs contributed to higher margins. MWW's gross profit margin is influenced by a number of factors and gross margin may fluctuate based on changes in the cost of supplies and product mix.

The primary components of cost of sales are direct labor and cost of parts and materials.  The Company has reduced head count which has driven the improvement in gross profit. The cost of parts and materials have been consistent from year to year.

OPERATING EXPENSES

Selling, general, and administrative expenses were $3,129,648 (77.77 % of revenues) in 2010 compared to $3,007,767 (80.92 % of revenues) during 2009. The decrease in costs as a percent of revenues is attributable to management’s stringent efforts to reduce overhead costs.

Significant components of operating expenses consist of professional fees, salaries, and impairment losses.  The Company is reducing head count which is driving the decrease in the cost as a percentage of revenue in 2010.

OTHER INCOME (EXPENSES)

Financing expenses were $367,760 in 2010 compared to $271,938 during 2009. The increase is due to forbearance charges by our bank while in default of our real estate mortgage plus the change on the working capital portion of our debt from a traditional bank to a factoring company.  The factoring company charges a much higher rate on the borrowings.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2010 we had working capital deficit of $4,373,032. We reported positive cash flow from operating activities of $351,089, positive cash flow from investing activities of $140,602 and negative cash flow from financing of ($560,439).

The negative cash flow from operating activities consists of $2,341,725 net loss, net with $381,509 depreciation and amortization expenses, $132,293 in amortization of deferred financing costs, $582,049 stock based compensation and $421,175 decrease in accounts receivable, $398,675 decrease in inventory, $15,236 decrease in other assets, $675,996 increase in accounts payable, net with $189,347 decrease in other current liabilities

Positive cash flow from investing activities of $140,602 occurred primarily from the disposal of various assets.

Page 12

 
On January 27, 2009, the Key Bank notified the Company it was in default of its obligations under the line of credit agreement and commercial mortgage loan secured by second 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.  Further, the lender notified the Company that the line of credit maturing on February 1, 2009 will not be renewed and no further advances are available on the line of credit.  As discussed in Note B, the Company has entered into a Forbearance Agreement through August 31, 2009. As of September 30, 2009, the Key Bank line of credit was repaid through the Company securing the below financing with Summit Financial Resources, L.P.
 
In September, 2009, Marketing Worldwide, LLC entered into a financing agreement with Summit Financial Resources L.P. (Summit) for a maximum borrowing of up to $1 million 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. The financing arrangement has been extended through August 31, 2011.
 
Under the arrangement, Summit typically advances to the Company 75% of the total amount of accounts receivable factored. Summit retains 25% 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.

MWW expects its regular capital expenditures to be approximately $160,000 for fiscal 2011. These anticipated expenditures are for continued investments in tooling and equipment used in our business.

The independent registered public accounting firm’s report on our September 30, 2010 financial statements included in this Form 10-K 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 continue developing profitable business opportunities and their ability to obtain adequate financing to fund anticipated growth.

The Company's existence is dependent upon management's ability to raise additional financing and develop profitable operations. Additional financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations

RECENT ACCOUNTING PRONOUNCEMENTS

For information regarding recent accounting pronouncements and their effect on the Company, see “Recent Accounting Pronouncements” in Note A of the Notes to Consolidated Financial Statements contained herein.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not maintain off-balance sheet arrangements nor does it participate in non-exchange traded contracts requiring fair value accounting treatment.

INFLATION

The effect of inflation on the Company's revenue and operating results was not significant.

ITEM 7A. 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 13

 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.

See pages F-1 through F-24 following:
 
 
 
 
 
MARKETING WORLDWIDE CORPORATION
SEPTEMBER 30, 2010

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

 
CONTENTS
 
PAGE NO.
 
       
    Reports of Independent Registered Public Accounting Firms
  F-1 F-2  
       
    Consolidated Balance Sheets at September 30, 2010 and 2009
  F-3  
       
    Consolidated Statements of Operations and Comprehensive Loss for the Years Ended September 30, 2010 and 2009
  F-4  
       
    Consolidated Statement of Stockholders’ Deficiency for the Two Years Ended September 30, 2010 and 2009
  F-5    F-6  
       
    Consolidated Statements of Cash Flows for the Years Ended September 2010 and 2009
  F-7  
       
    Notes to the Consolidated Financial Statements
 
F-8 F-25
 
 
Page 14

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders
of Marketing Worldwide Corporation


We have audited the accompanying consolidated balance sheet of Marketing Worldwide Corporation (the “Company”) as of September 30, 2010, and the related consolidated statements of operations comprehensive loss, stockholders’ deficiency and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Marketing Worldwide Corporation, as of September 30, 2010, and the results of its operations and comprehensive loss and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C to the financial statements, the Company’s working capital deficiency and substantial recurring losses from operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note C to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Marcum LLP
 
New York, NY
January 19, 2011
 
 
F-1

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
Board of Directors
Marketing Worldwide Corporation
Howell, Michigan

We have audited the accompanying consolidated balance sheet of Marketing Worldwide Corporation as of September 30, 2009, and the related consolidated statements of operations, deficiency in stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based upon our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated balance sheet referred to above presents fairly, in all material respects, the financial position of Marketing Worldwide Corporation as of September 30, 2009 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note C, the Company has a generated negative cash outflows from operating activities, experienced recurring net operating losses, is in default of loan certain covenants, and is dependent on securing additional equity and debt financing to support its business efforts. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are described in Note C. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
New York, New York
 
/s/ R B S M LLP
 
January 13, 2010, except for the effects of the retrospective reclassification of the discontinued operations discussed in the Note N, as to which date is January 18, 2011.

F-2

 
MARKETING WORLDWIDE CORPORATION
 CONSOLIDATED BALANCE SHEETS
 
   
September 30,
 
   
2010
   
2009
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 3,847     $ 113,539  
Accounts receivable, net
    315,919       737,094  
Inventories, net
    144,400       543,075  
Current assets of discontinued operations     -       184,833  
Other current assets
    9,328       24,564  
Total current assets
    473,494       1,603,105  
                 
                 
Property, plant and equipment, net
    2,112,457       2,903,520  
                 
Other assets:
               
Intangible assets, net
    -       80,000  
Capitalized finance costs, net of accumulated amortization of $456,008 and $323,715
    205,457       337,750  
Other assets, net
    19,400       19,400  
Other assets of discontinued operations
    -       178,352  
Total other assets
    224,857       615,502  
                 
Total assets
  $ 2,810,808     $ 5,122,127  
                 
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
               
Current liabilities:
               
Finance company lines of credit
  $ 209,986     $ 721,224  
Notes payable , current portion
    1,863,961       1,919,692  
Accounts payable
    1,302,177       663,586  
Warranty liability
    95,000       66,216  
Other current liabilities
    883,396       407,834  
Current liabilities of discontinued operations
    492,006       464,229  
Total current liabilities
    4,846,526       4,242,781  
                 
Long term debt:
               
Derivative liability
    1,186,670       -  
Other
 
-
      21,247  
                 
Total liabilities
    6,033,196       4,264,028  
                 
Series A convertible preferred stock, $0.001 par value; 3,500,000 shares issued and outstanding
    3,499,950       3,499,950  
                 
Commitments and contingencies
               
                 
Stockholders' Deficiency
               
Series B convertible preferred stock, $0.001 par value, 10,000,000 shares authorized; 1,192,308 shares issued and outstanding as of September 30, 2010 and 2009
    1,192       1,192  
Common stock, $0.001 par value, 100,000,000 shares authorized; 29,510,091 and 17,835,091 shares issued and outstanding as of September 30, 2010 and 2009, respectively
    29,510       17,835  
Additional paid in capital
    8,244,895       9,639,388  
Deficit
    (14,358,814     (12,154,087 )
Accumulated other comprehensive (loss)
    (148,873 )     (107,929 )
Total Marketing Worldwide Corporation Stockholders’ Deficiency
    (6,232,090 )     (2,603,601 )
Non-controlling interest
    (490,248 )     (38,250 )
Total Stockholders’ Deficiency
    (6,722,338 )     (2,641,851 )
                 
Total Liabilities and Stockholders’ Deficiency
  $ 2,810,808     $ 5,122,127  
 
See the accompanying notes to the consolidated financial statements
 
F-3

 
MARKETING WORLDWIDE CORPORATION
  CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
YEARS ENDED SEPTEMBER 30, 2010 AND 2009
 
   
2010
   
2009
 
         
   
 
             
Revenues
  $ 4,024,351     $ 3,717,089  
Cost of goods sold
    2,881,735       2,686,909  
                 
Gross profit
    1,142,616       1,030,180  
                 
                 
Operating expenses:
               
Selling, general and administrative expenses
    3,129,648       3,007,767  
Impairment loss on property, plant and equipment
    409,823       -  
Impairment loss on customer list (intangible asset)
    50,000          
Loss of disposal of equipment
    727       33,260  
Total operating expenses
    3,590,198       3,041,027  
Loss from operations
    (2,447,582 )     (2,010,847 )
                 
Gain on change in fair value of derivative liability
    784,445       -  
Financing expenses
    (367,760 )     (271,938 )
Other income (expense), net
    94,190       46,172  
                 
Loss from continuing operations
    (1,936,707 )     (2,236,613 )
                 
Loss from discontinued operations
    (405,018 )     (703,307 )
                 
Net Loss
    (2,341,725 )     (2,939,920 )
                 
(Loss) Income attributable to Non-controlling interest
    (451,998 )     (62,548
                 
Loss attributable to Company
    (1,889,727 )     (2,877,372 )
                 
Preferred stock dividend
    (315,000 )     (315,000 )
                 
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
  $ (2,204,727 )   $ (3,192,372 )
                 
Loss per common share, basic and diluted
               
Continuing operations
  $ (0.09 )   (0.15 )
Discontinued operations
    (0.02 )     (0.04 )
Totals
  $ (0.11 )   $ (0.19 )
                 
Weighted average common stock outstanding
               
Basic and diluted
    21,002,981       17,138,146  
                 
                 
Comprehensive loss:
               
Net Loss
  $ (2,341,725 )   $ (2,939,920 )
Foreign currency translation loss
    (40,944 )     (23,157 )
                 
Comprehensive loss
  $ (2,382,669 )   $ (2,963,077 )
Comprehensive loss attributable to non
               
Controlling interest
    (451,998 )     (62,548
Comprehensive loss attributable to Company
  $ (1,930,671 )   $ (2,900,529 )
 
See the accompanying notes to the consolidated financial statements
F-4


MARKETING WORLDWIDE CORPORATION
 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
TWO YEARS ENDED SEPTEMBER 30, 2010
 
                           
Additional
   
Non
   
Other
             
   
Preferred stock
   
Common stock
   
Paid in
   
Controlling
   
Comprehensive
   
Accum
       
   
Shares 
   
Amount 
   
Shares
   
 Amount
   
Capital 
   
Interest
   
Loss
   
Deficit
   
Total
 
                                                       
Balance, October 1, 2008
    1,192,308     $ 1,192       16,545,091     $ 16,545     $ 8,993,683       134,298     $ (84,772 )   $ (8,961,715 )   $ 99,231  
                                                                         
Common stock issued in settlement of debt
    -       -       300,000       300       79,700       -       -       -       80,000  
                                                                         
Common stock issued for services rendered at $0.30 per share
    -       -       205,000       205       61,295       -       -       -       61,500  
                                                                         
Common stock issued in settlement of cumulative preferred stock dividend
    -       -       785,000       785       392,965       -       -       -       393,750  
                                                                         
Fair value of vested options
    -       -       -               111,745       -       -       -       111,745  
                                                                         
Foreign currency translation
    -       -       -       -       -       -       (23,157 )     -       (23,157 )
                                                                         
Distribution of non controlling entity
    -       -       -       -       -       (110,000 )     -               (110,000 )
                                                                         
Effective of adoption of Accounting Standards Codification subtopic 810-10
    -       -       -       -       -       -       -       38,250       38,250  
                                                                         
Preferred Stock Dividend                                                               (315,000     (315,000
                                                                         
Net loss
    -       -       -       -       -       (62,548 )     -       (2,877,372 )     (2,939,920 )
                                                                         
Balance, September 30, 2009
    1,192,308     $ 1,192     $ 17,835,091     $ 17,835     $ 9,639,388     $ (38,250 )   $ (107,929 )   $ (12,154,087 )   $ (2,641,851 )
 
See the accompanying notes to the consolidated financial statements
 
F-5

 
MARKETING WORLDWIDE CORPORATION
 CONSOLIDATED STATEMENT OF DEFICIENY IN  STOCKHOLDERS' EQUITY
TWO YEARS ENDED SEPTEMBER 30, 2010
 
                           
Additional
   
Non-
                   
   
Preferred stock
   
Common stock
   
Paid in
   
Controlling
   
Other
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Interest
   
Comprehensive
   
Deficit
   
Total
 
                                                       
Balance forward
    1,192,308     $ 1,192       17,835,091     $ 17,835     $ 9,639,388     $ (38,250   $ (107,929 )   $ (12,154,087 )   $ (2,641,851 )
                                                                         
Effective of adoption of Accounting Standards Codification subtopic 815-40, reclassification on equity – linked financial instruments to derivative liabilities
    -       -       -       -       (1,971,115 )     -       -       -       (1,971,115 )
                                                                         
Common stock issued in settlement of debt
    -       -       500,000       500       29,500       -       -       -       30,000  
                                                                         
Common stock issued for services rendered at $0.15 per share
    -       -       80,000       80       11,920       -       -       -       12,000  
                                                                         
Common stock issued for service rendered at $0.20 per share
    -       -       1,520,000       1,520       302,480       -       -       -       304,000  
                                                                         
Common stock issued for service rendered at $0.11 per share
    -       -       1,075,000       1,075       117,175       -       -       -       118,250  
                                                                         
Fair Value of vested options
                                    7,797                               7,797  
                                                                         
Beneficial conversion feature relating to issuance of convertible debt
                                    6,250                               6,250  
                                                                         
Foreign currency translation
    -       -       -       -       -       -       (40,944 )     -       (40,944 )
                                                                         
Common stock issued for service rendered at $0.02 per share
    -       -       3,500,000       3,500       66,500       -       -       -       70,000  
                                                                         
Common stock issued in settlement of debt at $0.02 per share
    -       -       2,000,000       2,000       38,000       -       -       -       40,000  
                                                                         
Common stock issued in settlement of debt at $0.02 per share – JCMD
    *       -       3,000,000       3,000       (3,000 )     -       -       -       -  
                                                                         
Preferred Stock Dividend                                                              (315,000     (315,000
                                                                         
Net loss
    -       -       -       -       -       (451,998 )     -       (1,889,727     (2,341,725 )
                                                                         
Balance, September 30, 2010
    1,192,308     $ 1,192       29,510,091     $ 29,510     $ 8,244,895     $ (490,248 )   $ (148,873 )   $ (14,358,814 )   $ (6,722,338 )
 
See the accompanying notes to the consolidated financial statements
 
F-6

 
MARKETING WORLDWIDE CORPORATION
 CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2010 AND 2009
 
   
2010
   
2009
 
         
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss attributable to continuing operations
  $ (1,936,707 )   $ (2,236,613 )
Loss from discontinued operations
    (405,018 )     (703,307 )
Net Loss     (2,341,725     (2,939,920
Adjustments to reconcile net loss to cash used in  operations:
               
Depreciation and amortization
    381,509       390,894  
Loss on disposal of property, plant and equipment, net
    727       33,260  
Impairment loss on customer list
    50,000        
Beneficial conversion feature attributable to convertible debt
    6,250       -  
Amortization of deferred financing costs
    132,293       132,293  
Impairment loss on sale of property     409,823       -  
Change in fair value of derivative liability
    (784,445 )     -  
                 
Fair value of vested employee options
    7,797       111,745  
Common stock issued for services rendered
    504,250       61,500  
                 
(Increase) decrease in:
               
Accounts receivable
    421,173       182,601  
Inventories
    398,675       489,217  
Other current assets
    15,236       260,093  
Other assets
    -       8,930  
Increase (decrease) in:
               
Accounts payable
    675,996       165,440  
Other current liabilities
    189,347       (195,300 )
Cash provided by (used in) continuing operating activities
    136,906       (1,299,247 )
Cash provided by discontinued operating operations
    214,183       342,858  
Net cash provided by (used in) operating activities:
    351,089       (956,389 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES: