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, 2009
¨
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)
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Delaware
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68-0566295
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State
or other jurisdiction of
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(I.R.S.
Employer Identification No.)
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incorporation
or organization)
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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
¨
. No
x
.
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.
¨
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
¨
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.
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
¨
Accelerated filer
¨
Non-accelerated
filer
¨
Smaller reporting company
x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes
¨
No
x
The
aggregate market value of the Registrant's common stock held by non-affiliates
of the Registrant, based upon the last sale price of the Common Stock quoted on
the OTC Bulletin Board as of the last business day of the Registrant's most
recently completed fourth fiscal quarter was approximately $5,156,225. Shares of
the Registrant's common stock held by each executive officer and director and by
each entity or person that, to the Registrant's knowledge, owned 5% or more of
the Registrant's outstanding common stock as of March 31,2009 have been excluded
in that such persons may be deemed to be affiliates of the Registrant. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
At
January 3, 2010, there were 18,415,091 shares of $.001 par value common stock
issued and outstanding.
TABLE OF
CONTENTS
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PAGE
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PART
I
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ITEM
1.
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BUSINESS
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1
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ITEM
1A.
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RISK
FACTORS
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9
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ITEM
1B.
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UNRESOLVED
STAFF COMMENTS
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14
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ITEM
2.
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PROPERTIES
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15
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ITEM
3.
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LEGAL
PROCEEDINGS
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16
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ITEM
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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16
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PART
II
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ITEM
5.
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MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
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ISSUER
PURCHASES OF EQUITY SECURITIES
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16
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ITEM
6.
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SELECTED
FINANCIAL DATA
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17
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ITEM
7.
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND
RESULTS OF OPERATIONS
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17
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ITEM
7A.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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24
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ITEM
8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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24
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ITEM
9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
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AND
FINANCIAL DISCLOSURE
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25
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ITEM
9A.
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CONTROLS
AND PROCEDURES
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25
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ITEM
9A(T).
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CONTROLS
AND PROCEDURES
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25
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ITEM
9B.
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OTHER
INFORMATION
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26
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PART
III
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ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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26
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ITEM
11.
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EXECUTIVE
COMPENSATION.
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29
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ITEM
12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
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MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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30
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ITEM
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND
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DIRECTOR
INDEPENDENCE
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34
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ITEM
14.
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PRINCIPAL
ACCOUNTING FEES AND SERVICES.
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35
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PART
IV
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ITEM
15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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36
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PART
I
FORWARD-LOOKING
INFORMATION
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:
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discuss
our future expectations;
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contain
projections of our future results of operations or of our
financial
condition; and
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state
other "forward-looking"
information.
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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.
ITEM
1.BUSINESS
BUSINESS
DEVELOPMENT
Marketing
Worldwide Corporation, a Delaware corporation ("MWW" "We" "Us" "Our" or the
"Company"), was incorporated on July 21, 2003. MWW's headquarters is in Howell,
Michigan. MWW uses a holding company structure and conducts its business
operations through subsidiaries. On October 1, 2003, MWW acquired 100% of the
membership interests of Marketing Worldwide LLC, a Michigan limited liability
company, under a Purchase Agreement with the owners. Accordingly, Marketing
Worldwide LLC became a wholly owned subsidiary as of October 1, 2003. The
predecessor of Marketing Worldwide LLC, a Michigan limited liability company,
was organized on October 27, 1997 in the state of Florida as Marketing
Worldwide, Ltd., a Florida limited partnership. Marketing Worldwide, Inc., a
Florida corporation, was the corporate general partner of Marketing Worldwide
Ltd. Marketing Worldwide Ltd. had limited operations until August 1998. On
December 27, 2001, Marketing Worldwide, Ltd., a Florida limited partnership,
merged with Marketing Worldwide LLC, a Michigan limited liability company.
Marketing Worldwide LLC, a Michigan limited liability company, was organized on
December 27, 2001. The same day Marketing Worldwide LLC was organized, it merged
with Marketing Worldwide, Ltd. The merger between Marketing Worldwide, Ltd., and
Marketing Worldwide LLC represented a change in the form of legal organization
(limited partnership to Limited Liability Company) and change in legal
domicile
(Florida
to Michigan).
On May
24, 2007, MWW acquired 100% of Colortek, Inc., a Michigan corporation, under a
Stock Purchase Agreement with the owners. Accordingly, Colortek, Inc. became a
wholly owned subsidiary as of May 24, 2007. On September 28, 2007, MWW acquired
MW Global Limited which owns 100% of Modelworxx GmbH, an entity formed under the
laws of the Federal Republic of Germany. Accordingly, MW Global Limited which
owns 100% of Modelworxx GmbH became a wholly owned subsidiary as of September
28, 2007. On March 31, 2008 MW Global Limited was eliminated and Modelworxx GmbH
is now a wholly owned subsidiary of Marketing Worldwide Corp.
BUSINESS
OF ISSUER
MWW
operates in a niche of the supply chain for new passenger motor vehicles in the
United States, Canada and Europe. MWW is a designer and manufacturer of
accessories for the customization of cars, sport utility vehicles and light
trucks. MWW provides design services and delivers its products to large global
automobile manufacturers and it's Vehicle Processing Centers in the US, Canada,
Mexico and Europe.
MWW's
principal products and services consist of design services and accessory
programs for the transportation industry. An accessory program refers to the
complete package of goods and services related to a single accessory for a
particular type of automobile. In 1999, our first accessory program started with
an agreement to design, manufacture, and deliver rear deck spoilers for the
Toyota Camry to South East Toyota Distributors.
During
the last 12 months, our accessory programs consisted of the
following.
KIT-SPOILER
AVALON '05
KIT-SPOILER
CAMRY
KIT-SPOILER
COROLLA
KIT-SPOILER
4RUNNER
KIT-SPOILER
SIENNA
KIT-SPOILER
YARIS SEDAN
KIT-SPOILER
YARIS HB
KIT-SPOILER
MATRIX
KIT
COROLLA BODY SIDE MOLDING
KIT PRIUS
BODY SIDE MOLDING
KIT
MATRIX BODY SIDE MOLDING
KIT-iPod
INTERFACE
KIT-SEAT
HEATER
KIT-EXHAUST
SYSTEM TUNDRA
KIT-EXHAUST
SYSTEM SEQUOIA
KIT-EXHAUST
SYSTEM SCION TC
KIT-EXHAUST
SYSTEM TACOMA
KIT-EXHAUST
SYSTEM FJ
MWW,
through its wholly owned subsidiary Modelworxx GmbH (MWX), provides design
services to BMW in Germany from within the BMW design facility in Munich,
Germany. These design services include the BMW, Rolls Royce and Mini
brands. Further, Modelworxx GmbH also designs and manufactures
accessories in a second MWX facility and delivers these accessories to Toyota
Motor Germany, Toyota Motor Europe and has established European distribution for
the sale of its Mercedes, BMW and Audi accessories.
In future
periods, MWW expects to extend its operations to other automobile brands and to
acquire additional customers in the US, Europe and Asia. During the year ended
September 30, 2009, Marketing Worldwide sold 26 accessory programs, primarily
for installation on new Toyota automobiles, to its four major customers. These
four customers accounted for 87% of revenues during fiscal 2009. The accessory
programs that we market to large vehicle processing centers for installation on
new automobiles are created by the MWW design teams in the US and Germany and
manufactured through a process in the US and Germany that we manage and control.
Notably, MWW does not have a direct contractual relationship with Toyota Motor
Corporation or Ford Motor in the U.S. Instead, MWW’s products and services are
sold to the vehicle processing centers of those manufacturers in the US and
Canada. MWW sells its products and services directly to Toyota Motor
Manufacturing Company in Canada, in Europe to Toyota Germany and provides its
design services directly to BMW in Germany.
In June
of 2007 we acquired Colortek Inc., a “Class A” Original Equipment (OE) painting
facility, headquartered in Baroda, Michigan. Colortek is a mid-sized “Class A”
painting facility in the United States, qualified to provide “Class A” OE
painting for a variety of automotive accessories. During the last four years,
Colortek has painted automotive accessory programs for Toyota, Ford, Chrysler,
Mitsubishi, Mazda, and Navistar and has worked with Tier 1 companies such a
Magna/Decoma and Meridian. Currently produced programs include the Toyota Camry,
Corolla, Matrix, Sienna, 4 Runner and RAV 4 and in the past have included all
spoilers for the 2005-2007 Ford Focus Street Appearance II option package for
the Ford Motor Company.
In
September of 2007 we acquired Modelworxx GmbH, an automotive design and
engineering firm located in Munich, Germany. Modelworxx has longstanding
relationships with many European domestic and foreign automobile manufacturers,
and has especially deep relationships with BMW, Mini and Rolls Royce. The
transaction has been executed to expand MWW’s design, engineering and marketing
capabilities, broaden its product and customer base and widen access to the
global and especially European automotive markets. Modelworxx is one of the few
outside design firms permitted to have its teams located inside the BMW design
facility in Munich and is involved in the design process of future BMW Group
automobiles. In July of 2008, Modelworxx established a second design and
engineering studio facility outside the BMW facility. Besides providing similar
services as the company currently provides to BMW to other manufacturers, this
studio is focusing on the design and engineering of automotive accessories for
the European and North American markets. Initial product from this studio has
been delivered to Toyota Germany and has also been requested by Toyota Motor
Europe and other European manufacturers. New advanced products are already in
the prototype stage and will be launched into the European and North American
markets during 2010. Modelworxx has established several large European
distributors and is also executing all sales and marketing efforts for MWW’s US
designed and manufactured products in the European market and
Russia.
PRINCIPAL
PRODUCTS AND SERVICES
MWW’s
accessory programs are sold directly to vehicle processing centers and
distributors located in North America and Europe. These vehicle processing
centers and distributors receive a continuous stream of new vehicles from the
foreign and domestic automobile manufacturers for accessorization and
customization and subsequently, distribution into the domestic dealer
distribution network. Distributors also sell 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
PRODUCTS
IN DEVELOPMENT
During
2009, MWW developed molded 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 will 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. The new product designs
include accessories for Nissan, KIA, Hyundai, Smart Car, and
Toyota
Motor Sales. 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 2010.
In
September 2008, Colortek signed a strategic alliance agreement with American
Autocoat, a large Tier 1 supplier to the Domestic Big Three and has been quoting
several new programs to US manufacturers.
In June
of 2009 Colortek entered into a strategic alliance agreement with Polytec-Foha
and was awarded three paint programs through Polytec for Hyundai, Ford Motor and
Subaru components for launch in December 2009/January 2010.
In 2009
Modelworxx developed a running board for installation on the Toyota 4Runner and
a universal running boards for installation on a wide range of different SUVs
from different automobile manufacturers, such as BMW, VW, Mercedes and Audi. The
new Toyota 4Runner Running Board launched at Toyota Canada in September 2009 and
will continue through 2014.
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. Accordingly, MWW receives
its revenue directly from the vehicle processing centers and not from the
automobile manufacturers or the automotive dealer.
The
vehicle processing centers are typically owned either by the automobile
manufacturers or independent third parties. These centers focus on purchasing
and installing accessories (i.e. from MWW) and then distributing the
accessorized automobiles into the retail dealership network.
The
vehicle processing centers do not design and manufacture the option packages.
Instead, the vehicle processing centers have well-trained employees who can
install virtually any accessory for a particular vehicle they distribute. As
such, any vehicle received by the vehicle processing centers in North America
and Europe 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 includes 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.
At
present, MWW has no relationship with the individual retail dealer or the
vehicle manufacturer, with the exception of Toyota Motor Manufacturing Company
in Canada and BMW in Germany. Efforts are currently under way to establish
similar relationships with the "Big Three" in the US.
MAJOR
CUSTOMERS
MWW's
major customers in the U.S. are the large independently owned Toyota Vehicle
Processing Centers. In Canada, MWW's major customer is Toyota Canada, Inc and
Toyota Motor Manufacturing Corporation. In Europe, MWW's major customers are
BMW, ABT, Toyota Germany and Toyota Europe. Other customers in the US include
KIA Motors America, Warren Distribution (distributor for the Scion Accessory
Group of TMS), Polytec, 3-D Carbon, domestic and international manufacturer of
original equipment and after market roof systems.
For the
year ended September 2009, MWW was dependent upon four (4) customers for 87% of
its revenue. Customer #1, Customer #2, Customer #3, and Customer #4 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 these four (4) customers. For the
year ended September 30, 2008, MWW was dependent upon four customers for 73.8%
of its revenue. Customer #1, Customer #2, Customer #3, and Customer #4
represented 23.9, 23.7, 13.9, and 12.3% of revenue, respectively. Moreover,
80.4% of our accounts receivable at September 30, 2008 were due from four
customers.
MWW
devotes significant attention to its major customers and is seeking to develop
relationships with additional customers throughout the US, Canada, Europe and
Asia, so that it will decrease its dependency on only a few major customers. The
acquisitions of Colortek, Inc. and Modelworxx GmbH should decrease this
dependency in future periods.
PRODUCT
WARRANTIES
MWW
generally warrants 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
Modelworxx
GmbH, our wholly owned subsidiary in Germany, has an experienced design team
whose members have been involved in the design of BMW, Rolls Royce and Mini
automobiles for several years. Modelworxx GmbH applies the latest design tools
and technologies during this process and covers the entire range of the design
process from the initial sketch to CAD design, full size clay modeling to fully
functional show cars to finally preparing automobiles for production. This
experience, combined with MWW's existing experience and customer base in the US,
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 computer aided design (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.
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, 2009, MWW did not have any suppliers that represented
greater than 10% of our total purchases. For the year ended September
30, 2008, MWW made 31% of its purchases from three suppliers and 43.7 % of MWW’s
accounts payable were due to three suppliers.
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.
MAIN
COMPETITORS
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 two strategic alliances with
former Tier1 competitors. During the next twelve months a clearer picture of
main competitors will emerge again.
COMPETITIVE
ADVANTAGES
MWW
believes that its competitive edge lies in its extensive global 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 (Colortek) has entered into several strategic alliances with
larger Tier 1 companies that are beginning to generate additional revenue for
MWW by utilizing the existing customer relationships and logistics capabilities
of the strategic alliance partners.
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, if MWW
can manage its supplier and customer relationships effectively, it is creating
reasonable barriers of entry for competitors, which might make it more difficult
to persuade MWW's customers to switch to their goods and services. MWW expects
to establish similar relationships with additional foreign and domestic
manufacturers in future periods. First meetings for entry into the burgeoning
Russian markets have been successfully conducted. However, there can be no
reasonable assurance that MWW will be able to maintain or expand its customer
relationships.
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.
In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. MWW has applied for a patent for its APDM
(Accessory Power Distribution Module) product, has filed copyright protection
for some of its products and may continue to pursue additional copyrights and
patent protection for selected products in the future.
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
forty six (46) full-time and five (5) part-time employees. During fiscal 2008,
MWW had fifty seven (57) full time and three (3) part time employees. MWW
considers full-time to be 32 or more hours per week. 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.
OUR
SUCCESS TO DATE HAS BEEN DEPENDENT ON OUR FOUNDERS, WINZKOWSKI AND MARVIN. THE
LOSS OF EITHER PERSON WOULD LIKELY CAUSE A DISRUPTION IN OUR
OPERATIONS.
Our
success is dependent on the creative, technical, financial, administrative,
logistical, design, engineering, manufacturing and other contributions of the
founders of Marketing Worldwide Corporation, Michael Winzkowski and James Marvin
and the founders of our wholly owned subsidiaries Colortek and Modelworxx,
Patrick Smiarowski and Gerold Haas, respectively. These individuals have
established the relationships with our customers and suppliers and manage the
day to day operations of the company. The loss of either person would 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 our founders. The loss of one or both might substantially reduce our revenues
and our net income.
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 potential for a significant and prolonged global
economic recession, may materially and adversely affect our results of
operations and financial condition. These conditions may also materially impact
our customers, suppliers and other parties with which we do business. Economic
and financial market conditions that adversely affect our customers may cause
them to terminate existing purchase orders or to reduce the volume of products
they purchase from us in the future. 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.
OUR
INDEPENDENT AUDITORS HAVE 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, 2010, our independent auditors stated that our
financial statements for the year ended September 30, 2009 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 incurring net losses and deficits in cash
flows from operations. 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
REVENUE DEPENDS ON A FEW KEY CUSTOMERS. THE LOSS OF A KEY CUSTOMER WOULD
HAVE A
NEGATIVE IMPACT ON OUR REVENUE AND RESULTS FROM OPERATIONS.
For the
fiscal year ended September 30, 2009, our four largest customers represented
28.4%, 28.4%, 17.4% and 13.3% of our $4.5 million in net sales. For the fiscal
year ended September 30, 2008, our four largest customers represented 23.9%,
23.7%, 13.9%, and 12.3% of the 2008 $8.3 million in net sales. The loss of a key
customer would have a material adverse effect on our operations.
WE DEPEND
ON A FEW KEY SUPPLIERS TO OBTAIN EQUIPMENT AND COMPONENTS. ANY DISRUPTION IN OUR
ABILITY TO OBTAIN ADEQUATE QUANTITIES AND MEET DELIVERY SCHEDULES CAUSED BY OUR
RELIANCE ON A FEW KEY SUPPLIERS COULD HURT OUR BUSINESS.
For the
fiscal year ended September 30, 2009, 17% of our purchases came from two
suppliers. For the year ended September 30, 2009, MWW did not have any suppliers
that represented greater than 10% of our total purchases. For the
fiscal year ended September 30, 2008, 31% of our purchases came from three
suppliers. The loss of a key supplier would result in delivery delays disrupt
our revenue and net income and hurt our reputation. Vertical integration has
reduced our dependency on outside suppliers.
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, running boards, front grills, stainless steel exhaust
systems, side skirts, front ends, carbon fiber seat heaters, and light systems
and the intellectual property and trade secrets used during the manufacturing
and assembly processes. 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.
Southeast
Toyota Distributors, LLC, Gulf States Toyota, Inc., Toyota Canada, Inc., Toyota
Motor Manufacturing Corp., BMW, Germany 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.
The
customer then makes delivery releases against those blanket purchase orders or
short term agreements in frequent time intervals. However, none of our key
customers have any binding obligations to us 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, except in the short term agreements
with BMW. 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. Similarly, AWA Aisin, BORLA Performance, and
WET/NCC are all key suppliers, but none of them have any binding obligation to
us except to adhere to the terms and conditions of the purchase order submitted
by us and accepted by them, to furnish goods or services.
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 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
annual operating results are likely to fluctuate significantly in the future as
a result of our dependence on our major customers, South East Toyota
Distributors, Inc., Gulf States Toyota, Inc., Toyota Canada, Inc., Toyota Motor
Manufacturing Corp, and BMW.
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
previous years, we entered into an asset based loan agreement with Key Bank N.A.
to borrow up to $800,000 (the "Loan"). The Loan was due on February 1, 2009. MWW
pledged all of its inventory, equipment, accounts, chattel paper, instruments,
and letters of credit, documents, deposit accounts, investment property, money,
rights to payment and general intangibles to secure the Loan.
On
September 11, 2009 we repaid the KeyBank loan in full and entered into a new
loan agreement with Summit Financial to borrow up to $1,000,000. MWW pledged all
of its inventory, equipment, accounts, 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 COMMON STOCK
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.
TWO
STOCKHOLDERS WITH 33% 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 Chief
Executive Officer owns 22% and Chief Operating Officer owns 11% of the issued
and outstanding common stock of the Company. These two stockholders with 33% of
the common stock are the controlling officers and directors and because of the
voting power held can effectively approve or block any corporate change of
control. Moreover, because of the voting power, these two 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.
THERE IS
A GRADUALLY EMERGING PUBLIC MARKET FOR MWW'S SECURITIES AND YOU MAY HAVE
DIFFICULTIES TO LIQUIDATE YOUR INVESTMENT.
Trading
of MWW stock (MWWC.OB) has commenced, with a closing ask price of $0.28 on
December 31, 2009. 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 ARE A
GUARANTOR ON THE BUILDING MORTGAGE TO OUR LANDLORD WHO IS A RELATED PARTY WHICH
CREATES A RISK THAT ANY CONFLICT BETWEEN THE LANDLORD AND GUARANTOR MAY BE
RESOLVED IN A MANNER THAT IS INFLUENCED BY THE RELATED PARTY INTEREST AND NOT
SOLELY IN THE BEST INTEREST OF THE STOCKHOLDERS.
JCMD
Properties LLC is owned by our founders, directors, executive officers and
controlling shareholders, Michael Winzkowski and James C. Marvin. The Lease
Amendment provides that our rent obligations shall be equal to the amount
necessary to amortize the debt, plus pay expenses related to the building that
we lease from JCMD Properties LLC, a related party. Further, if JCMD Properties
LLC defaults on its mortgage, we have unconditionally guaranteed to repay the
loan. Our mortgage guarantees and long term lease agreement with JCMD Properties
LLC makes it unlikely that we will be able to relocate our operations to any
other location.
UNDER ASC
810-10, OUR CONSOLIDATED FINANCIAL STATEMENTS CONTAIN ASSETS, LIABILITIES,
REVENUES, COSTS, AND EXPENSES OF JCMD PROPERTIES, LLC, A VARIABLE INTEREST
ENTITY.
Under
generally accepted accounting principles, specifically FASB ASC 810-10, MWW
combines the assets, liabilities, and non-controlling interest of JCMD
Properties LLC, a "Variable Interest Entity" at fair value. Investors should
read the notes to our financial statements and understand the accounting rules
in this area. The assets, liabilities, revenues, costs, and expenses of the
Variable Interest Entity ("VIE") that is included in the consolidated financial
statements are not ours.
WE ARE
SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS THAT COULD HARM
OUR REVENUES AND PROFITABILITY.
We have
operations in Europe. Certain risks are inherent in international operations,
including:
o
difficulty of enforcing agreements and
collecting receivables through certain foreign legal systems;
o
foreign customers may have longer payment cycles than customers in the United
States;
o
tax rates in certain foreign countries may exceed those in the United States and
foreign earnings may be subject to withholding requirements or the imposition of
tariffs, exchange controls or other restrictions;
o
currency fluctuations and devaluations;
As we
continue to expand our business globally, our success will be dependent, in
part, on our ability to anticipate and effectively manage these and other risks.
We cannot assure you that these and other factors will not have a material
adverse effect on our international operations or our business, results of
operations and financial condition as a whole.
WE HAVE
IDENTIFIED WEAKNESSES IN OUR INTERNAL CONTROLS.
Our
management has concluded that our internal control over financial reporting was
not completely effective as of September 30, 2009, as a result of several
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 weaknesses, we performed additional work to obtain reasonable
assurance regarding the reliability of our financial statements, have hired an
outside CPA to oversee certain reporting procedures and have hired an
experienced CFO to manage the financial department. However, the
remaining 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 2009 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 office
building is approximately 24,000 square feet.
The
facility was built to suit MWW's requirements and leased from JCMD Properties
LLC, a company owned by James Marvin and Michael Winzkowski, current officers,
directors and large stockholders of MWW. As such, MWW has a long term lease with
the landlord, JCMD Properties LLC that is owned by these two affiliates. Under
the Lease Agreement, as amended, MWW pays monthly rent of approximately $17,000
with annual adjustments. The lease rates between MWW and JCMD Properties LLC is
higher than current market rates. The current cost per square foot at the
facility is $8.60 per square foot and subject to a price increase if the lease
is extended. Nearby, triple net lease rates range between $6.00 - $10.00 per
square foot.
Under
generally accepted accounting principles, specifically ASC 810-10, MWW
consolidates the assets, liabilities, and non-controlling interest of JCMD
Properties LLC, a "Variable Interest Entity" at fair value. The following
mortgage obligations of JCMD Properties LLC pertain to the real property
occupied by MWW. As of September 30, 2009, the aggregate outstanding mortgage
obligations were $1,235,015. The assets, liabilities, revenues and costs and
expenses of JCMD Properties LLC that are included in the combined financial
statements are not the Company's.
The
satellite/home offices for the support teams operating in different parts of the
U.S. and Germany are located at the following addresses.
A second
location is in Bluffton, South Carolina, United States. MWW does not record any
lease expense for this office because this facility is made available to MWW by
its employee who is reimbursed for out-of-pocket costs, such as telephone,
facsimile and courier. A third office is located in Los Angeles, CA and is made
available to MWW at no cost. The South Carolina office coordinates the
relationship with South East Toyota Distributors, Inc., Gulf States Toyota, Inc.
and explores expansion opportunities with Caribbean.
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, 2009 was $644,129 with a 180 month term
and a fixed interest rate of 6.75%. The current monthly payment is
$5,962.
The main
office of Modelworxx is a 3,000 square foot leased facility in Munich, Germany,
with a rent of $2,750 per month. Modelworxx also has business with a second
14,000 square foot facility, with a rent of $5,700 per month.
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. MWW currently is not
involved in any legal proceedings.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART
II
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
At
January 3, 2010, there were 18,415,091 shares of common stock issued and
outstanding. There are 2,495,000 shares of common stock that are subject to
outstanding options and warrants to purchase common stock. On December 31, 2009
the closing ask price of our common stock was $0.28 per share.
The
common stock of MWW commenced trading on the OTCBB on September 14, 2006. The
table below sets forth the high and low bid information for each quarter for the
year ended September 30, 2008. The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
Marketing
Worldwide Corp
High -
Low
|
Date
|
|
High
|
|
|
Low
|
|
|
December
2007
|
|
$
|
0.95
|
|
|
$
|
0.40
|
|
|
March
2008
|
|
$
|
0.90
|
|
|
$
|
0.27
|
|
|
June
2008
|
|
$
|
0.41
|
|
|
$
|
0.19
|
|
|
September
2008
|
|
$
|
0.45
|
|
|
$
|
0.12
|
|
|
September
2009
|
|
$
|
0.55
|
|
|
$
|
0.05
|
|
At
January 4, 2010, MWW had 46 common stockholders of record and the share price
was $0.28. 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.
In April
18, 2007, MWW's board of directors adopted the 2007 Stock and Stock Option
Compensation Plan (the "2007 Plan") and reserved 1,500,000 shares of common
stock for future issuance under the 2007 Plan. In May 2007, MWW granted 170,000
employee stock options vesting over the next three years. The options grant the
employee the right to purchase the Company's common stock over the next 8 to 10
years at an exercise price of $0.45. The options were valued using the
Black-Scholes Option Pricing model with the following assumptions: dividend
yield: 0%; volatility: 112.99%; risk free interest rate: 4.50%. The determined
fair value of the options of $41,440 will be recognized as a period expense
ratably with vesting rights.
In May
2008, MWW granted 490,000 employee stock options vesting over next one to three
years. The options grant the employee the right to purchase the Company's common
stock over the next 4 to 10 years at an exercise price of $0.26. The options
were valued using the Black-Scholes Option Pricing model with the following
assumptions: dividend yield: -0-%; volatility: 221.26%; risk free interest rate:
2.73% to 3.85%. The determined fair value of the options of $124,603 will be
recognized as a period expense ratably with vesting rights.
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 of the supply chain for new passenger motor vehicles in the
United States, Canada and Europe. 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
consumer interest rates, fuel costs, and new environmental regulations. Growth
opportunities for the Company include expanding its geographical coverage and
increasing its penetration of existing markets in the US, Canada and Europe
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, and at the same
time supply access to additional markets and customers. Challenges currently
facing the Company include managing its growth, controlling costs and completing
the integration of the acquisitions it has executed during the last quarter of
2007. 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:
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
|
Allowance
for doubtful accounts
|
|
|
o
|
Stock
based compensation
|
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 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.
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 and $0
allowance for doubtful accounts at September 30, 2009 and 2008,
respectively.
STOCK-BASED
COMPENSATION
Prior to
January 1, 2006, we accounted for the Plans under the recognition and
measurement provisions of APB Opinion No. 25, as permitted by SFAS No. 123.
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 SFAS No. 123(R), 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 SFAS No. 123,
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 SFAS No. 123(R), all recognized on a straight line basis as
the requisite service periods are rendered. Results for prior periods have not
been restated.
COMPARISON
OF THE YEAR ENDED SEPTEMBER 30, 2009 TO THE YEAR ENDED SEPTEMBER 30,
2008
Revenues
Net
revenues were $4,507,941 for the year ended September 30, 2009. Our revenues
decreased by $3,797,720 or 45.7% from $8,305,661 for the year ended September
30, 2008. The significant decrease is attributable to the severe economic
downturn of the auto industry.
GROSS
PROFIT
Management
improved MWW's gross profit margin as a percentage of revenues by 1.55% compared
to the prior year. For the fiscal year ended September 30, 2009, MWW's gross
profit was $1,514,345 (33.60%) compared to $ 2,661,594 (32.05%) for the fiscal
year ended September 30, 2008. MWW sold a greater percentage of its
higher margin products in 2009 than in 2008. 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, product mix, currency exchange, and
competition.
OPERATING
EXPENSES
Selling,
general, and administrative expenses were $4,209,179 in 2009 compared to
$4,818,937 during 2008. The decrease in selling, general, and administrative
costs of $609,758 is attributable to management of expenses. While not a regular
and recurring activity, the Company's management from time to time assesses its
new acquisition opportunities in regard to making additional acquisitions in the
future.
OTHER
INCOME (EXPENSES)
Financial
expenses were $271,938 in 2009 compared to $177,878 during 2008. The increase is
due to higher borrowing costs this year as compared to the prior
year.
Other
income (expense), net was $60,112 in 2009 compared to $90,863 in 2008; a change
of $30,751. Other income (expense) represents interest income $1,423 and other
income of $58,689. While not a recurring activity, the Company's management from
time to time assesses its foreign currency risks in connection with its
agreements to acquire inventory and materials from its vendors and enters into
contracts to hedge such risks. The Company currently has no foreign currency
contracts.
LIQUIDITY
AND CAPITAL RESOURCES
As of
September 30, 2009, we had working capital deficit of $2,639,676. We reported
negative cash flow from operating activities of $975,446, negative cash flow
from investing activities of $32,749 and positive cash flow from financing of
$142,763.
The
negative cash flow from operating activities consists of $2,915,622 net loss,
net with $433,591 depreciation and amortization expenses, $132,293 in
amortization of deferred financing costs, $173,245 stock based compensation and
$33,260 loss on sale of equipment, $306,192 decrease in accounts receivable,
$491,568 decrease in inventory, $285,476 decrease in other assets, $324,149
increase in accounts payable, net with $195,300 decrease in other current
liabilities
Negative
cash flow from investing activities of $32,749 occurred from acquiring
additional property and equipment.
We
reported generating net cash of $142,753 from financing activities primarily
from additional line of credit of $339,832, net with $107,069 repayment of notes
payable and capital leases and $90,000 distribution from our variable interest
entity.
On July
11, 2008, we 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.
In order
to finance its expanding operations, the Company obtained conventional bank and
lease financing, which provided the liquidity to meet its on-going and
anticipated working capital requirements, as well as increase its inventory
levels and invest in equipment utilized in the ordinary course of its business
operations.
Based on
the application of Accounting Standards Codification Subtopic 810-10 (
“ASC 810-10
”
), the
Company is consolidating its financials with those of JCMD Properties LLC. The
assets, liabilities, revenues and costs and expenses of JCMD Properties LLC that
are included in the combined financial statements are not the Company's. The
liabilities of the VIE's will be satisfied from the cash flows of the VIE's
assets and revenues belong to the VIE.
The
Company had a line of credit with a maximum borrowing limit of $800,000 with Key
Bank. Borrowings under the agreement are collateralized by
substantially all the Company's assets. At September 30, 2008, the Company was
in default on its line of credit agreement.
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.
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.
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.
During
the three months ended September 30, 2009, we factored invoices totaling
$791,500 in receivables. As of September 30, 2009, the advance balance due to
Summit was $721,224.
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
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 develop profitable
operations. In addition, at September 30, 2008, the Company was in default on
certain secured credit facilities.
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.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
See pages
F-1 through F-34 following:
MARKETING
WORLDWIDE CORPORATION
SEPTEMBER
30, 2009
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
CONTENTS
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PAGE NO.
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|
|
|
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|
Report
of Independent Registered Certified Public Accounting Firm
|
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F-2
|
|
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|
|
Consolidated
Balance Sheets at September 30, 2009 and 2008
|
|
F-3
|
|
|
|
|
|
Consolidated
Statements of Operations for the Years Ended September 30, 2009 and
2008
|
|
F-4
|
|
|
|
|
|
Consolidated
Statement of Deficiency in Stockholder's Equity for the Two Years
Ended September 30, 2009
|
|
F-5
|
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended September 2009 and
2008
|
|
F-7
|
|
|
|
|
|
Notes
to the Consolidated Financial Statements
|
|
F-8
~ F-34
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
Marketing
Worldwide Corporation
Howell,
Michigan
We have
audited the accompanying consolidated balance sheets of Marketing Worldwide
Corporation as of September 30, 2009 and 2008, and the related consolidated
statements of operations, deficiency in stockholders' equity and cash flows for
each of the two years in the period ended September 30, 2009. 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 audits.
We
conducted our audits 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 sheets referred to above presents
fairly,
in all material respects, the financial position of Marketing Worldwide
Corporation as of September 30, 2009 and 2008 and the results of its operations
and its cash flows for each of the two years in the period ended September 30,
2009 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 B, 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 B. 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
|
|
|
|
MARKETING
WORLDWIDE CORPORATION
CONSOLIDATED
BALANCE SHEETS
|
|
|
September
30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
114,482
|
|
|
$
|
1,003,071
|
|
|
Accounts
receivable, net
|
|
|
844,679
|
|
|
|
1,150,871
|
|
|
Inventories
|
|
|
615,910
|
|
|
|
1,107,478
|
|
|
Deferred
income taxes
|
|
|
-
|
|
|
|
188,271
|
|
|
Other
current assets
|
|
|
28,034
|
|
|
|
102,577
|
|
|
Total
current assets
|
|
|
1,603,105
|
|
|
|
3,552,268
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
3,052,522
|
|
|
|
3,456,624
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
|
Other
intangible assets
|
|
|
80,000
|
|
|
|
110,000
|
|
|
Capitalized
finance costs, net
|
|
|
337,750
|
|
|
|
470,043
|
|
|
Other
assets, net
|
|
|
48,750
|
|
|
|
71,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
5,122,127
|
|
|
$
|
7,660,347
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND DEFICIENCY IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Lines
of credit
|
|
$
|
739,832
|
|
|
$
|
400,000
|
|
|
Notes
payable and capital leases, current portion
|
|
|
1,919,692
|
|
|
|
1,356,002
|
|
|
Accounts
payable
|
|
|
1,109,207
|
|
|
|
865,058
|
|
|
Warranty
liability
|
|
|
66,216
|
|
|
|
126,983
|
|
|
Other
current liabilities
|
|
|
407,834
|
|
|
|
621,117
|
|
|
Total
current liabilities
|
|
|
4,242,781
|
|
|
|
3,369,160
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
term debt:
|
|
|
|
|
|
|
|
|
|
Notes
payable, long term
|
|
|
-
|
|
|
|
653,776
|
|
|
Capital
leases, long term
|
|
|
21,247
|
|
|
|
38,230
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
4,264,028
|
|
|
|
4,061,166
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
in non-controlling entity
|
|
|
-
|
|
|
|
134,298
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, $0.001 par value; 3,500,000 shares issued
and outstanding
|
|
|
3,499,950
|
|
|
|
3,499,950
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficiency
in Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Series
B convertible preferred stock, $0.001 par value, 10,000,000 authorized;
1,192,308 shares issued and outstanding as of September 30, 2009 and
2008
|
|
|
1,192
|
|
|
|
1,192
|
|
|
Common
stock, $0.001 par value, 100,000,000 shares authorized; 17,835,091 and
16,545,091 shares issued and outstanding as of September 30, 2009 and
2008, respectively
|
|
|
17,835
|
|
|
|
16,545
|
|
|
Additional
paid in capital
|
|
|
9,639,388
|
|
|
|
8,993,683
|
|
|
Deficit
|
|
|
(12,192,337
|
)
|
|
|
(8,961,715
|
)
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(107,929
|
)
|
|
|
(84,772
|
)
|
|
Total
deficiency in stockholders' equity
|
|
|
(2,641,851
|
)
|
|
|
(35,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Deficiency in Stockholders' Equity
|
|
$
|
5,122,127
|
|
|
$
|
7,660,347
|
|
See the
accompanying notes to the consolidated financial statements
MARKETING
WORLDWIDE CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
YEARS
ENDED SEPTEMBER 30, 2009 AND 2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
(Restated)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
Sales,
net
|
|
$
|
4,112,870
|
|
|
$
|
6,629,579
|
|
|
Services
|
|
|
395,071
|
|
|
|
1,676,082
|
|
|
Total
revenue
|
|
|
4,507,941
|
|
|
|
8,305,661
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales:
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
2,511,477
|
|
|
|
4,198,919
|
|
|
Cost
of services provided
|
|
|
482,119
|
|
|
|
1,445,148
|
|
|
Total
cost of sales
|
|
|
2,993,596
|
|
|
|
5,644,067
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
1,514,345
|
|
|
|
2,661,594
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
4,209,179
|
|
|
|
4,818,937
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(2, 694,834
|
)
|
|
|
(2,157,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing
expenses
|
|
|
(271,938
|
)
|
|
|
(177,878
|
)
|
|
Loss
of disposal of equipment
|
|
|
(33,260
|
)
|
|
|
-
|
|
|
Other
income (expense), net
|
|
|
60,112
|
|
|
|
90,863
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(2,939,920
|
)
|
|
|
(2,244,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes (benefit)
|
|
|
-
|
|
|
|
(4,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before minority interest
|
|
|
(2,939,920
|
)
|
|
|
(2,239,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from non-controlling interest
|
|
|
24,298
|
|
|
|
(35,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(2,915,622
|
)
|
|
|
(2,275,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividend
|
|
|
(315,000
|
)
|
|
|
(315,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS AVAILABLE TO COMMON STOCKHOLDERS
|
|
$
|
(3,230,622
|
)
|
|
$
|
(2,590,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share, basic
|
|
$
|
(0.19
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share, fully diluted
|
|
$
|
(0.19
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common stock outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,138,146
|
|
|
|
16,017,852
|
|
|
Fully
Diluted
|
|
|
17,138,146
|
|
|
|
16,017,852
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(3,230,622
|
)
|
|
$
|
(2,590,188
|
)
|
|
Foreign
currency translation loss
|
|
|
(23,157
|
)
|
|
|
(84,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(3,253,779
|
)
|
|
$
|
(2,674,960
|
)
|
See the
accompanying notes to the consolidated financial statements
MARKETING
WORLDWIDE CORPORATION
CONSOLIDATED
STATEMENT OF DEFICIENY IN STOCKHOLDERS' EQUITY
TWO
YEARS ENDED SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Additional
|
|
|
Subscription
|
|
|
Comprehensive
|
|
|
Retained Earnings
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid in Capital
|
|
|
Receivable
|
|
|
Income (loss)
|
|
|
(Deficit)
|
|
|
Total
|
|
|
Balance,
October 1, 2008
|
|
|
-
|
|
|
$
|
-
|
|
|
|
15,763,080
|
|
|
$
|
15,763
|
|
|
$
|
8,056,551
|
|
|
$
|
(2,000,000
|
)
|
|
$
|
-
|
|
|
$
|
(6,371,527
|
)
|
|
$
|
(299,213
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock subscription
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued in settlement of cumulative preferred stock
dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
303,678
|
|
|
|
304
|
|
|
|
209,696
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of warrants extended expiry date
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,188
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
exercised in conjunction with the issuance of preferred
stock
|
|
|
442,308
|
|
|
|
442
|
|
|
|
-
|
|
|
|
-
|
|
|
|
524,558
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock issued in exchange for cancellation of warrants
|
|
|
750,000
|
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(750
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services rendered at $0.30 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
158,333
|
|
|
|
158
|
|
|
|
47,342
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services rendered at $0.17 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
200
|
|
|
|
33,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services rendered at $.30 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
120,000
|
|
|
|
120
|
|
|
|
35,880
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of warrants issued in exchange for services rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,418
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(84,772
|
)
|
|
|
-
|
|
|
|
(84,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,590,188
|
)
|
|
|
(2,590,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2008
|
|
|
1,192,308
|
|
|
$
|
1,192
|
|
|
|
16,545,091
|
|
|
$
|
16,545
|
|
|
$
|
8,993,683
|
|
|
$
|
-
|
|
|
$
|
(84,772
|
)
|
|
$
|
(8,961,715
|
)
|
|
$
|
(35,067
|
)
|
See the
accompanying notes to the consolidated financial statements
MARKETING
WORLDWIDE CORPORATION
CONSOLIDATED
STATEMENT OF DEFICIENY IN STOCKHOLDERS' EQUITY
TWO
YEARS ENDED SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Additional
|
|
|
Subscription
|
|
|
Comprehensive
|
|
|
Retained Earnings
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid in Capital
|
|
|
Receivable
|
|
|
Income (loss)
|
|
|
(Deficit)
|
|
|
Total
|
|
|
Balance
forward
|
|
|
1,192,308
|
|
|
$
|
1,192
|
|
|
|
16,545,091
|
|
|
$
|
16,545
|
|
|
$
|
8,993,683
|
|
|
$
|
-
|
|
|
$
|
(84,772
|
)
|
|
$
|
(8,961,715
|
)
|
|
$
|
(35,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(315,000
|
)
|
|
|
(315,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,915,622
|
)
|
|
|
(2,915,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2009
|
|
|
1,192,308
|
|
|
$
|
1,192
|
|
|
|
17,835,091
|
|
|
$
|
17,835
|
|
|
$
|
9,639,388
|
|
|
$
|
-
|
|
|
$
|
(107,929
|
)
|
|
$
|
(12,192,337
|
)
|
|
$
|
(2,641,851
|
)
|
See the
accompanying notes to the consolidated financial
statements
MARKETING
WORLDWIDE CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
YEARS
ENDED SEPTEMBER 30, 2009 AND 2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
(Restated)
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(2,915,622
|
)
|
|
$
|
(2,275,188
|
)
|
|
Adjustments
to reconcile net loss to cash used
in operations:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
433,591
|
|
|
|
382,470
|
|
|
Loss
on disposal of property, plant and equipment
|
|
|
33,260
|
|
|
|
-
|
|
|
Amortization
of deferred financing costs
|
|
|
132,293
|
|
|
|
133,381
|
|
|
Fair
value of extended warrant expiry terms
|
|
|
-
|
|
|
|
58,188
|
|
|
Fair
value of vested employee options
|
|
|
111,745
|
|
|
|
-
|
|
|
Common
stock issued for services rendered
|
|
|
61,500
|
|
|
|
47,500
|
|
|
Interest
in non controlling entity
|
|
|
(44,298
|
)
|
|
|
35,422
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
306,192
|
|
|
|
(458,800
|
)
|
|
Inventory
|
|
|
491,568
|
|
|
|
(249,494
|
)
|
|
Other
current assets
|
|
|
262,814
|
|
|
|
117,422
|
|
|
Other
assets
|
|
|
22,662
|
|
|
|
127,871
|
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
324,149
|
|
|
|
(212,242
|
)
|
|
Other
current liabilities
|
|
|
(195,300
|
)
|
|
|
(32,149
|
)
|
|
Net
cash used in operating activities:
|
|
|
(975,446
|
)
|
|
|
(2,325,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(32,749
|
)
|
|
|
(487,267
|
)
|
|
Net
cash used in investing activities:
|
|
|
(32,749
|
)
|
|
|
(487,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Distribution
by non controlling entity
|
|
|
(90,000
|
)
|
|
|
(141,893
|
)
|
|
Proceeds
from common stock subscription
|
|
|
-
|
|
|
|
2,525,000
|
|
|
Proceeds
from (repayments of) lines of credit
|
|
|
339,832
|
|
|
|
(600,000
|
)
|
|
Proceeds
from (repayments of) notes payable and capital leases
|
|
|
(107,069
|
)
|
|
|
(152,691
|
)
|
|
Net
cash provided by (used in) financing activities
|
|
|
142,763
|
|
|
|
1,630,416
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of currency rate change on cash:
|
|
|
(23,157
|
)
|
|
|
(84,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(888,589
|
)
|
|
|
(1,267,242
|
)
|
|
Cash
and cash equivalents, beginning of period
|
|
|
1,003,071
|
|
|
|
2,270,313
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
114,482
|
|
|
$
|
1,003,071
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Cash
paid during year for interest
|
|
$
|
47,814
|
|
|
$
|
130,551
|
|
|
Cash
(recoverable) during year for taxes
|
|
$
|
(188,271
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
TRANSACTIONS:
|
|
|
|
|
|
|
|
|
|
Common
stock issued in settlement of debt
|
|
$
|
80,000
|
|
|
$
|
-
|
|
|
Common
stock issued for dividend payments (which the Company elected to pay in
Common stock as opposed to cash) on the Series A Convertible Preferred
Stock
|
|
$
|
393,750
|
|
|
$
|
210,000
|
|
See the
accompanying notes to the consolidated financial statements
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE
A - SUMMARY OF ACCOUNTING POLICIES
General
Summary
of the significant accounting policies applied in the preparation of the
accompanying financial statements follows:
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.
The
consolidated financial statements include the accounts of the Registrant and its
wholly-owned subsidiary, Marketing Worldwide LLC. Effective January 1, 2005, the
consolidated financial Statements also include a variable interest entity (VIE)
of which the LLC is the primary beneficiary as further described in Note M.
Additionally on May 24, 2007 the Company acquired Colortek, Inc. and on
September 28, 2007 the Company acquired MW Global Limited which owns 100% of the
outstanding ownership and economical interest in Modelworxx GmbH. 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 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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 and $0 allowance for doubtful accounts at September
30, 2009 and 2008, respectively.
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 years ended September 30,
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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
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 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 years ended September 30, 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 $750 and $17,769 for the
years ended September 30, 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 1,000,000 and 1,100,000 at September
30, 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
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 the 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
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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
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 years ended September
30, 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”)
will become 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 will require 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.
Reclassification
Certain
reclassifications have been made to conform to prior periods' data to the
current presentation. These reclassifications had no effect on reported net
income (loss).
Accounting for variable
interest entities
Accounting
Standards Codification subtopic 810-10, Consolidation (“ASC 810-10”) discusses
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity risk for the
entity to finance its activities without additional subordinated financial
support. ASC 810-10 requires the consolidation of these entities, known as
variable interest entities, by the primary beneficiary of the entity. The
primary beneficiary is the entity, if any, that will absorb a majority of the
entities expected losses, receive a majority of the entity's expected residual
returns, or both.
Pursuant
to the effective date of a related party lease obligation, the Company adopted
ASC 810-10. This resulted in the consolidation of one variable
interest entity (VIE) of which the Company is considered the primary
beneficiary. The Company's variable interest in this VIE is the result of
providing certain secured debt mortgage guarantees on behalf of a limited
liability company that leases warehouse and general offices located in the city
of Howell, Michigan.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE A - SUMMARY OF ACCOUNTING
POLICIES (CONTINUED)
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 year ended September 30,
2009. The Company granted 490,000 employee options during the years ended
September 30, 2009 and 2008, respectively. The Company recorded the fair value
of the vested portion of issued employee options of $111,745 and $0 for the year
ended September 30, 2009 and 2008, respectively.
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 will be require to
fair value the resent provision as a derivative liability.
In
December 2007, the FASB issued new accounting and reporting standards for the
non-controlling
interest in a subsidiary
and for the deconsolidation of a subsidiary. The new guidance also changes the
way the consolidated financial statements are presented, establishes a single
method of accounting for changes in a parent’s ownership interest in a
subsidiary that do not result in deconsolidation, requires that a parent
recognize a gain or loss in net income when a subsidiary is deconsolidated and
expands disclosures in the consolidated financial statements that clearly
identify and distinguish between the parent’s ownership interest and the
interest of the non-controlling owners of a subsidiary. The provisions are to be
applied prospectively as of the beginning of the fiscal year in which the
guidance is adopted, except for the presentation and disclosure requirements,
which are to be applied retrospectively for all periods presented. The new
guidance is effective for our financial statements for the fiscal year that
began October 1, 2009. We are in the process of evaluating the impact that
the guidance may have on our financial statements and related
disclosures.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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.
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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements (continued)
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 13 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.
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 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
consolidated financial statements during the year ended September 30, 2009, the
Company incurred a loss of $3,230,622.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
B - GOING CONCERN MATTERS AND TRIGGERING EVENTS (continued)
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 statements do not
include any adjustments that might result should the Company be unable to
continue as a going concern.
NOTE
C - INTANGIBLE ASSETS AND GOODWILL
As the
result of Colortek, Inc and Modelworxx GmbH acquisitions at May 24, 2007 and
September 28, 2007, respectively, the Company had intangibles totaling
$1,734,551 at the completion of the acquisitions.
In
accordance with Accounting Standards Codification subtopic 350-10, Goodwill and
Other Intangibles (“ASC 350-10”), an impairment testing is required at least
annually. Subsequent to the acquisitions, in the year ended September 30, 2007;
management preformed an evaluation of its goodwill acquired from Colortek, Inc
and Modelworxx GmbH for purpose of determining the implied fair value of the
assets at September 30, 2007. The tests indicated that the recorded book value
of the goodwill exceeded its fair value, as determined by discounted cash flows.
As a result, upon completion of the assessment, management recorded non-cash
impairment charges for both acquisitions of $1,584,552, net of tax, or $0.14 per
share during the year ended September 30, 2007 to reduce the carrying value of
the goodwill to $0. Considerable management judgment is necessary to estimate
the fair value. Accordingly, actual results could vary significantly from
management's estimates.
The
remaining identifiable intangible assets acquired and their carrying value at
September 30, 2008 is customer lists with a carrying value of $110,000. The
customer list was determined to have a five-year life. This intangible was
amortized using that life and amortization from the date of the acquisition
through September 30, 2009 was taken as a charge against income in the
consolidated statement of operations. Total amortization expense charged to
operations for the years ended September 30, 2009 and 2008 was $30,000 and
$30,000, respectively. Estimated amortization expense as of September 30, 2009
is as follows:
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE
C - INTANGIBLE ASSETS AND GOODWILL (continued)
|
Years Ending September 30,
|
|
|
|
|
2010
|
|
$
|
30,000
|
|
|
2011
|
|
|
30,000
|
|
|
2012
|
|
|
20,000
|
|
|
Total
|
|
$
|
80,000
|
|
NOTE
D - INVENTORIES
Inventories
are stated at the lower of cost or market determined by the average method.
Components of inventory as of September 30, 2009 and 2008 are as
follows:
|
|
|
2009
|
|
|
2008
|
|
|
Finished
goods
|
|
$
|
256,862
|
|
|
$
|
486,425
|
|
|
Raw
materials
|
|
|
649,815
|
|
|
|
696,538
|
|
|
Less:
inventory reserve
|
|
|
(290,767
|
)
|
|
|
(75,485
|
)
|
|
Total
|
|
$
|
615,910
|
|
|
$
|
1,107,478
|
|
NOTE E - PROPERTY, PLANT AND
EQUIPMENT
At September 30, 2009 and 2008,
property, plant and eq
uipment consist of the
following:
|
|
|
2009
|
|
|
2008
|
|
|
Land
|
|
$
|
411,645
|
|
|
$
|
411,645
|
|
|
Building
|
|
|
1,915,700
|
|
|
|
1,915,700
|
|
|
Office
equipment
|
|
|
192,497
|
|
|
|
174,572
|
|
|
Tooling and other
equipment
|
|
|
1,542,890
|
|
|
|
1,522,073
|
|
|
Vehicles
|
|
|
260
,086
|
|
|
|
266,397
|
|
|
Total
|
|
|
4,322,818
|
|
|
|
4,290,387
|
|
|
Less: accumulated
depreciation
|
|
|
(1,270,296
|
)
|
|
|
(833,763
|
)
|
|
Net
|
|
$
|
3,052,522
|
|
|
$
|
3,456,624
|
|
Depreciation expense included as a
charge to income was $402,867 and $382,470 for the years e
nded September 30, 2009 and 2008,
respectively. At September 30, 2009, $33,260 in equipment was written off. For
the year end September 30, 2009, the Company charged $33,260 related to the
disposal of equipment.
NOTE F - OTHER CURRENT
LIABILITIES
As of S
eptember 30, 2009 and 2008 other current
liabilities consist of the following:
|
|
|
2009
|
|
|
2008
|
|
|
Accrued
expenses
|
|
$
|
396,173
|
|
|
$
|
609,456
|
|
|
Taxes
|
|
|
11,661
|
|
|
|
11,661
|
|
|
Total
|
|
$
|
407,834
|
|
|
$
|
621,117
|
|
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE
G - LINE OF CREDIT
Key Bank
The
Company had a line of credit with a maximum borrowing limit of $800,000 with Key
Bank. Borrowings under the agreement are collateralized by
substantially all the Company's assets. At September 30, 2008, the Company was
in default on its line of credit agreement.
On
January 27, 2009, 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.
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.
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.
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 September 30, 2009, the advance balance due to Summit was
$721,224.
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 September 30, 2009, the advance balance due was
$18,608.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE H - NOTES
PAYABLE
As of
September 30, 2009 and 2008, notes payable consists of the
following:
|
|
|
2009
|
|
|
2008
|
|
|
Guarantee
for the JCMD Mortgage loan payable in monthly principal installments plus
interest. Note secured by first deed of trust on real property and
improvements located in Howell, MI. The JCMD General Partners personally
guarantee the loan. The note is in default. (*)
|
|
$
|
683,165
|
|
|
$
|
703,324
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantee
for the JCMD Mortgage loan payable in 240 monthly principal installments
plus interest. The loan is secured by a second deed of trust on real
property and improvements located in Howell, MI. The JCMD General Partners
personally guarantee the loan The note is in default. (*)
|
|
|
551,850
|
|
|
|
573,328
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
loan payable in monthly principal installments of $5,633 with a fixed
interest rate of 5.98% per annum. Note based on a 20 year
amortization. Note is secured by first priority security interest in the
business property of Colortek, Inc, the Company's wholly owned subsidiary.
The note is currently in default. (**)
|
|
|
644,129
|
|
|
|
670,602
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable in monthly payments of $1,857.54 per month including interest at
7.25% per annum, unsecured
|
|
|
24,218
|
|
|
|
32,689
|
|
|
|
|
|
1,903,362
|
|
|
|
1,979,943
|
|
|
Less
current portion
|
|
|
1,903,362
|
|
|
|
1,326,167
|
|
|
Long
term portion
|
|
$
|
-0-
|
|
|
$
|
653,776
|
|
(*) 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
|
|
$
|
1,903,362
|
|
|
2011
|
|
|
-
|
|
|
2012
|
|
|
-
|
|
|
2013
|
|
|
-
|
|
|
2014
and thereafter
|
|
|
-
|
|
|
Total
|
|
$
|
1,903,362
|
|
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE I- CAPITAL LEASE
OBLIGATIONS
Automobile
and equipment includes the following amounts for capitalized leases at September
30, 2009:
|
Automobile
and equipment
|
|
$
|
185,550
|
|
|
Less:
Accumulated depreciation and amortization
|
|
|
129,704
|
|
|
Net
book value:
|
|
$
|
55,846
|
|
Future
minimum lease payments required under the capital leases are as
follows:
|
Total
minimum lease payments
|
|
$
|
41,872
|
|
|
Less: amount
representing interest
|
|
|
4,295
|
|
|
Subtotal
|
|
|
37,577
|
|
|
Less
current portion
|
|
|
16,330
|
|
|
Long
term portion
|
|
$
|
21,247
|
|
Following is a schedule of the Company's
future minimum capital lease obligations: Year ended September
30,
|
2010
|
|
|
18,604
|
|
|
2011
|
|
|
12,331
|
|
|
2012
|
|
|
10,937
|
|
|
2013
|
|
|
—
|
|
|
Afte
r
|
|
|
—
|
|
|
Total
|
|
$
|
41
,
872
|
|
The present value of minimum capital
lease obligations amounts to $41,872.
NOTE J - WARRANTY
LIABILITY
The Company provides for estimated costs
to fulfill customer warranty obligations upon recognition of the related
reven
ue in accordance with
Accounting Standards Codification subtopic 460-10, Guarantees (“
ASC 460-10”
) as a charge in the current period cost
of goods sold. The range for the warranty coverage for the Company's products is
up to 18 to 36 months. The Company e
s
timates the anticipated future costs of
repairs under such warranties based on historical experience and any known
specific product information. These estimates are reevaluated periodically by
management and based on current information, are adjusted acco
r
dingly. The Company's determination of
the warranty obligation is based on estimates and as such, actual product
failure rates may differ significantly from previous
expectations.
A summary of our warranty activity for
the year ended September 30, 2009 is
as follows:
|
Balance, September 30,
2008:
|
|
$
|
126,983
|
|
|
Warranty
costs incurred, net during the year ended September 30,
2009
|
|
|
(60,767
|
)
|
|
|
|
|
|
|
|
Balance, September 30,
2009:
|
|
$
|
66,216
|
|
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE K - 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 o
f which 10,000,000 shares of par value
of $.001 each shall be preferred stock. As of September 30, 2009 and 2008, the
Company has issued and outstanding 3,500,000 shares of Series A preferred stock
and 17,835,091 and 16,545,091 shares of common stock, res
p
ectively.
On March 4, 2008, the Company issued
303,678 shares of Common Stock representing dividend payments (which the Company
elected to pay in Common Stock as opposed to cash) on the Series A Convertible
Preferred Stock for the three quarters ended Jun
e 30, 2007, September 30, 2007 and
December 31, 2007.
On May 29, 2009, the Company issued
785,000 shares of Common Stock representing dividend payments (which the Company
elected to pay in Common Stock as opposed to cash) on the Series A Convertible
Prefe
rred Stock for the
five quarters ended March 31, 2008, June 30, 2008, September 30, 2008, December
31, 2008 and March 31, 2009.
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 th
e 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 September 30, 2009 and 2008,
a to
t
al of $157,500 and $131,385 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, subjec
t 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 Prefer
red Stock being converted plus any
accrued but unpaid dividends thereon DIVIDED BY (ii) the Conversion Price of
$0.50 per share, subject to certain adjustments.
MANDATORY CONVERSION. Subject to certain
restrictions and limitations, five years after the is
suance 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 P
r
eferred 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
th
e 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 S
t
ock. 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE K - CAPITAL STOCK
(continued)
REGISTRATION RIGHTS. The Company is
required to file a registration statement with the SEC to affect the
regis
tration 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 in
i
tial 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.
As additional consideration for the
purchase of the Series A Preferred Stock, the Company granted to the holders
warrants entitling it to purchase 11,00
0,000 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
la
p
se 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 allocat
e
d 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
f
eature, 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
equit
y.
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 liquidatio
n 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
K - CAPITAL STOCK (CONTINUED)
PAYMENT OF DIVIDENDS. If declared by the
Company, dividends on the Series B Preferred Stock shall be on a pro rata basis
wit
h 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
September 30, 2009, the Company has 1,192,308 shares of Series B Preferred Stock
outstanding.
Common
stock
In March
2008, the Company issued 303,678 shares of common stock in payment of Series A
Preferred Stock dividend (see above).
In August
2008, the Company issued an aggregate of 478,333 shares of common stock in
exchange for services totally $117,500. These shares were valued at a weighted
average of $0.25 per share which represents the fair value of the services
received which did not differ materially from the value of the stock
issued.
On
October 20, 2008, the Company settled with Carter Securities for 300,000 shares
of the Company's common stock and the surrender of 490,000 warrants held by
Carter to purchase the Company’s common stock at $0.65 per share held by Carter
Securities, LLC.
On May
28, 2009, the Company issued 80,000 shares of the Company’s common stock in
exchange for services rendered. The shares of common stock were
valued at $24,000.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
K - CAPITAL STOCK (CONTINUED)
On May
29, 2009, the Company issued 785,000 shares of the Company’s common stock in
settlement of $393,750 of outstanding dividends payable to Series A Convertible
Preferred stockholders.
On June
17, 2009, the Company issued 125,000 shares of the Company’s common stock in
exchange for services rendered. The shares of common stock were
valued at $37,500.
NOTE
L - 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 September 30, 2009:
|
|
|
|
|
|
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Exercise
|
|
Number
|
|
|
Remaining Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Average
|
|
|
Price
|
|
Outstanding
|
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$
|
0.26
|
|
|
490,000
|
|
|
|
3.76
|
|
|
$
|
0.26
|
|
|
|
430,000
|
|
|
$
|
0.26
|
|
|
$
|
0.45
|
|
|
170,000
|
|
|
|
4.65
|
|
|
$
|
0.45
|
|
|
|
170,000
|
|
|
$
|
0.45
|
|
|
|
|
|
660,000
|
|
|
|
4.00
|
|
|
$
|
0.31
|
|
|
|
600,000
|
|
|
$
|
0.32
|
|
Transactions
involving options issued to employees are summarized as follows:
|
|
|
Weighted Average
Number of Shares
|
|
|
Price per
Share
|
|
|
Outstanding
at October 1, 2007
|
|
|
170,000
|
|
|
$
|
0.45
|
|
|
Granted
|
|
|
490,000
|
|
|
$
|
0.26
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding,
September 30, 2008
|
|
|
660,000
|
|
|
|
0.31
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding,
September 30, 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
L STOCK OPTIONS AND WARRANTS (CONTINUED)
In May
2008 the Company granted 490,000 employee stock options vesting over next one to
three years. The options grant the employee the right to purchase the Company's
common stock over the next 4 to 10 years at an exercise price of $0.26. The
options were valued using the Black-Scholes Option Pricing model with the
following assumptions: dividend yield: -0-%; volatility: 221.26%; risk free
interest rate: 2.73% to 3.85%. The determined fair value of the options of
$124,603 will be recognized as a period expense ratably with vesting rights. For
the year ended September 30, 2009, the Company recognized $111,745 in current
period operations.
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 September 30, 2009:
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted Average
Remaining
|
|
|
Weighted
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
Number
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Average
|
|
|
Exercise Price
|
|
Outstanding
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$
|
0.10
|
|
1,000,000
|
|
|
3.00
|
|
|
$
|
0.10
|
|
|
|
1,000,000
|
|
|
$
|
0.10
|
|
Transactions
involving options issued to non-employees are summarized as
follows:
|
|
|
Weighted Average
Number of Shares
|
|
|
Price per
Share
|
|
|
Outstanding
at October 1, 2007
|
|
|
1,395,000
|
|
|
$
|
0.39
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding,
September 30, 2008
|
|
|
1,395,000
|
|
|
|
0.39
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
or expired
|
|
|
(395,000
|
)
|
|
|
1.13
|
|
|
Outstanding,
September 30, 2009
|
|
|
1,000,000
|
|
|
$
|
0.10
|
|
Aggregate
intrinsic value of options outstanding and exercisable at September 30, 2009 and
2008 was $-0- and $350,000, respectively. Aggregate intrinsic value represents
the difference between the Company's closing price on the last trading day of
the fiscal period, which was $0.10 and $0.45 as of September 30, 2009 and 2008,
respectively, and the exercise price multiplied by the number of options
outstanding.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
L STOCK OPTIONS AND WARRANTS (CONTINUED)
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 September 30, 2009:
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
|
|
Weighted Average
Remaining
|
|
|
Weighted
Average
|
|
|
Weighted
|
|
|
|
|
|
|
|
Number
|
|
Contractual
|
|
|
Exercise
|
|
|
Number
|
|
|
Average
|
|
|
Exercise Price
|
|
Outstanding
|
|
Life (Years)
|
|
|
Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
|
$
|
0.30
|
|
100,000
|
|
|
1.94
|
|
|
$
|
0.30
|
|
|
|
100,000
|
|
|
$
|
0.30
|
|
Transactions
involving warrants are summarized as follows:
|
|
|
Weighted Average
Number of Shares
|
|
|
Price per
Share
|
|
|
Outstanding
at October 1, 2007
|
|
|
20,490,000
|
|
|
$
|
0.69
|
|
|
Granted
|
|
|
100,000
|
|
|
|
0.30
|
|
|
Exercised
|
|
|
(3,500,000
|
)
|
|
|
-
|
|
|
Canceled
or expired
|
|
|
(15,500,000
|
)
|
|
|
-
|
|
|
Outstanding,
September 30, 2008
|
|
|
1,590,000
|
|
|
|
0.54
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Canceled
or expired
|
|
|
(1,490,000
|
)
|
|
|
0.65
|
|
|
Outstanding,
September 30, 2009
|
|
|
100,000
|
|
|
$
|
0.30
|
|
During
the year ended September 30, 2009, the Company cancelled 490,000 warrants in
connection with a settlement of an outstanding debt obligation.
NOTE
M - 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
M - CONSOLIDATION OF VARIABLE INTEREST ENTITIES (CONTINUED)
Included
in the Company's consolidated balance sheets at September 30, 2009 and 2008 are
the following net assets of JCMD:
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
(JCMD)
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
17,616
|
|
|
$
|
117,726
|
|
|
Accounts
receivable, prepaid expenses
and
other current assets
|
|
|
19,400
|
|
|
|
19,400
|
|
|
Total
current assets
|
|
|
37,016
|
|
|
|
137,126
|
|
|
Property,
plant and equipment, net
|
|
|
1,241,824
|
|
|
|
1,273,824
|
|
|
Total
assets
|
|
|
1,278,840
|
|
|
|
1,410,950
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Current
portion of long term debt
|
|
|
1,235,015
|
|
|
|
1,276,652
|
|
|
Accounts
payable and accrued liabilities
|
|
|
82,075
|
|
|
|
—
|
|
|
Total
current liabilities
|
|
|
1,317,090
|
|
|
|
1,276,652
|
|
|
Long
term debt
|
|
|
|
|
|
|
-
|
|
|
Total
liabilities
|
|
|
1,317,090
|
|
|
|
1,276,652
|
|
|
Net
assets
|
|
$
|
(38,250
|
)
|
|
$
|
134,298
|
|
Consolidated
results of operations include the following:
|
|
|
2009
|
|
|
2008
|
|
|
Revenues
|
|
$
|
156,527
|
|
|
$
|
157,508
|
|
|
Cost
and expenses - real estate: Operating expenses
|
|
|
12,494
|
|
|
|
20,845
|
|
|
Depreciation
|
|
|
32,000
|
|
|
|
32,000
|
|
|
Interest,
net
|
|
|
174,582
|
|
|
|
69,241
|
|
|
Total
costs and expenses
|
|
|
219,076
|
|
|
|
122,086
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss) income-Real estate
|
|
$
|
(62,549
|
)
|
|
$
|
35,422
|
|
During
the year ended September 30, 2009 and 2008, JCMC Properties LLC issued cash
distributions to its members totaling $90,000 and $141,894,
respectively.
NOTE
N - 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
O - PROVISION FOR INCOME TAXES
The
provision (benefit) for income taxes from continued operations for the years
ended September 30, 2009 and 2008 consist of the following:
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(-
|
)
|
|
$
|
(-
|
)
|
|
State
|
|
|
(-
|
)
|
|
|
(-
|
)
|
|
|
|
|
(-
|
)
|
|
|
(-
|
)
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(-
|
)
|
|
|
(4,592
|
)
|
|
State
|
|
|
(-
|
)
|
|
|
(-
|
)
|
|
|
|
|
(-
|
)
|
|
|
(4,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit)
provision for income taxes, net
|
|
$
|
(-
|
)
|
|
$
|
(4,592
|
)
|
The
difference between income tax expense computed by applying the federal statutory
corporate tax rate and actual income tax expense is as follows:
|
|
|
2009
|
|
|
2008
|
|
|
Statutory
federal income tax rate
|
|
|
15.0
|
%
|
|
|
15.0
|
%
|
|
State
income taxes and other
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Deferred
income taxes result from temporary differences in the recognition of income and
expenses for the financial reporting purposes and for tax purposes. The tax
effect of these temporary differences representing deferred tax asset and
liabilities result principally from the following:
|
|
|
2009
|
|
|
2008
|
|
|
Net
Short Term Deferred Tax Asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
985,000
|
|
|
|
754,320
|
|
|
Inventory
reserve
|
|
|
98,000
|
|
|
|
75,485
|
|
|
Warranty
reserve
|
|
|
22,000
|
|
|
|
37,260
|
|
|
Valuation
allowance
|
|
|
(1,105,000
|
)
|
|
|
(678,794
|
)
|
|
Net
Short Term Deferred Tax Asset
|
|
|
—
|
|
|
|
188,271
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income tax asset
|
|
$
|
—
|
|
|
$
|
188,271
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Long Term Deferred Tax Asset (Liability)
|
|
$
|
—
|
|
|
|
—
|
|
|
Depreciation
|
|
|
—
|
|
|
|
—
|
|
|
Goodwill
impairment
|
|
|
—
|
|
|
|
—
|
|
|
Valuation
allowance
|
|
|
—
|
|
|
|
—
|
|
|
Net
Long Term Deferred Tax Asset (Liability)
|
|
$
|
—
|
|
|
|
—
|
|
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
O - PROVISION FOR INCOME TAXES (continued)
During
the year ended September 30, 2008, the Company filed Federal net operating loss
carryback returns to recover taxable income and prior taxes paid of $137,375 and
$50,896 for the tax years ended September 30, 2006 and 2005,
respectively.
As of
September 30, 2009, the Company had a net operating loss carryforwards available
to offset future taxable income through 2029. A valuation allowance has been
established as a reserve against the deferred tax assets arising from the future
benefit of any carryforward net operating losses and other net temporary
differences since it cannot, at this time, be considered more likely than not
that their benefit will be realized in the future.
NOTE
P - ECONOMIC DEPENDENCY
During
the years ended September 30, 2009 and 2008, revenues were derived from
the Following customers:
|
|
|
Revenue
|
|
|
Accounts
Receivable
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Customer
A
|
|
|
28.4
|
%
|
|
|
23.9
|
%
|
|
|
20.3
|
%
|
|
|
46.0
|
%
|
|
Customer
B
|
|
|
28.4
|
%
|
|
|
23.7
|
%
|
|
|
22.6
|
%
|
|
|
20.4
|
%
|
|
Customer
C
|
|
|
17.4
|
%
|
|
|
13.9
|
%
|
|
|
35.3
|
%
|
|
|
8.0
|
%
|
|
Customer
D
|
|
|
13.3
|
%
|
|
|
12.3
|
%
|
|
|
5.9
|
%
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
87.5
|
%
|
|
|
73.8
|
%
|
|
|
84.1
|
%
|
|
|
80.4
|
%
|
|
|
|
Purchases
|
|
|
Accounts
Payable
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Supplier
1
|
|
|
8.7
|
%
|
|
|
20.0
|
%
|
|
|
6.2
|
%
|
|
|
18.70
|
%
|
|
Supplier
2
|
|
|
8.3
|
%
|
|
|
11.0
|
%
|
|
|
5.4
|
%
|
|
|
25.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
17.0
|
%
|
|
|
31.0
|
%
|
|
|
11.6
|
%
|
|
|
43.7
|
%
|
NOTE
Q - COMMITMENTS AND CONTINGENCIES
Related party lease
obligations and transactions
On
January 1, 2005, the Company entered into a twenty-two month real property lease
ended October 31, 2006 with a related party (Michael Winzkowski, the Company's
President & CEO) for use of general offices located in the city of Palm
Harbor, Florida. During the year ended September 30, 2009, the
Company terminated the Palm Harbor, Florida lease.
On March
5, 2004, MWW and MWWLLC entered into five year real property lease, beginning on
January 1, 2005, with a related party (JCMD Properties LLC: See Note K) for use
of warehouse and general offices located in the city of Howell,
Michigan.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE
Q - COMMITMENTS AND CONTINGENCIES (continued
Following
is a schedule of the Company's annual related party operating lease commitments
for the coming three years:
Year
ended September 30,
|
2009
|
|
$
|
161,715
|
|
|
2010
|
|
|
205,200
|
|
|
2011
|
|
|
205,200
|
|
|
2012
|
|
|
205,200
|
|
|
2013
|
|
|
—
|
|
|
After
|
|
|
—
|
|
|
Total
|
|
$
|
777,345
|
|
During
the years ended September 30, 2009 and 2008, the Company incurred rent expense
of $80,700 and $79,800, respectively.
Employment and Consulting
Agreements
The
Company has employment agreements with all of its employees. In addition to
salary and benefit provisions, the agreements include non-disclosure and
confidentiality provisions for the protection of the Company's proprietary
information.
The
Company has consulting agreements with outside contractors to provide marketing
and financial advisory services. The Agreements are generally for a term of 12
months from inception and renewable automatically from year to year unless
either the Company or Consultant terminates such engagement by written
notice.
Litigation
The
Company is 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.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
R - 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 year ended September 30, 2009 and 2008 concerning principal geographic
areas is presented below according to the area where the activity is taking
place.
|
|
|
September 30,
2009
|
|
|
September 30,
2008
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
United
States
|
|
$
|
3,717,089
|
|
|
$
|
6,432,109
|
|
|
Germany
|
|
|
790,852
|
|
|
|
1,873,552
|
|
|
Total
revenue
|
|
|
4,507,941
|
|
|
|
8,305,661
|
|
|
GROSS
PROFIT (LOSS)
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
1,561,108
|
|
|
|
2,375,368
|
|
|
Germany
|
|
|
(46,763
|
)
|
|
|
286,226
|
|
|
Total
gross profit
|
|
|
1,514,345
|
|
|
|
2,661,594
|
|
|
OPERATING
LOSS:
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
(1,975,081
|
)
|
|
|
(1,609,121
|
)
|
|
Germany
|
|
|
(719,753
|
)
|
|
|
(548,221
|
)
|
|
Total
operating (loss)
|
|
$
|
(2,694,834
|
)
|
|
$
|
(2,157,342
|
)
|
|
|
|
September 30,
2009
|
|
|
September 30,
2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
4,758,942
|
|
|
$
|
7,093,088
|
|
|
Germany
|
|
|
363,185
|
|
|
|
567,259
|
|
|
Total
asset
|
|
|
5,122,127
|
|
|
|
7,660,347
|
|
|
CAPITAL
EXPENDITURES
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
-
|
|
|
|
353,994
|
|
|
Germany
|
|
|
32,749
|
|
|
|
133,273
|
|
|
Total
capital expenditures
|
|
$
|
32,749
|
|
|
$
|
487,267
|
|
NOTE
S - 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:
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,
2009
NOTE
S - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
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.
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 September 30, 2009:
|
|
|
|
|
Fair Value Measurements at September 30, 2009 Using:
|
|
|
|
|
September 30,
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
|
|
$
|
82,075
|
|
|
|
$
|
82,075
|
|
|
|
|
Lines
of credit
|
|
|
739,832
|
|
|
|
|
739,832
|
|
|
|
|
Notes
payable and capital leases
|
|
$
|
1,940,939
|
|
|
|
$
|
1,940,939
|
|
|
|
NOTE T - SUBSEQUENT
EVENTS
Subsequent
events have been evaluated through January 12, 2010, a date that the financial
statements were issued. All appropriate subsequent event disclosures,
if any have been made in notes to our Consolidated Financial
Statements.
In
October 2009, the Company issued an aggregate of 580,000 share of its common
stock in exchange for services rendered.
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE
U – RESTATEMENT
The
accompanying consolidated financial statements for the year ended September 30,
2008 has been restated to correct errors relating to the accounting treatment
of the warrants issued in connection with the Series A Convertible
Preferred Stock (the “Preferred Stock”) and dividend classification of our
Preferred Stock. The effect of these adjustments is a
reclassification from interest expense to preferred stock dividend on the face
of the Statements of Operations. There was no effect on the balance sheet or
cash flows from operating, investing or financing for either period, except for
line items changes within each category.
The
following tables summarize the effects of these adjustments on the Company’s
consolidated statements of operations and cash flows for the year
ended September 30, 2008:
Consolidated
Statement of Operations
For the
Year Ended September 30, 2008
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
Reference
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
8,305,661
|
|
|
$
|
|
|
|
|
$
|
8,305,661
|
|
|
Cost
of sales
|
|
|
5,644,067
|
|
|
|
|
|
|
|
|
5,644,067
|
|
|
Gross
profit
|
|
|
2,661,594
|
|
|
|
-
|
|
|
|
|
2,661,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
4,818,937
|
|
|
|
-
|
|
|
|
|
4,818,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(2,157,343
|
)
|
|
|
|
|
|
|
|
(2,157,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
costs
|
|
|
(492,878
|
)
|
|
|
315,000
|
|
a
|
|
|
(177,878
|
)
|
|
Other
income (expense)
|
|
|
90,863
|
|
|
|
|
|
|
|
|
90,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before income taxes
|
|
|
(2,559,358
|
)
|
|
|
315,000
|
|
|
|
|
(2,244,358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
(4,592
|
)
|
|
|
-
|
|
|
|
|
(4,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss before minority interest
|
|
|
(2,554,766
|
)
|
|
|
315,000
|
|
|
|
|
(2,239,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from minority interest
|
|
|
(35,422
|
)
|
|
|
|
|
|
|
|
(35,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,590,188
|
)
|
|
$
|
315,000
|
|
|
|
$
|
(2,275,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividend
|
|
|
-
|
|
|
|
(315,000
|
)
|
a
|
|
|
(315,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
|
$
|
(2,590,188
|
)
|
|
$
|
-
|
|
|
|
$
|
(2,590,188
|
)
|
MARKETING
WORLDWIDE CORPORATION
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
(Restated)
NOTE
U – RESTATEMENT (continued)
Consolidated
Statement of Cash Flows
For the
Year Ended September 30, 2008
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
Reference
|
|
As Restated
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
|
$
|
(2,590,188
|
)
|
|
$
|
315,000
|
|
a
|
|
$
|
(2,275,188
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
382,470
|
|
|
|
|
|
|
|
|
382,470
|
|
|
Common
stock issued for services rendered
|
|
|
47,500
|
|
|
|
|
|
|
|
|
47,500
|
|
|
Change
in fair value of extended expiry terms
|
|
|
58,188
|
|
|
|
|
|
|
|
|
58,188
|
|
|
Amortization
of deferred financing costs
|
|
|
133,381
|
|
|
|
|
|
|
|
|
133,381
|
|
|
Minority
interest
|
|
|
35,422
|
|
|
|
|
|
|
|
|
35,422
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(458,800
|
)
|
|
|
|
|
|
|
|
(458,800
|
)
|
|
Inventory
|
|
|
(249,494
|
)
|
|
|
|
|
|
|
|
(249,494
|
)
|
|
Other
assets
|
|
|
245,293
|
|
|
|
|
|
|
|
|
245,293
|
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
70,609
|
|
|
|
(315,000
|
)
|
a
|
|
|
(244,391
|
)
|
|
Net
cash used in operating activities
|
|
|
(2,325,619
|
)
|
|
|
-
|
|
|
|
|
(2,325,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(487,267
|
)
|
|
|
|
|
|
|
|
(487,267
|
)
|
|
Net
cash used in investing activities
|
|
|
(487,267
|
)
|
|
|
-
|
|
|
|
|
(487,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
by non controlling entity
|
|
|
(141,893
|
)
|
|
|
|
|
|
|
|
(141,893
|
)
|
|
Proceeds
from common stock subscription
|
|
|
2,525,000
|
|
|
|
|
|
|
|
|
2,525,000
|
|
|
Repayments
of lines of credit
|
|
|
(600,000
|
)
|
|
|
|
|
|
|
|
(600,000
|
)
|
|
Repayments
of notes payable and capital leases
|
|
|
(152,691
|
)
|
|
|
|
|
|
|
|
(152,691
|
)
|
|
Net
cash provided by financing activities
|
|
|
1,630,416
|
|
|
|
-
|
|
|
|
|
1,630,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of currency rate change on cash:
|
|
|
(84,772
|
)
|
|
|
|
|
|
|
|
(84,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash
|
|
|
(1,267,242
|
)
|
|
|
|
|
|
|
|
(1,267,242
|
)
|
|
Cash
at beginning of period
|
|
|
2,270,313
|
|
|
|
|
|
|
|
|
2,270,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
1,003,071
|
|
|
$
|
-
|
|
|
|
$
|
1,003,071
|
|
(a)
reclassify beneficial conversion feature and dividends accrued from financing
costs to preferred stock dividend
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
None.
ITEM 9A.
CONTROLS AND PROCEDURES.
Not
applicable
ITEM 9A
(T)
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURE
We
maintain disclosure controls and procedures, as defined in Rule 13a-15(e)
promulgated under the Exchange Act that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure. We carried out an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of September
30, 2009. Based on the evaluation of these disclosure controls and procedures,
and in light of the material weaknesses found in our internal controls, the
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not effective.
MANAGEMENT
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. Because of its inherent limitations, internal control over
financial reporting is not intended to provide absolute assurance that a
misstatement of our financial statements would be prevented or detected. Under
the supervision of our Chief Executive Officer and Chief Financial Officer, the
Company conducted an evaluation of the effectiveness of our internal control
over financial reporting as of September 30, 2008 using the criteria established
in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
A
material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis. In its assessment of the
effectiveness of internal control over financial reporting as of September 30,
2009, we determined that control deficiencies existed that constituted material
weaknesses, as described below:
|
|
O
|
lack
of documented policies and
procedures;
|
|
|
O
|
we
have no audit committee;
|
|
|
O
|
there
is a risk of management override given that our officers have a high
degree of involvement in our day to day
operations.
|
|
|
O
|
there
is no policy on fraud and no code of ethics at this time, though we plan
to implement such policies in fiscal 2010;
and
|
|
|
O
|
there
is no effective separation of duties, which includes monitoring controls,
between the members of management.
|
Management
is currently evaluating what steps can be taken in order to address these
material weaknesses.
Accordingly,
we concluded that these control deficiencies resulted in a reasonable
possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis by the company's
internal controls.
As a
result of the material weaknesses described above, Chief Executive Officer and
Chief Financial Officer has concluded that the Company did not maintain
effective internal control over financial reporting as of September 30, 2009
based on criteria established in Internal Control—Integrated Framework issued by
COSO.
CHANGES
IN INTERNAL CONTROLS
During
the fiscal quarter ended September 30, 2009, there were no changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B.
OTHER INFORMATION.
None.
PART
III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Michael
Winzkowski, age 58, and James C. Marvin, age 54, are the directors of MWW. Both
were appointed to MWW's board of directors in October 2003 in connection with
the purchase of MWWLLC. In October 2003, both men were elected to serve until
the next annual meeting of the stockholders. Mr. Winzkowski was appointed by the
board of directors to serve as Chief Executive Officer, President and Secretary.
Mr. Marvin was appointed by the board of directors to serve as Chief Operating
Officer and Chief Financial Officer. The board made these appointments in
October 2003. No member of the board is independent since both directors are
employees of MWW. MWW does not have a standard arrangement for the compensation
of its directors. At present, MWW's directors serve without compensation for
acting as directors and do not receive any special compensation for committee
participation or special assignments, but do receive salaries and other benefits
as employees of MWW.
MWW does
not have a majority of independent directors, have a separately designated audit
committee nor a person designated as an audit committee member financial expert.
MWW does not have a majority of independent board members, separately designated
audit committee or an audit committee member financial expert because the cost
of identifying, interviewing, appointing, educating, and compensating such
persons would outweigh the benefits to its stockholders at the present time. If
MWW is successful in its efforts to secure additional capital, the resources may
be available to appoint additional directors.
Mr.
Winzkowski and Mr. Marvin have had written employment agreements with MWWLLC
since March 23, 2003. The material terms of their employment agreements are set
forth in the section below titled Executive Compensation.
In August
1997, Mr. Winzkowski (age 58) became Director of the Inalfa Industries Global
Aftermarket Operations, CEO of North America and a member of the Board of
Directors. In September 2000, Mr. Winzkowski left his position with Inalfa to
serve as the President of Marketing Worldwide. Mr. Winzkowski has served as
Chief Executive Officer, President, Secretary and Director of MWW Corporation
since October 2003. Mr. Winzkowski holds a degree in chemical Bio-Engineering
and in addition studied Business, Marketing and Accounting
Administration.
He is an
accomplished commercial pilot with close to 10,000 Hrs of flight experience,
holding European and US Commercial, Air Transport Pilot and Instrument pilot
certificates and a variety of Turboprop and Business Jet type ratings along with
his single and multi engine ratings. Mr. Winzkowski is a member and manager of
JCMD Properties LLC. MWW moved into a new facility in Howell, Michigan as its
principal business location, which was built to suit MWW's requirements by JCMD
Properties LLC under a long term lease agreement. (See Certain Relationships and
Related Transactions). JCMD LLC was formed in the state of Michigan on December
31, 2003 as a property development and management company.
DIRECTORS,
EXECUTIVE OFFICERS
Mr.
Winzkowski and Mr. Marvin have been the members and managers of JCMD Properties
LLC since its formation.
In August
1997 Mr. Marvin (age 54) became the COO and a member of the Board of Directors
of the North American Aftermarket entity of Inalfa Industries. In November 2000,
Mr. Marvin became the Managing Director of Operations and co-owner of Marketing
Worldwide. Since October 2003, James C. Marvin has served as Chief Operating
Officer, Chief Financial Officer and Director of MWW Corporation. Mr. Marvin
attended Lake Superior and Cleary Universities majoring in Business and obtained
degrees in Business Accounting and Business Administration. Mr. Marvin is a
member and manager of JCMD Properties LLC. MWW moved into a new facility in
Howell, Michigan as its principal business location, which was built to suit
MWW's requirements by JCMD Properties LLC under a long term lease agreement.
(See Certain Relationships and Related Transactions) JCMD LLC was formed in the
state of Michigan on December 31, 2003 as a property development and management
company. Mr. Winzkowski and Mr. Marvin have been the members and managers of
JCMD LLC since its formation. Effective October, 2009, Mr. Marvin is no longer
functioning as Chief Financial Officer of MWW. He continues as Chief
Operating Officer and Director of MWW.
On
October 10, 2009, Marketing Worldwide Corporation (the “Company”) appointed
James E. Davis as the Company’s Chief Financial Officer. Mr. Davis replaces
James Marvin, the Company’s former Chief Financial Officer, who will continue to
serve as the Company’s Chief Operating Officer and member of the Company’s board
of directors. James Davis, 54,
brings 30 years of
experience in different positions in the financial and automotive sectors,
including public accounting as Audit Manager at Coopers & Lybrand. In this
capacity he audited middle market companies’ financial reporting and assisted in
taking privately owned companies public. From 1999 through 2008, Mr. Davis was
the Chief Financial Officer for the Epoch Restaurant Group and Wisne
Holdings. The Epoch Restaurant Group owned and operated six
restaurants and a full service catering company. Wisne Holdings was a real
estate and investment entity specializing in a multitude of investments for
profit. The Wisne Family created Wisne Holdings after selling
Progressive Tool & Industry Company, a tier 1 automotive supplier, where Mr.
Davis was the financial controller following his engagement with Coopers &
Lybrand. As Controller for Progressive Tool & Industry Company, Mr. Davis
was responsible for new business development, banking and investor relations and
financial planning and reporting. From January 2008 through August 2009,
Mr. Davis focused on troubled companies and participated in restructuring and
turnaround efforts through CFO Associates, LLC.
The
following individuals are expected to make significant a contribution to the
business.
In May
2006 Mr. Scott Turpin joined the Company as Director of Engineering and Product
Development. He has held positions as a project engineer and project manager for
companies such as Magna Automotive-Decoma in Specialty Vehicle Engineering, Lear
Corporation for the development of several Ford F150 products and has directed
the design and development for three successive product launches at Johnson
Controls. Mr. Turpin holds a B.S, in mechanical engineering.
Mr.
Smiarowski is the President of Colortek. He has been involved in the automotive
industry for 30 years and is currently responsible for sales, operations,
engineering, sourcing and supplier relations at Colortek and AutoFX. He has held
positions as paint operations and QA lab manager for ITT United Plastic Division
for exterior automotive plastics. He was instrumental at CFG Coatings in
Cincinnati to establish a tier one relationship with PACCAR for their Peterbuilt
line of commercial vehicles. He has established two aftermarket automotive
accessory companies and at Colortek managed Tier II and Port Programs for Ford,
Chrysler, GM and Toyota, in both manufacturing and painting of automotive
exterior plastics and has set up from scratch four paint production
facilities.
In June
2007 Mr. Scott Wolin joined the Company as Director of Sales and Marketing.
Scott has over 21 years of experience in the automotive industry holding various
positions in senior management in Sales, Marketing, Operations and Finance. He
is actively involved within the SEMA organization and was the PRO Select Council
chairman from 2003-2005. Mr. Wolin graduated from the University of Minnesota
with a degree in Sociology of Law.
Gerold
Haas is the President of Modelworxx GmbH. Mr. Haas has longstanding
relationships with most European domestic and foreign automobile manufacturers,
especially with BMW, Mini and Rolls Royce. Mr. Haas involvement in the European
automobile industry include his participation in the design process of the BMW 5
Series, 6 Series, X5, Z4, Mini Traveler and the Rolls Royce Coupe model. His
team also designed and realized for production the Mercedes M Class off-road kit
and conducted the complete engineering and realization for production for the
Porsche Cayenne off-road kit. As a design studio manager he has lead design and
development teams for the Ferrari 513 BB, 308, 412 and Mondial convertible and
managed the manufacturing of the L&R Cobra and L&R Silver Falcon sport
cars.
Rainer
Poertner, Executive Vice President, has served as a consultant to the Company
since its inception. Mr. Poertner has a 22-year record of accomplishments in
founding, leading and consulting with private and publicly traded companies in
the USA and Europe. As founder, CEO, Chairman and majority shareholder of two
publicly traded companies; he was responsible for managing the companies'
financial, technical and business development and secured funding for
acquisitions and corporate working capital purposes through a network of private
investors and US and overseas investment banking firms.
Section
16(a) Beneficial Ownership Reporting Compliance
MWW is
not aware of any reporting person that failed to file on a timely basis, reports
required by Section 16(a) of the Exchange Act during the most recent fiscal
year.
Code of
Ethics
MWW does
not have a code of ethics but intends to implement a code of ethics in
2009.
ITEM
11. EXECUTIVE COMPENSATION.
The
Summary Compensation Table below identifies the compensation of Michael
Winzkowski and James Marvin. Mr. Winzkowski and Mr. Marvin are the only MWW
executives with total annual salary and bonus that exceeded $100,000 during the
last two years. Mr. Winzkowski and Mr. Marvin entered written employment
agreements with MWW on March 23, 2003 for the four year periods from October 1,
2003 through September 30, 2007. During the first year of the employment term,
Mr. Winzkowski and Mr. Marvin each earn $120,000 as their base salary; receive a
car allowance and discretionary bonuses. MWW and its predecessor MWWLLC paid no
bonuses to Mr. Winzkowski and Mr. Marvin during 2006, 2007, or 2008. Neither Mr.
Winzkowski nor Mr. Marvin earned in excess of $100,000 in the fiscal year ending
September 30, 2009.
SUMMARY COMPENSATION TABLE
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
|
|
|
|
|
|
Nonequity
|
|
qualified
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
incentive
|
|
deferred
|
|
All
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
plan
|
|
compensation
|
|
other
|
|
|
|
|
Position
|
|
Year
|
|
Salary($)
|
|
Bonus($)
|
|
Awards($)
|
|
Awards($)
|
|
compensation($)
|
|
earnings($)
|
|
compensation($)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
|
|
2009
|
|
|
70,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
70,000
|
|
|
Winzkowski
|
|
2008
|
|
|
130,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
130,000
|
|
|
CEO
|
|
2007
|
|
|
130,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
130,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
|
|
2009
|
|
|
97,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
97,000
|
|
|
Marvin
|
|
2008
|
|
|
130,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
130,000
|
|
|
COO
|
|
2007
|
|
|
120,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
120,000
|
|
MWW did
not make any option or SAR grants in its last fiscal year and has not adopted a
long term incentive compensation plan.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The
following table sets forth information regarding the beneficial ownership of our
common stock and preferred stock as of December 31, 2008, by: o each person
known by us to be the beneficial owner of more than 5% of our outstanding shares
of common stock; o each of our officers and directors; and o all our officers
and directors as a group.
Unless
otherwise indicated, all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them.
Security Ownership of
Certain Beneficial Owners and Management
|
(1)
|
|
(2)
|
|
(3)
|
|
(4)
|
|
|
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Class**
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
common stock
|
|
Michael Winzkowski
PO Box 2462,
Palm Harbor, FL 34682-2462
Mgmt.
|
|
3,914,800 shares (a)
(direct)
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
common stock
|
|
James C. Marvin
4772 Schafer Road
|
|
2,032,400 shares (b)
(direct)
|
|
13
|
%
|
|
$.001 par value
common stock
|
|
Pinckney, MI 48169
Mgmt.
|
|
200,000 Options
(direct)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
Common stock
|
|
Vision Opportunity Master Fund Ltd.
20th West 55th
New York, NY 10019
|
|
5,000,000 shares (c)
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
Common stock
|
|
Bonnie A. Hollister
366 Harvard St.
Howell, MI 48843
|
|
2,032,400 shares
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
common stock
|
|
Wendover Investments Limited*
5th Floor, Zephyr House,
|
|
4,000 shares
(direct)
|
|
0.025
|
%
|
|
$.001 par value
common stock
underlying stock
options
|
|
Mary Street,
Grand Cayman, Cayman Islands
BWI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
common stock
|
|
Rainer Poertner
730 Oxford Avenue
|
|
1,732,309 shares
(direct)
|
|
9.4
|
%
|
|
$.001 par value
common stock
underlying stock
option
|
|
Marina del Rey, CA 90292
Mgmt.
|
|
400,000 options
(direct)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$.001 par value
common stock
|
|
All directors and officers as a group (2)
individuals)
|
|
5,947,200
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible
Preferred Stock
|
|
Vision Opportunity Master Fund, Ltd.(c)
20 West 55th Street, 5th Floor
New York, NY 10019
|
|
3,500,000
|
|
100
|
%
|
* Wendover Investments Limited owns 4,000 shares of common stock and a common
stock purchase warrant to acquire up to 1,000,000 shares of common stock at
purchase price of $.50 per share. Mr. Robert Lyons is the principal of Wendover
Investments Limited. Under Rule 13(d) (1) a person is deemed the beneficial
owner if that person has the right to acquire the securities within 60 days
pursuant to options, warrants, conversion privileges or other
rights.
**
Percentages are based upon the amount of outstanding securities at December 31,
2009, of 17,835,091 shares, plus for each person or group, any securities that
person or group has the right to acquire within 60 days pursuant to options,
warrants, conversion privileges or other rights.
(a) Does
not include 1,000 shares purchased by Ms. Johanna Winzkowski in May 2004, the
mother of Michael Winzkowski. Michael Winzkowski disclaims any beneficial
ownership of the shares referred to in the preceding sentence.
(b) Does
not include 10,000 shares purchased by Ms. Joanne Marvin or 770 shares purchased
by Mr. Scott F. Marvin in May 2004, the mother and brother of James C. Marvin,
respectively. James C. Marvin disclaims any beneficial ownership of the shares
referred to in the preceding sentence.
(c) Adam
Benowitz, in his capacity as Managing Member of Vision Opportunity Master Fund,
Ltd has the ultimate dispositive power over the securities. Under Rule 13(d)(1)
a person is deemed the beneficial owner if that person has the right to acquire
the securities within 60 days pursuant to options, warrants, conversion
privileges or other rights. In April 2007, MWW sold 3,500,000 shares of the
Series A Convertible Preferred Stock and certain Warrants to Vision Opportunity
Master Fund, Ltd. for $3,500,000. The Series A Warrants allow the holder to
purchase up to 3,500,000 shares of common stock at a price of $.70 per share
until April 23, 2012. The Series B Warrants allow the holder to purchase up to
3,500,000 shares of common stock at a price of $.85 per share until April 23,
2012. The Series C Warrants allow the holder to purchase up to 3,500,000 shares
of common stock at a price of $1.20 per share until April 23, 2012. The Series J
Warrants allow the holder to purchase up to 5,000,000 shares of common stock at
a price of $.70 per share until June 23, 2008. Provided the Series J Warrants
have been exercised, the Series D Warrants allow the holder to purchase up to
2,500,000 shares of common stock at a price of $.70 per share until June 23,
2012; the Series E Warrants allow the holder to purchase up to 2,500,000 shares
of common stock at a price of $.85 per share until June 23, 2012; and the Series
F Warrants allow the holder to purchase up to 2,500,000 shares of common stock
at a price of $1.20 per share until April 23, 2012. All of the Warrants sold to
Vision Opportunity Master Fund, Ltd. contain anti-dilution protection and other
rights. Further, the transaction documents provided that Vision Opportunity
Master Fund, Ltd. may not acquire common stock upon conversion of the Series A
Convertible Preferred Stock or upon exercise of any warrants to the extent that,
upon conversion or exercise the number of shares of common stock beneficially
owned would exceed 9.99% of the issued and outstanding share of common stock of
MWW. On September 27, 2007, the Fund entered into Amendment No.1 (the "Series F
Amendment"), by and among the Issuer and the Fund whereby the Series
F Warrant exercise price was reduced to $0.01 per share. All other terms and
provisions of the Series F Warrant remain unmodified and in full force and
effect. On September 27, 2007, the Fund entered into Amendment No. 1 (the
"Series J Amendment"), by and among the Issuer and the Fund whereby the Series J
Warrant exercise price was reduced to $0.50 per share and the Ownership Cap and
Exercise Restriction of 9.99% was deleted in its entirety. All other terms and
provisions of the Series J Warrant remain unmodified and in full force and
effect. Subsequent to the Series J Amendment, the Fund exercised the Series J
Warrant for four million (4,000,000) shares of Common Stock of the Issuer at an
exercise price of $0.50 leaving the Series J Warrant with one million
(1,000,000) shares of Common Stock available for exercise.
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
September 30, 2009, the Company has 1,192,308 shares of Series B Preferred Stock
outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTORS INDEPENDENCE.
On
October 1, 2003, MWW acquired 100% of the membership interests in Marketing
Worldwide LLC, a Michigan limited liability company ("MWWLLC"), in a tax-free
exchange whereby MWWLLC became a wholly owned subsidiary of MWW. Under the
Purchase Agreement, the three selling members of MWWLLC were issued 9,600,000
shares of common stock. Michael Winzkowski received 4,564,800 shares, James C.
Marvin received 4,564,800 shares and Gregory G. Green received 470,400 shares of
MWW under the Purchase Agreement. Immediately following the transaction, Michael
Winzkowski and James C. Marvin became the officers and directors of MWW. Mr.
Winzkowski and Mr. Marvin serve as members of MWW's board of directors without
compensation.
Michael
Winzkowski, James C. Marvin, Gregory G. Green, Richard O. Weed and Rainer
Poertner are defined as promoters by the Securities Act Rules since each
directly or indirectly took initiative in founding and organizing the business
of MWW. Mr. Weed served as the sole Director, President, Secretary and Treasurer
of MWW from its inception on July 21, 2003 until the effective date of the
acquisition of MWWLLC on October 1, 2003. Mr. Weed was granted a Stock Option to
purchase 250,000 shares of MWW common stock at $1.00 per share that expires
December 31, 2008 as an incentive to represent MWW as legal counsel. Mr. Weed is
a partner in Weed & Co. LLP and has provided legal services to MWW under a
Fee Agreement since August 15, 2003. Mr. Poertner has provided consulting
services to MWWLLC since April 2003 and to MWW since August 2003. Under the
Consulting Agreement with MWW dated July 1, 2005, Mr. Poertner receives $10,000
per month plus expenses, which has been increased to $15,000 per month in April
of 2007.
During
the next twelve months, MWW will make lease payments under a five-year lease
with a landlord, JCMD Properties LLC that is owned by James Marvin and Michael
Winzkowski. The monthly lease payments are $17,000 per month. MWW pays rent to
JCMD Properties LLC, a company owned and controlled by Michael Winzkowski and
James C. Marvin, and unconditionally guaranteed a $631,000 loan to JCMD
Properties LLC by the U.S. Small Business Administration that was used by JCMD
Properties LLC to finance its ownership of the land and buildings occupied
by MWW. While the monthly rental obligation of MWW to JCMD Properties LLC is
currently consistent with lease rates for similarly situated property, the
nature of the relationship among MWW, JCMD Properties LLC, Michael Winzkowski,
and James C. Marvin creates a potential conflict of interest that investors
should fully consider, recognize, and understand.
MWW does
not have any independent directors.
ITEM
14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
The
following table sets forth fees billed to us by our auditors during the fiscal
years ended September 30, 2009 and 2008 for: (i) services rendered for the audit
of our annual financial statements and the review of our quarterly financial
statements, (ii) services by our auditor that are reasonably related to the
performance of the audit or review of our financial statements and that are not
reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for
services rendered.
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
(i)
|
|
Audit
Fees
|
|
$
|
160,393
|
|
|
$
|
194,420
|
|
|
(ii)
|
|
Audit
Related Fees
|
|
|
—
|
|
|
|
12,000
|
|
|
(iii)
|
|
Tax
Fees
|
|
|
7,500
|
|
|
|
10,000
|
|
|
(v)
|
|
All
Other Fees
|
|
|
—
|
|
|
|
—
|
|
|
Total
fees
|
|
|
|
$
|
167,893
|
|
|
$
|
216,420
|
|
AUDIT
FEES. Consists of fees billed for professional services rendered for the audit
of the Company's consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by RBSM LLP in connection with statutory and
regulatory filings or engagements.
AUDIT-RELATED
FEES. Consists of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of MWW's
consolidated financial statements and are not reported under "Audit Fees." There
were no Audit-Related services provided in fiscal 2009 or 2008.
TAX FEES.
Consists of fees billed for professional services for tax compliance, tax advice
and tax planning.
ALL OTHER
FEES. Consists of fees for products and services other than the services
reported above.
POLICY ON
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
The
Company currently does not have a designated Audit Committee, and accordingly,
the Company's Board of Directors' policy is to pre-approve all audit and
permissible non-audit services provided by the independent auditors. These
services may include audit services, audit-related services, tax services and
other services. Pre- approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The independent auditors and
management are required to periodically report to the Company's Board of
Directors regarding the extent of services provided by the independent auditors
in accordance with this pre-approval, and the fees for the services performed to
date. The Board of Directors may also pre-approve particular services on a
case-by-case basis.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
See the
financial statements listed in Item 8.
(b)
Exhibits
(a)
EXHIBIT(S) DESCRIPTION
(3)(i)
Certificate of Incorporation * (3)(ii) Bylaws *
(4)(1)
Form of Common Stock Certificate *
(4)(2)
Common Stock Purchase Warrant with Wendover Investments Limited *
(4)(3)
Stock Option Agreement with Richard O. Weed *
(5)
Opinion on Legality *****
(10)(1)
Consulting Agreement with Rainer Poertner ***
(10)(2)
Fee Agreement with Weed & Co. LLP *
(10)(3)
Purchase Agreement MWW and MWWLLC *
(10)(4)
Amendment to Purchase Agreement between MWW and MWWLLC **
(10)(5)
Employment Agreement with CEO Michael Winzkowski **
(10)(6)
Employment Agreement with COO/CFO James Marvin **
(10)(7)
Loan Agreement with Key Bank N.A. ***
(10)(8)
Amendment to Consulting Agreement with Rainer Poertner ***
(10)(10)
Real Property Lease Agreement for 11224 Lemen Road, Suite A ****
(10)(11)
Real Property Lease Agreement for 11236 Lemen Road ****
(10)(12)
Supplier and Warranty Agreement ****
(10)(13)
Business Loan Agreement April 4, 2006 with KeyBank N.A. ******
(10)(14)
Supplier and Warranty Agreement ****
(10)(15)
Blanket Purchase Order, Non-Disclosure and Confidentiality Agreement
******
1(0)(16)
Lease Agreement and Amendment to Lease Agreement with JCMD Properties, LLC
******
(10)(17)
Consulting Agreement with Rainer Poertner dated July 1, 2006 ******
(10)(18)
Waiver of Cashless Exercise Provisions in Warrant by Wendover Investments Ltd.
*******
(10)(19)
Waiver of Cashless Exercise Provisions in Stock Option by Richard O. Weed
*******
(10)(20)
Extension of Employment Agreement with Michael Winzkowski dated October 15,
2006
(10)(21)
Extension of Employment Agreement with James Marvin dated (21) Subsidiaries of
Registrant *
(31)(1)
Certification of Chief Executive Officer pursuant to Section302 of the
Sarbanes-Oxley Act of 2002.
(31)(2)
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32)(1)
Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation
S-K.
(32)(2)
Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation
S-K.
*
Previously filed on February 11, 2005 as part of the Registration Statement on
Form 10-SB12G of Marketing Worldwide Corporation SEC File 0-50586 Accession
Number 1019687-4-279.
**
previously filed on August 10, 2005 as part of the Registration Statement on
Form 10-SB12G/A Amendment No. 1 of Marketing Worldwide Corporation SEC File
0-50586 Accession Number 0001019687-04-001719.
***
previously filed on November 9, 2005 as part of the Registration Statement on
Form 10-SB12G/A Amendment No. 2 of Marketing Worldwide Corporation SEC File
0-50586 Accession Number 0001019687-04-002436.
****
Previously filed on January 31, 2006 as part of the Form 10-KSB for the year
ended September 30, 2005 of Marketing Worldwide Corporation SEC File 0-50586
Accession Number 0001019687-05-000207.
*****
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.
SIGNATURES
Pursuant
to the requirements of section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
MARKETING
WORLDWIDE CORPORATION
|
|
|
|
|
BY:
|
/s/ M
ICHAEL
WINZKOWSKI
|
|
|
NAME:
MICHAEL WINZKOWSKI
|
|
|
TITLE:
CHIEF EXECUTIVE OFFICER
|
|
|
Date:
January 13, 2010
|
Pursuant
to requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
BY:
|
/s/ MICHAEL WINZKOWSKI
|
|
|
NAME:
MICHAEL WINZKOWSKI
|
|
|
TITLE:
CHIEF EXECUTIVE OFFICER,
|
|
|
SECRETARY
AND DIRECTOR
|
|
|
Date:
January 13, 2010
|
|
|
|
|
BY:
|
/s/ JAMES E. DAVIS
|
|
|
NAME:
JAMES E. DAVIS
|
|
|
TITLE:
CHIEF FINANCIAL OFFICER
|
|
|
AND
DIRECTOR
|
|
|
Date:
January 13, 2010
|
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