UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
AMENDMENT NO. 2

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2008
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                         to                         

Commission file number 0-20394

‘mktg, inc.’

(Exact name of registrant as specified in its charter)

Delaware	06-1340408
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
75 Ninth Avenue, New York, New York	10011
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 660-3800

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock,	The NASDAQ Stock Market LLC
$.001 Par Value Per Share

Securities registered pursuant to Section 12(g) of the Act: None

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

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   o;  No   x

          Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x  No   o

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

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

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

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

As of September 30, 2007, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $16,442,000.

As April 28, 2009, 8,333,192 shares of Common Stock, $.001 par value, outstanding.

Documents Incorporated by Reference

Document	Part of 10-K into which incorporated
Definitive Proxy Statement relating to Registrant’s 2008 Annual	Part III
Meeting of Stockholders

Explanatory Note

This Amendment No. 2 on Form 10-K/A to our Annual Report for the year ended March 31, 2008, initially filed with the Securities and Exchange Commission (the “SEC”) on June 25, 2008 (the “Original Filing”) reflects a restatement of the consolidated financial statements of ‘mktg, inc.’ (formerly CoActive Marketing Group, Inc.)(the “Company”) for the year ended March 31, 2008, as discussed in Note 2 to the consolidated financial statements. The financial statements are being restated as a result of management’s determination that the Company had inadvertently made a number of clerical and accounting errors in preparing its financial statements for the year ended March 31, 2008, as well as the subsequent fiscal quarter ended June 30, 2008, primarily in connection with the calculation and recognition of revenue, including reimbursable and outside production costs and expenses, and properly recording general and administrative expenses in the periods in which they were incurred. For a description of the actions we are taking to prevent a recurrence of these errors, please see “Management’s Report on Internal Control Over Financial Reporting” in Item 9A(T) of this filing.

The restatement for these errors reduces the Company’s income before taxes for the fiscal year ended March 31, 2008 (“Fiscal 2008”) from $2,934,000 as originally reported to a loss before taxes of approximately $142,000, and increases the tax provision from $1,448,000 to $4,751,000. The restatement reduces net income for Fiscal 2008 by approximately $6,380,000 ($.92 per diluted share) to a loss of approximately $4,893,000. The restated loss for the year includes a non-cash charge of approximately $4,535,000 as a result of a valuation allowance established at March 31, 2008 against our deferred tax asset, as described further in this filing. The restatement had no effect on the Company’s cash or net cash used in operations for the fiscal year ended March 31, 2008. After reviewing the circumstances leading up to the restatement, management believes that the errors were inadvertent and unintentional, and were related in part to a change in the Company’s accounting software during Fiscal 2008. In addition, following the discovery of these errors, the Company began implementing procedures intended to strengthen its internal control processes and prevent a recurrence of future errors of this nature. See also Item 9A(T).

We have not amended any of our other previously filed quarterly reports affected by the restatement reflected in this Amendment No. 2 as described above, and we do not plan to amend those reports or any other related prior filings. Therefore, when considering financial information for our fiscal year ended March 31, 2008, you should rely only on this Amendment No. 2.

In addition to including restated financial statements as described above, this Amendment No. 2 also includes related changes to the disclosures in “Risk Factors – Recent Losses,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Controls and Procedures.” With the exception of reflecting the Company’s name change to ‘mktg, inc.’ all other information contained herein is as of March 31, 2008 and does not reflect any events or changes that have occurred subsequent to that date. For the convenience of readers, this Amendment No. 2 restates in its entirety the Original Filing.

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PART I

This report contains certain “forward-looking statements” concerning the Company’s operations, economic performance and financial condition, which are subject to inherent uncertainties and risks. Actual results could differ materially from those anticipated in this report. When used in this report, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements.

Item 1. Business.

Corporate Overview

          ‘mktg, inc.’ (formerly CoActive Marketing Group, Inc.), through its wholly-owned subsidiaries: Inmark Services LLC, Optimum Group LLC, U.S. Concepts LLC and Digital Intelligence Group LLC, is an integrated sales promotional and marketing services company. We develop, manage and execute sales promotion programs at both national and local levels, utilizing both online and offline media channels. Our programs help our clients effectively promote their goods and services directly to retailers and consumers and are intended to assist them in achieving maximum impact and return on their marketing investment. Our activities reinforce brand awareness, provide incentives to retailers to order and display our clients’ products, and motivate consumers to purchase those products, and are designed to meet the needs of our clients by focusing on communities of consumers who want to engage brands as part of their lifestyles.

          Our services include experiential and face to face marketing, event marketing, interactive marketing, ethnic marketing, and all elements of consumer and trade promotion, and are marketed directly to our clients by our sales force operating out of offices located in New York, New York; Cincinnati, Ohio; Chicago, Illinois and San Francisco, California.

          ‘mktg, inc.’ was formed under the laws of the State of Delaware in March 1992 and is the successor to a sales promotion business originally founded in 1972. ‘mktg, inc.’ began to engage in the promotion business following a merger consummated on September 29, 1995 that resulted in Inmark becoming its wholly-owned subsidiary.

          Our corporate headquarters are located at 75 Ninth Avenue, New York, New York 10011, and our telephone number is 212-660-3800. Our Web site is www.coactivemarketing.com. Copies of all reports we file with the Securities and Exchange Commission are available on our Web site.

What We Do

          We use data and analytics to target and drive insight to optimize our clients’ marketing programs. Through the union of data, technology, creativity and a sophisticated marketing field force, we develop face to face and digital experiences that drive those consumers into a relevant relationship with the brands we promote. Our programs are designed to increase sales to targeted consumers and retailers while enhancing brand image. In contrast with general advertising, we provide specialized marketing services across a wide variety of communications channels, including “alternative media” channels, with the goal of increasing sales of our client’s products and services as a direct and verifiable consequence of our programs.

          Utilizing our experiential marketing, loyalty marketing, digital marketing and retail promotional capabilities along with our analytic tools, we enable our clients to interact more meaningfully with their target consumers. Our strategy is to build a best in class data-driven, measurable, integrated marketing company that integrates experiential marketing, retail promotion, online marketing, customer relationship management (“CRM”) and loyalty programs into a highly optimized marketing architecture that can compete against any marketing organization in the United States.

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Experiential Marketing

          U.S. Concepts is among the nation’s most awarded event, experiential, mobile and field marketing resources. U.S. Concepts’ experiential programs include concerts, tours and festivals, sales driven sampling activities, demonstration programs and other events that introduce and promote our clients’ brands, services and products. U.S. Concepts designs and executes brand experiences based on the philosophy that “continuous consumer contact drives brand growth.” Our technological and data capture capabilities at events have evolved our business to include word of mouth and advocate marketing techniques.

Digital Marketing

          We see our digital capability as four lines of business: a) interactive marketing which includes advertising, marketing promotions and sweepstakes, b) social networking and word of mouth marketing – building brand extensions that allow consumers and advocates to participate in the brand, c) data analytics and segmentation – the ability to analyze what we do through the collection of data across experiential, promotional and traditional marketing campaign execution, and d) business process enablement – the development of technology and applications that allow companies to drive efficiencies and optimize their marketing infrastructures.

Multi-Cultural Marketing

          Through our introduction of sophisticated online and offline segmentation techniques and a focus on African American and Latino consumers, we have created a multi-cultural segmentation product that, coupled with a highly motivated and culturally diverse creative team, has opened the doors to Fortune 500 companies looking to grow their share across these underserved consumers.

Strategic Planning and Sales Promotion

          Taking into account each client’s unique needs for brand positioning, message creation and the selection of the appropriate communication channels to be employed, we immerse ourselves in our client’s business and collaborate with their marketing team to develop a strategic and sales promotion plan. Once the plan is developed, we focus on creative and program development and implementation, recognizing that successful execution is as important as the plan.

Trade Marketing

          We have extensive experience in developing customized programs for retailers in a variety of channels. We are active in all major retail channels, including mass, grocery, drug, do-it-yourself (“DIY”) and convenience. With our clients, we present marketing and promotional programs to retailers, capitalizing on established relationships we have cultivated with these retailers over many years.

The Growth of Alternative Media

          The digital, experiential and other marketing arenas in which we interact with consumers on behalf of our clients have come to be known as “alternative media”. Included in alternative media are word-of-mouth campaigns, which we are able to execute through our extensive field network of part-time employees. The increased use of alternative media as a marketing tool is attributable to the need to target difficult to find yet highly desirable consumers who are no longer predictable in their media consumption habits. According to recent statistics, marketing spending on alternative media in the U.S. jumped 22% to $73.5 billion from 2006 to 2007, and represented 16% of total marketing spending in 2007, up from only 8% in 2002. Industry publications expect spending on alternative media to continue to grow over the next five years. We believe that we are well positioned to capitalize on this anticipated growth in spending.

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Premier Client Roster

          Our principal clients are large manufacturers of packaged goods and other consumer products. Our client partners are actively engaged in promoting their products to both the consumer as well as trade partners, (i.e., retailers, distributors, etc.), and include, among others, Bayer HealthCare, LLC, Coty, Diageo North America, Inc. (“Diageo”), Fas Mart Convenience Stores, Fresh Express, Inc., Kikkoman International, Inc., Moet Hennessy, Nintendo of America, Pepsi Cola North America, The Procter & Gamble Company, SAP, and SuperValu.

          For our fiscal years ended March 31, 2008 and 2007, Diageo accounted for approximately 65% and 53%, respectively, of our revenues (inclusive of reimbursable program costs and expenses) and 62% and 64%, respectively, of our accounts receivable.

          To the extent that we continue to have a heavily weighted sales concentration with one or more clients, the loss of any such client would have a material adverse effect on our earnings. Unlike traditional general advertising firms which are engaged as agents of record on behalf of their clients, as a promotional company, we are typically engaged on a product-by-product, or project-by-project basis.

Backlog

          Excluding sales backlogs attributable to reimbursable costs and expenses, at March 31, 2008, our sales backlog amounted to approximately $7,700,000 compared to a sales backlog of approximately $9,750,000 at March 31, 2007. As described further below our revenue patterns are unpredictable and may vary significantly from period to period. Our backlog at any given point in time is similarly subject to fluctuation.

Competition

          The market for promotional services is highly competitive, with hundreds of companies claiming to provide various services in the promotions industry. In general, our competition is derived from two basic groups: other full service promotion agencies, and companies which specialize in providing one specific aspect of a general promotional program. Some of our competitors are affiliated with larger general advertising agencies, and have greater financial and marketing resources available than we do. These competitors include Wunderman and OgilvyAction, divisions of WPP Group, Arnold Brand Promotions, part of Havas, and Momentum Worldwide, part of IPG. Niche independent competitors include PromoWorks, Ryan Partnership and ePrize LLC.

Employees

          We currently have approximately 270 full-time and 4,500 part-time employees. Our part-time employees are primarily involved in marketing support, program management and in-store sampling and demonstration, and are employed on an as needed basis. None of our employees are represented by a labor organization and we consider our relationship with our employees to be good.

Item 1A. Risk Factors

          Recent Losses. We sustained a net loss of approximately $4,893,000 in our fiscal year ended March 31, 2008. In addition, although we were profitable in our fiscal year ended March 31, 2007, we sustained a net loss of approximately $711,000 in the fourth quarter that fiscal year, and a net loss of approximately $1,802,000 for our fiscal year ended March 31, 2006. There can be no assurance that we will be profitable in the future.

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          Customers. A substantial portion of our sales has been dependent on one client or a limited concentration of clients. In particular, Diageo accounted for approximately 65% and 53% of our revenues for our fiscal years ended March 31, 2008 and 2007, and Diageo accounted for 62% of our accounts receivable at March 31, 2008. To the extent such dependency continues, significant fluctuations in revenues, results of operations and liquidity could arise if Diageo or any other significant client reduces its budget allocated to the services we provide.

          Need for Additional Funding. Since June 20, 2007, we have operated without bank financing. However, on June 12, 2008, we signed a commitment letter with a commercial lender providing for a $5,000,000 senior secured credit facility. Pursuant to the commitment letter, the credit facility would consist of a three-year revolving credit facility in the principal amount of $2,500,000 and a three-year term loan in the principal amount of $2,500,000. We believe that the credit facility will meet our funding needs for the foreseeable future; however, should we be unable to close on the credit facility, or should we require additional funding in the future, there can be no assurance that we will be able to secure such financing at favorable terms, if at all. If we issue additional shares of common stock or securities convertible into common stock in order to secure additional funding, current stockholders may experience dilution of their ownership. In the event we issue securities or instruments other than common stock, we may be required to issue such instruments with greater rights than those currently possessed by holders of common stock.

          Dependence on Key Personnel. Our business is managed by a limited number of key management and operating personnel. The loss of any one of those persons could have a material adverse impact on our business. We believe that our future success will depend in large part on our continued ability to attract and retain highly skilled and qualified personnel.

          Unpredictable Revenue Patterns. A significant portion of our revenues is derived from large promotional programs which originate on a project-by-project basis. Since these projects are susceptible to change, delay or cancellation as a result of specific client financial or other marketing and manufacturing related circumstantial issues, as well as changes in the overall economy, our revenue is unpredictable and may vary significantly from period to period.

          Competition. The market for promotional services is highly competitive, with hundreds of companies claiming to provide various services in the promotion industry. Some of these companies have greater financial and marketing resources than we do. We compete on the basis of the quality and the degree of comprehensive services which we provide to our clients. There can be no assurance that we will be able to continue to compete successfully with existing or future industry competitors.

          Risks Associated with Acquisitions. An integral part of our growth strategy is evaluating and, from time to time, engaging in discussions regarding acquisitions and strategic relationships. No assurance can be given that suitable acquisitions or strategic relationships can be identified, financed and completed on acceptable terms, or that future acquisitions, if any, will be successful.

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Item 2. Properties.

We have the following leased facilities:

		Square		Fiscal
Facility	Location	Feet		2008 Rent
Principal office of ‘mktg, inc.’ and principal and sales office of U.S. Concepts and Inmark	New York, New York		33,400	$	909,000
Principal and sales office of Optimum	Cincinnati, Ohio		17,000	$	178,000
Other sales offices and warehouses of Inmark, Optimum and U. S. Concepts	Chicago, Illinois		10,400
	Miami, Florida		1,300
	San Francisco, California		600
	Total		12,300	$	147,000

In addition to the above, from time to time we enter into short-term warehouse leases for the storage of promotional materials that we use in connection with our programs.

          With the exception of the principal office leases in Cincinnati, Ohio, and New York, New York, which at March 31, 2008 have remaining terms of approximately three years and seven years, respectively, each of our other facility leases are short term and renew annually. For a summary of our minimum rental commitments under all non-cancelable operating leases with a maturity date in excess of one year as of March 31, 2008, see Note 12 to the Notes to the Consolidated Financial Statements.

          We consider our facilities sufficient to maintain our current operations.

Item 3. Legal Proceedings.

          None.

Item 4. Submission of Matters to a Vote of Security Holders.

          Not Applicable.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

Market Information

          Our Common Stock is traded on the Nasdaq Capital Market under the symbol CMKG. The following table sets forth for the periods indicated the high and low trade prices for our Common Stock as reported by Nasdaq. The quotations listed below reflect inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

	Common Stock
	High		Low
Fiscal Year 2008
Fourth Quarter	$	3.18	$	2.55
Third Quarter		2.91		2.49
Second Quarter		2.64		2.28
First Quarter		2.65		1.93
Fiscal Year 2007
Fourth Quarter	$	1.99	$	1.53
Third Quarter		2.19		1.49
Second Quarter		2.23		1.54
First Quarter		2.19		1.40

          On June 18, 2008 there were 7,629,519 shares of our Common Stock outstanding, approximately 62 shareholders of record and approximately 800 beneficial owners of shares held by a number of financial institutions.

          No cash dividends have ever been declared or paid on our Common Stock. We intend to retain earnings, if any, to finance future operations and expansion and do not expect to pay any cash dividends in the foreseeable future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Equity Compensation Plan Information

          The following table sets forth information with respect to equity compensation plans (including individual compensation arrangements) of the Company as of March 31, 2008.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders(1)		466,250	$	4.12		326,898
Equity compensation plans not approved by security holders(2)		40,766	$	3.68		—
Total		507,016	$	4.09		326,898

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(1)	Includes options to purchase 438,750 shares of Common Stock granted under our 2002 Long-Term Incentive Plan and options to purchase 27,500 shares of Common Stock granted under our 1992 Stock Option Plan.
(2)	Consists of warrants to purchase shares of Common Stock issued in 1997 to a director of ours, in connection with our entry into a financial advisory services agreement.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements.

          This report contains forward-looking statements which we believe to be within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on beliefs of management as well as assumptions made by and information currently available to our management. When used in this report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect,” “plan,” “predict,” “may,” “should,” “will,” the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in those forward-looking statements. Factors that could cause actual results to differ materially from our expectations include but are not limited to those described above in “Risk Factors.” Other factors may be described from time to time in our public filings with the Securities and Exchange Commission, news releases and other communications. The forward-looking statements contained in this report speak only as of the date hereof. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Restatement of Financial Statements

          This Amendment No. 2 on Form 10-K/A reflects a restatement of our consolidated financial statements for the year ended March 31, 2008, as discussed in Note 2 to the consolidated financial statements included in Item 8 of this Form 10-K/A. The financial statements have been restated as a result of management’s determination that the Company had inadvertently made a number of clerical and accounting errors in preparing its financial statements for the year ended March 31, 2008, as well as the subsequent fiscal quarter ended June 30, 2008, primarily in connection with the calculation and recognition of revenue, including reimbursable and outside production costs and expenses, and properly recording general and administrative expenses in the periods in which they were incurred. For a description of the actions we are taking to prevent a recurrence of these errors, please see “Management’s Report on Internal Control Over Financial Reporting” in Item 9A(T) of this report.

          The restatement for these errors reduces the Company’s net income, as originally reported for the fiscal year ended March 31, 2008 by approximately $6,380,000 ($.92 per diluted share), net of tax of $3,304,000, to a loss of approximately $4,893,000. The restatement had no effect on our cash or net cash used in operations for the fiscal year ended March 31, 2008. After reviewing the circumstances leading up to the restatement, management believes that the errors were inadvertent and unintentional and were related in part to a change in the Company’s accounting software during Fiscal 2008. In addition, following the discovery of these errors, we have begun implementing procedures intended to strengthen our internal control processes and prevent a recurrence of future errors.

Critical Accounting Policies

          Our significant accounting policies are described in Note 3 to the consolidated financial statements included in Item 8 of this Form 10-K/A. We believe the following represent our critical accounting policies:

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Estimates and Assumptions

          The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and of revenues and expenses during the reporting period. Estimates are made when accounting for revenue (as discussed below under “Revenue Recognition”), depreciation, amortization, bad debt reserves, income taxes and certain other contingencies. We are subject to risks and uncertainties that may cause actual results to vary from estimates. We review all significant estimates affecting the financial statements on a recurring basis and record the effects of any adjustments when necessary.

Revenue Recognition

          Our revenues are generated from projects subject to contracts requiring us to provide services within specified time periods generally ranging up to twelve months. As a result, on any given date, we have projects in process at various stages of completion. Depending on the nature of the contract, revenue is recognized as follows: (i) on time and material service contracts, revenue is recognized as services are rendered and the costs are incurred; (ii) on fixed price retainer contracts, revenue is recognized on a straight-line basis over the term of the contract; (iii) on fixed price multiple services contracts, revenue is recognized over the term of the contract for the fair value of segments of the services rendered which qualify as separate activities or delivered units of service; to the extent multi-service arrangements are deemed inseparable, revenue on these contracts is recognized as the contracts are completed; (iv) on certain fixed price contracts, revenue is recognized on a percentage of completion basis, whereby the percentage of completion is determined by relating the actual cost of labor performed to date to the estimated total cost of labor for each contract; (v) on certain fixed price contracts, revenue is recognized on the basis of proportional performance as certain key milestones are delivered. Costs associated with the fulfillment of projects are accrued and recognized proportionately to the related revenue in order to ensure a matching of revenue and expenses in the proper period. Our business is such that progress towards completing projects may vary considerably from quarter to quarter.

          If we do not accurately estimate the resources required or the scope of work to be performed, or do not manage our projects properly within the planned periods of time to satisfy our obligations under the contracts, then future profit margins may be significantly and negatively affected or losses on existing contracts may need to be recognized. Our outside production costs consist primarily of costs to purchase media and program merchandise; costs of production; merchandise warehousing and distribution; third party contract fulfillment costs; and other costs directly related to marketing programs.

          In many instances, revenue recognition will not result in related billings throughout the duration of a contract due to timing differences between the contracted billing schedule and the time such revenue is recognized. In such instances, when revenue is recognized in an amount in excess of the contracted billing amount, we record such excess on our balance sheet as unbilled contracts in progress. Alternatively, on a scheduled billing date, should the billing amount exceed the amount of revenue recognized, we record such excess on our balance sheet as deferred revenue. In addition, on contracts where costs are incurred prior to the time revenue is recognized on such contracts, we record such costs as deferred contract costs on our balance sheet. Notwithstanding this, labor costs for permanent employees are expensed as incurred.

Goodwill and Other Intangible Asset

          Our goodwill consists of the cost in excess of the fair market value of the acquired net assets of our subsidiary companies, Inmark, Optimum, U.S. Concepts, and Digital Intelligence, which have been identified as our reporting units. We also have an intangible asset consisting of an Internet domain name and related intellectual property rights. At both March 31, 2008 and 2007, our balance sheet reflected goodwill in the amount of approximately $7,357,000 and an intangible asset in the amount of $200,000.

          Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Goodwill impairment tests require the comparison of the fair value and carrying value of reporting units. Measuring fair value of a reporting unit is generally based on valuation techniques using multiples of earnings. We assess the potential impairment of goodwill and intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Upon completion of such review, if impairment is found to have occurred, a corresponding charge will be recorded.

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          Goodwill and the intangible asset will continue to be tested annually at the end of each fiscal year to determine whether they have been impaired. Upon completion of each annual review, there can be no assurance that a material charge will not be recorded. During the year ended March 31, 2008, we have not identified any indication of goodwill impairment in our reporting units.

Accounts Receivable and Credit Policies

          The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. In addition to reviewing delinquent accounts receivable, management considers many factors in estimating its general allowance, including historical data, experience, customer types, credit worthiness, and economic trends. From time to time, management may adjust its assumptions for anticipated changes in any of those or other factors expected to affect collectibility

Accounting for Income Taxes

          Our ability to recover the reported amounts of the deferred income tax asset resulting from net operating losses is dependent upon our ability to generate sufficient taxable income during the periods over which such losses are deductible to reduce our tax expense in future periods. In assessing the realizability of deferred tax assets, management considers, in light of available objective evidence, whether it is more likely than not that some or all of such assets will be utilized in future periods. For financial reporting purposes, the Company has incurred losses for fiscal years 2004 through 2008 aggregating $5,961,000. The Company must generate approximately $11,340,000 of aggregate taxable income to fully utilize its net deferred tax asset. Accordingly, based upon the available objective evidence, particularly the Company’s history of losses, the Company has provided for a full valuation allowance against its net deferred tax asset at March 31, 2008.

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Results of Operations

          The following table presents the reported operating results for the fiscal years ended March 31, 2008 and 2007:

	2008 (restated)			2007
Operations Data:
Sales	$	80,834,000		$	95,880,000
Reimbursable program costs and expenses		17,040,000			14,710,000
Outside production and other program expenses		32,143,000			46,161,000
Operating revenue		31,651,000			35,009,000
Compensation expense		24,770,000			23,121,000
General and administrative expenses		7,110,000			9,901,000
Operating (loss) income		(229,000	)		1,987,000
Interest income (expense), net		87,000			(35,000	)
Other expense, net		—			(207,000	)
(Loss) income from continuing operations before provision for income taxes		(142,000	)		1,745,000
Provision for income taxes		4,751,000			572,000
(Loss) income from continuing operations		(4,893,000	)		1,173,000
Loss from discontinued operations		—			(177,000	)
Net (loss) income	$	(4,893,000	)	$	996,000
Per Share Data:
Basic (loss) earnings per share:
Continuing operations	$	(.71	)	$	.17
Discontinued operations	$	—		$	(.02	)
Net (loss) income per share	$	(.71	)	$	.15
Diluted (loss) earnings per share:
Continuing operations	$	(.71	)	$	.16
Discontinued operations	$	—		$	(.02	)
Net (loss) income per share	$	(.71	)	$	.14
Weighted Average Shares Outstanding:
Basic		6,935,806			6,837,533
Diluted		6,935,806			7,283,742

          We believe Operating Revenue is a key performance indicator. We define Operating Revenue as our sales less reimbursable program costs and expenses, and outside production and other program expenses. Operating Revenue is the net amount derived from sales to customers that we believe is available to fund our compensation, general and administrative expenses, and capital expenditures. Operating Revenue is a Non-GAAP financial measure disclosed by management to provide additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with Non-GAAP financial measures used by other companies.

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          The following table presents operating data expressed as a percentage of Operating Revenue for each of the fiscal years ended March 31, 2008 and 2007, respectively:

	2008 (restated)			2007
Statement of Operations Data:
Operating revenue		100.0	%		100.0	%
Compensation expense		78.2	%		66.0	%
General and administrative expenses		22.5	%		28.3	%
Operating (loss) income		(0.7	%)		5.7	%
Interest income (expense), net		0.3	%		(0.1	%)
Other expense, net		—			(0.6	%)
(Loss) income from continuing operations before provision for income taxes		(0.4	%)		5.0	%
Provision for income taxes		15.0	%		1.6	%
(Loss) income from continuing operations		(15.4	%)		3.4	%
Loss from discontinued operations		—			(0.5	%)
Net (loss) income		(15.4	%)		2.9	%

Fiscal Year 2008 Compared to Fiscal Year 2007

          Sales. Sales consist of fees for services, commissions, reimbursable program costs and expenses and other production and program expenses. We purchase a variety of items and services on behalf of our clients for which we are reimbursed pursuant to our client contracts. The amount of reimbursable program costs and expenses, and outside production and other program expenses which are included in revenues will vary from period to period, based on the type and scope of the service being provided.

          Sales for the twelve months ended March 31, 2008 were $80,834,000, compared to $95,880,000 for the fiscal year ended March 31, 2007, a decrease of $15,046,000. The decrease in sales reflects an increase in client contracts under which we are compensated based primarily on labor, with lower associated reimbursable program and production costs; the elimination of single-project work; and a general decrease in our level of operations.

          Reimbursable Program Costs and Expenses. Reimbursable program costs and expenses are primarily direct labor, travel and product costs generally associated with events we execute for Diageo. In Fiscal 2008 and 2007, these expenses totaled $17,040,000 and $14,710,000, respectively. The increase in reimbursable program costs and expenses of approximately $2,330,000 or 16%, in Fiscal 2008 was primarily due to an increase in the number of events we executed for Diageo.

          Outside Production and Other Program Expenses. Outside production and other program expenses consist of the costs of purchased materials, media, services, certain direct labor charged to programs, and other expenditures incurred in connection with and directly related to sales but which are not classified as reimbursable program costs and expenses. Outside production costs for Fiscal 2008 were $32,143,000 compared to $46,161,000 for Fiscal 2007, a decrease of $14,018,000, or 30%. Outside production and other program expenses can fluctuate greatly based on the nature of the projects we execute for our clients

          Operating Revenue. For the twelve months ended March 31, 2008, Operating Revenue amounted to $31,651,000, a decrease of $3,358,000 compared to $35,009,000 for the fiscal year end March 31, 2007. The decrease in Operating Revenue reflected decreased sales as described above. A reconciliation of Sales to Operating Revenues for the twelve months ended March 31, 2008 and 2007 is set forth below.

13

	Twelve Months Ended March 31,
Sales	2008 (restated)		%		2007		%
Sales – U.S. GAAP	$	80,834,000		100	$	95,880,000		100
Reimbursable program costs and expenses, and outside production and other program expenses		49,183,000		61		60,871,000		63
Operating Revenue – Non-GAAP	$	31,651,000		39	$	35,009,000		37

          Compensation Expense. Compensation expense, exclusive of reimbursable program costs, consists of the salaries, payroll taxes and benefit costs related to indirect labor, overhead personnel and certain direct labor otherwise not charged to programs. For Fiscal 2008, compensation expense was $24,770,000, compared to $23,121,000 for Fiscal 2007, an increase of $1,649,000, or 7%. The increase was primarily due to a combination of the following: additional costs associated with recruiting senior talent to support growth in our technology group, performance based salary increases, an accrual for employee bonuses prior to giving effect to the restatement of our financial statements, and higher compensation expense for employee stock based compensation awards.

          General and Administrative Expenses.General and administrative expenses consist of office and equipment rent, depreciation and amortization, professional fees, charges for doubtful accounts and other overhead expenses. For Fiscal 2008, general and administrative costs were $7,110,000, compared to $9,901,000 for Fiscal 2007, a decrease of $2,791,000, or 28%. The decrease reflects our efforts to reduce overall overhead costs.

          Interest Income (Expense), Net. Net interest income for Fiscal 2008 amounted to $87,000, compared to net interest expense of ($35,000) for Fiscal 2007. Interest income consists primarily of interest on our money market and CD accounts. Interest expense consisted primarily of interest paid on bank debt, which was repaid in full in June 2007, and was tied to the bank’s prime rate in effect.

          Other Expense, Net. Other expense, net for the year ended March 31, 2007 amounted to $207,000 and consisted of a charge of approximately $306,000 in connection with the provision for the uncollectible portion of a note receivable from an officer. Such expense was offset by $57,000 in proceeds from the sale of certain Internet domain names which were not being utilized, as well as $42,000 of insurance policy proceeds.

          (Loss) Income from Continuing Operations before Provision for Income Taxes. Loss from continuing operations before provision for income taxes for Fiscal 2008 was ($142,000), a $1,887,000 decrease from income from continuing operations before provision for income taxes of $1,745,000 for Fiscal 2007.

          Provision for Income Taxes. The provision for income taxes was $4,751,000 in Fiscal 2008, consisting primarily of a $4,535,000 valuation allowance we established at March 31, 2008. We established this allowance because, in light of our losses for fiscal years 2004 through 2008 aggregating $5,961,000, there is uncertainty as to whether we will have future income against which we can offset our losses to reduce our tax expense in future periods. For Fiscal 2007, we had a provision for income taxes of $572,000, which was based on an effective tax rate of 32.8%.

          (Loss) Income from Continuing Operations. As a result of the items discussed above, we incurred a loss from continuing operations for the year ended March 31, 2008 of ($4,893,000) compared to income from continuing operations of $1,173,000 for the year ended March 31, 2007. Diluted loss per share from continuing operations amounted to $.71 for the year ended March 31, 2008 compared to $.16 of diluted earnings per share from continuing operations for the year ended March 31, 2007.

          Discontinued Operations. Loss from discontinued operations relating to the sale of MarketVision in May 2006 as well as the loss incurred on its disposal amounted to $177,000, on a net of tax basis for the year ended March 31, 2007. The loss on the disposal of MarketVision includes a tax provision of approximately $302,000 as a result of this sale with a corresponding reduction of the deferred tax asset on our balance sheet. Diluted loss per share from discontinued operations amounted to $.02 for the year ended March 31, 2007.

14

          Net (Loss) Income. As a result of the items discussed above, we incurred a net loss of ($4,893,000) for Fiscal 2008, a decrease of $5,889,000 compared to net income of $996,000 for Fiscal 2007. Fully diluted loss per share amounted to $.71 in Fiscal 2008 versus $.14 of fully diluted earnings per share for Fiscal 2007.

Liquidity and Capital Resources

          Beginning with our fiscal year ended March 31, 2000, we have continuously experienced negative working capital. This deficit has generally resulted from our inability to generate sufficient cash and receivables from our programs to offset our current liabilities, which consist primarily of obligations to vendors and other accounts payable and deferred revenues. We are continuing our efforts to increase revenues from our programs and reduce our expenses, but to date these efforts have not been sufficiently successful. We have been able to operate during this extended period with negative working capital due primarily to advance payments made to us on a regular basis by our largest customers, and to a lesser degree, equity infusions from private placements of our securities ($1 million in January 2000, and $1.63 million in January and February 2003), and stock option and warrant exercises. For the fiscal year ended March 31, 2008 the working capital deficit increased by $543,000 to $3,859,000.

          On June 20, 2007, we repaid the remaining obligations owed to our senior lender in the amount of $1,762,000. On June 26, 2008, subsequent to the end of Fiscal 2008, we entered into a Credit Agreement with Sovereign Bank. For a description of the Credit Agreement, please see Note 13 (Subsequent Events) to the consolidated financial statements included in Item 8 of this Form 10-K/A. We believe cash currently on hand together with cash expected to be generated from operations and available under the Credit Agreement will be sufficient to fund our operations through the end of Fiscal 2009.

          At March 31, 2008, we had cash and cash equivalents of $5,324,000, a working capital deficit of $3,859,000, and stockholders’ equity of $5,608,000. In comparison, at March 31, 2007, we had cash and cash equivalents of $9,514,000, a working capital deficit of $3,316,000, an outstanding bank term loan of $2,000,000, an outstanding bank letter of credit of $450,000, and stockholders’ equity of $10,056,000. The decrease of $4,190,000 in cash and cash equivalents was primarily due to the repayment of our outstanding debt obligations, purchases of fixed assets and cash used in operating activities.

          Operating Activities. Net cash used in operating activities for the twelve months ended March 31, 2008 was ($1,523,000) compared to $5,191,000 of cash provided by operating activities in Fiscal 2007. This $6,714,000 reduction in cash generated by operating activities was primarily attributable to a net loss of ($4,893,000), and a $7,632,000 change in certain balance sheet accounts during Fiscal 2008 as a result of timing differences between Operating Revenue recognized versus the amount of sales billed and program cost incurred as of March 31, 2008 and March 31, 2007, respectively. These accounts include unbilled contracts in progress, deferred contract costs, accrued job costs and deferred revenue. This was partially offset by the non-cash charge resulting from a $4,535,000 allowance established against deferred tax assets, and $4,010,000 of cash provided from the net change in the accounts receivable and accounts payable balances.

          Investing Activities. For Fiscal 2008, net cash used by investing activities was $679,000 due primarily to the purchase of computer equipment and a new accounting system. For the twelve months ended March 31, 2007, net cash provided by investing activities was $925,000, primarily as a result of proceeds from the sale of MarketVision offset by the purchase of certain fixed assets.

          Financing Activities. For the twelve months ended March 31, 2008, net cash used in financing activities was ($1,988,000) resulting primarily from payments made to repay bank borrowings. For the twelve months ended March 31, 2007, net cash used in financing activities amounted to ($531,000) resulting primarily from payments made to repay bank borrowings of ($1,000,000), offset by $454,000 in proceeds from the exercise of stock options

15

Off-Balance Sheet Transactions

          We are not a party to any “off-balance sheet transactions” as defined in Item 301 of Regulation S-K.

Impact of Recently Issued Accounting Standards

          On April 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). There was no impact on our consolidated financial position, results of operations or cash flows at March 31, 2008 and for the year then ended as a result of implementing FIN 48. At the adoption date of April 1, 2007 and at March 31, 2008, we did not have any unrecognized tax benefits. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of April 1, 2007 and March 31, 2008, we had no accrued interest or penalties related to income taxes. We currently have no federal or state tax examinations in progress.

          In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. In February 2008, the FASB released FASB Staff Position (FSP FAS 157-2 – Effective Date of FASB Statement No. 157) which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. Management currently believes that the adoption of this statement will not have a material impact on our financial statements.

          In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value that are currently required to be measured at historical costs. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions for which are required to be applied prospectively. Management currently believes that the adoption of this statement will not have a material impact on our financial statements.

          In December 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management currently believes that the adoption of this statement will not have a material impact on our financial statements.

          In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for annual periods beginning after December 15, 2008. Management currently believes that the adoption of this statement will not have a material impact on our financial statements.

16

          In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Management currently believes that the adoption of this statement will not have a material impact on our financial statements.

          In May 2008, the FASB issued Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. Prior to the issuance of SFAS 162, GAAP hierarchy was defined in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards (SAS) No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.

17

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm - Successor	19
Report of Independent Registered Public Accounting Firm - Predecessor	20
Consolidated Financial Statements:
Balance Sheets as of March 31, 2008 (Restated) and 2007	21
Statements of Operations for the years ended March 31, 2008 (Restated) and 2007	22
Statements of Stockholders’ Equity for the years ended March 31, 2008 (Restated) and 2007	23
Statements of Cash Flows for the years ended March 31, 2008 (Restated) and 2007	24
Notes to Consolidated Financial Statements	25

18

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
‘mktg, inc.’
New York, New York

We have audited the accompanying consolidated balance sheet of ‘mktg, inc.’ and subsidiaries (the Company) as of March 31, 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ‘mktg, inc.’ and subsidiaries as of March 31, 2008, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

As disclosed in Note 2 to the consolidated financial statements, the Company restated its previously issued financial statements as of and for the year ended March 31, 2008.

/s/ Parente Randolph, LLC

New York, New York
May 6, 2009

19

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
‘mktg, inc.’
New York, New York

We have audited the accompanying consolidated balance sheet of ‘mktg, inc.’ (formerly CoActive Marketing Group, Inc.) and subsidiaries (collectively the “Company”) as of March 31, 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ‘mktg, inc.’ (formerly CoActive Marketing Group, Inc.) and subsidiaries as of March 31, 2007, and the results of their operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America

/s/ Lazar Levine & Felix LLP

Lazar Levine & Felix LLP

New York, New York
June 20, 2007

20

‘mktg, inc.’
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2008 AND 2007

	2008 (Restated)			2007
Assets
Current assets:
Cash and cash equivalents	$	5,323,527		$	9,514,081
Accounts receivable, net of allowance for doubtful accounts of $388,000 in 2008 and $365,000 in 2007		6,586,673			12,131,037
Unbilled contracts in progress		4,245,148			2,114,564
Deferred contract costs		4,372,813			1,552,910
Prepaid expenses and other current assets		327,782			913,538
Total current assets		20,855,943			26,226,130
Property and equipment, net		3,429,752			3,382,968
Deferred tax asset		401,035			4,936,414
Goodwill and other intangible assets		7,557,203			7,557,203
Other assets		489,511			38,667
Total assets	$	32,733,444		$	42,141,382
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,056,913		$	3,568,910
Accrued compensation		2,774,033			2,166,244
Accrued job costs		6,030,473			999,588
Other accrued liabilities		2,801,352			2,200,483
Deferred revenue		10,651,494			18,364,020
Deferred tax liability		401,035			243,249
Notes payable bank		—			2,000,000
Total current liabilities		24,715,300			29,542,494
Deferred rent		2,409,942			2,542,452
Total liabilities		27,125,242			32,084,946
Commitments and contingencies
Stockholders’ equity:
Class A convertible preferred stock, par value $.001; authorized 650,000 shares; none issued and outstanding		—			—
Class B convertible preferred stock, par value $.001; authorized 700,000 shares; none issued and outstanding		—			—
Preferred stock, undesignated; authorized 3,650,000 shares; none issued and outstanding		—			—
Common stock, par value $.001; authorized 25,000,000 shares; issued and outstanding 7,624,103 shares and 7,626,001 shares at March 31, 2008 and 2007, respectively		7,624			7,626
Additional paid-in capital		11,178,594			10,733,431
Accumulated deficit		(5,578,016	)		(684,621	)
Total stockholders’ equity		5,608,202			10,056,436
Total liabilities and stockholders’ equity	$	32,733,444		$	42,141,382

See accompanying notes

21

‘mktg, inc.’
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2008 AND 2007

	2008 (Restated)			2007
Sales	$	80,833,857		$	95,879,958
Operating expenses:
Reimbursable program costs and expenses		17,040,426			14,709,688
Outside production and other program expenses		32,143,169			46,161,049
Compensation expense		24,769,447			23,121,391
General and administrative expenses		7,110,131			9,901,159
Total operating expenses		81,063,173			93,893,287
Operating (loss) income		(229,316	)		1,986,671
Interest income		157,835			260,085
Interest expense		(70,595	)		(295,155	)
Other expense, net		—			(206,714	)
(Loss) income from continuing operations before provision for income taxes		(142,076	)		1,744,887
Provision for income taxes		4,751,319			572,012
(Loss) income from continuing operations		(4,893,395	)		1,172,875
Discontinued operations:
Loss from discontinued operations, net of tax benefit of $32,591		—			(49,650	)
Loss on disposal of discontinued operations, net of tax provision of $302,004		—			(127,174	)
Loss from discontinued operations		—			(176,824	)
Net (loss) income	$	(4,893,395	)	$	996,051
Basic earnings (loss) per share:
Continuing operations	$	(.71	)	$	.17
Discontinued operations		—			(.02	)
Net (loss) income per share	$	(.71	)	$	.15
Diluted earnings (loss) per share:
Continuing operations	$	(.71	)	$	.16
Discontinued operations		—			(.02	)
Net (loss) income per share	$	(.71	)	$	.14
Weighted average number of shares outstanding:
Basic		6,935,806			6,837,533
Diluted		6,935,806			7,283,742

See accompanying notes

22

‘mktg, inc.’
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED MARCH 31, 2008 AND 2007

	Common Stock par value $.001						Additional Paid-in			Retained Earnings (Accumulated			Total Stockholders’
	Shares			Amount			Capital			Deficit)			Equity
Balance, March 31, 2006		6,831,423		$	6,831		$	10,250,003		$	(1,680,672	)	$	8,576,162
Exercise of options and warrants		371,380			372			453,284			—			453,656
Tax benefit from share-based payment arrangements		—			—			20,718			—			20,718
Issuance of restricted stock		576,250			576			(576	)		—			—
Retirement of common stock in connection with payment of interest on note receivable		(153,052	)		(153	)		(282,994	)		—			(283,147	)
Compensation cost recognized in connection with vested stock		—			—			171,884			—			171,884
Compensation cost recognized in connection with stock options		—			—			121,112			—			121,112
Net income		—			—			—			996,051			996,051
Balance, March 31, 2007		7,626,001			7,626			10,733,431			(684,621	)		10,056,436
Tax benefit from share-based payment arrangements		—			—			11,629			—			11,629
Issuance of restricted stock		359,352			359			(359	)		—			—
Forfeiture of restricted stock		(361,250	)		(361	)		361			—			—
Compensation cost recognized in connection with vested stock		—			—			329,292			—			329,292
Compensation cost recognized in connection with stock options		—			—			104,240			—			104,240
Net (loss) (Restated)		—			—			—			(4,893,395	)		(4,893,395	)
Balance, March 31, 2008 (Restated)		7,624,103		$	7,624		$	11,178,594		$	(5,578,016	)	$	5,608,202

See accompanying notes

23

‘mktg, inc.’
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2008 AND 2007

	2008 (Restated)			2007
Cash flows from operating activities:
Net (loss) income	$	(4,893,395	)	$	996,051
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		632,461			852,948
Deferred rent amortization		(132,510	)		(71,089	)
Provision for bad debt expense		22,853			122,790
Provision for uncollectible note receivable from officer		—			305,942
Interest income on note receivable from officer		—			(50,833	)
Share based compensation expense		433,532			292,996
Deferred income taxes		4,693,165			418,586
Loss from discontinued operations, net of tax		—			49,650
Loss on disposal of discontinued operations, net of tax		—			127,174
Changes in operating assets and liabilities:
Accounts receivable		5,521,511			(1,527,065	)
Unbilled contracts in progress		(2,130,584	)		535,889
Deferred contract costs		(2,819,903	)		970,155
Prepaid expenses and other assets		134,912			(8,851	)
Accounts payable		(1,511,997	)		(936,434	)
Accrued compensation		607,789			671,812
Accrued job costs		5,030,885			(368,647	)
Other accrued liabilities		600,869			225,770
Deferred revenue		(7,712,526	)		2,618,751
Net cash (used in) provided by operating activities of continuing operations		(1,522,938	)		5,225,595
Operating activities of discontinued operations		—			(35,004	)
Net cash (used in) provided by operating activities		(1,522,938	)		5,190,591
Cash flows from investing activities:
Proceeds from sale of discontinued operations		—			1,100,000
Proceeds from collection on note receivable		—			135,035
Purchases of fixed assets		(679,245	)		(310,357	)
Net cash (used in) provided by investing activities		(679,245	)		924,678
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants		—			453,656
Excess tax benefits from share-based payment arrangements		11,629			20,718
Payments of debt		(2,000,000	)		(1,000,000	)
Financing costs		—			(5,000	)
Net cash used in financing activities		(1,988,371	)		(530,626	)
Net (decrease) increase in cash and cash equivalents		(4,190,554	)		5,584,643
Cash and cash equivalents at beginning of year		9,514,081			3,929,438
Cash and cash equivalents at end of year	$	5,323,527		$	9,514,081
Supplemental disclosures of cash flow information:
Interest paid during the year	$	93,414		$	227,559
Income taxes paid during the year	$	100,917		$	79,037
Non-cash transactions relating to investing and financing activities:
Retirement of common stock in connection with payment of interest on note receivable	$	—		$	283,147

See accompanying notes.

24

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(1)	Organization and Nature of Business
	‘mktg, inc.’ (formerly CoActive Marketing Group, Inc.) (the “Company”), through its wholly-owned subsidiaries Inmark Services LLC, Optimum Group LLC, U. S. Concepts LLC, and Digital Intelligence Group LLC, is an integrated sales promotional and marketing services agency. The Company develops, manages and executes promotional programs at both national and local levels. These programs help the Company’s clients effectively promote their goods and services directly to retailers and consumers and are intended to assist them in achieving a maximum impact and return on their marketing investment. The Company’s activities reinforce brand awareness, provide incentives to retailers to order and display its clients’ products, and motivate consumers to purchase those products.
	The Company’s services include experiential marketing, event marketing, interactive marketing, multicultural and urban marketing, and all elements of consumer and trade promotion, and are marketed directly to clients through sales forces operating out of offices located in New York, New York; Cincinnati, Ohio; Chicago, Illinois and San Francisco, California.
(2)	Restatement of Financial Statements
	The consolidated financial statements of the Company as of and for the year ended March 31, 2008 have been restated as a result of management’s determination that the Company had inadvertently made a number of clerical and accounting errors in preparing its fiscal 2008 financial statements, primarily in connection with the calculation and recognition of revenue, including reimbursable and outside production costs and expenses, and properly recording general and administrative expenses in the periods in which they were incurred.
	The restatement for these errors reduces the Company’s net income, as originally reported for the fiscal year ended March 31, 2008 by approximately $6,380,000 ($.92 per diluted share) to a loss of approximately $4,893,000. The restatement had no effect on the Company’s cash or net cash used in operations as of and for the fiscal year ended March 31, 2008. After reviewing the circumstances leading up to the restatement, management believes that the errors were inadvertent and unintentional, and were related in part to a change in the Company’s accounting software during Fiscal 2008. In addition, following the discovery of these errors, the Company began implementing procedures intended to strengthen its internal control processes and prevent a recurrence of future errors.
	The effect of the restatements on the Company’s consolidated balance sheet as of the year ended March 31, 2008 and statements of operations for the fiscal year then ended is as follows:

CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2008

	March 31, 2008
	As previously reported		Effect of Restatement			As restated
Unbilled contracts in progress	$	6,338,361	$	(2,093,213	)	$	4,245,148
Deferred contract costs		3,912,437		460,376			4,372,813
Total current assets		22,488,780		(1,632,837	)		20,855,943
Deferred tax asset		3,704,829		(3,303,794	)		401,035
Total assets		37,670,075		(4,936,631	)		32,733,444
Accrued job costs		3,254,729		2,775,744			6,030,473
Deferred revenue and other client credits		11,983,638		(1,332,144	)		10,651,494
Total current liabilities		23,271,700		1,443,600			24,715,300
Total liabilities		25,681,642		1,443,600			27,125,242
Retained earnings (accumulated deficit)		802,215		(6,380,231	)		(5,578,016	)
Total stockholders’ equity		11,988,433		(6,380,231	)		5,608,202
Total liabilities and stockholders’ equity		37,670,075		(4,936,631	)		32,733,444

25

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(2) Restatement of Financial Statements (Continued)

CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
MARCH 31, 2008

	March 31, 2008
	As previously reported		Effect of Restatement			As restated
Sales	$	85,522,692	$	(4,688,835	)	$	80,833,857
Reimbursable costs and expenses		25,762,596		(8,722,170	)		17,040,426
Outside production costs and expenses		24,820,397		7,322,772			32,143,169
Compensation expense		25,633,447		(864,000	)		24,769,447
General and administrative expenses		6,459,131		651,000			7,110,131
Total operating expenses		82,675,571		(1,612,398	)		81,063,173
Operating income (loss)		2,847,121		(3,076,437	)		(229,316	)
Income (loss) from continuing operations before provision (benefit) for income taxes		2,934,361		(3,076,437	)		(142,076	)
Provision for income taxes		1,447,525		3,303,794			4,751,319
Net income (loss)		1,486,836		(6,380,231	)		(4,893,395	)
Earnings (loss) income per share from continuing operations:
Basic	$	.21	$	(.92	)	$	(.71	)
Diluted	$	.21	$	(.92	)	$	(.71	)

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
MARCH 31, 2008

	March 31, 2008
	As previously reported			Effect of Restatement			As restated
Cash flow from operating activities
Net income (loss)	$	1,486,836		$	(6,380,231	)	$	(4,893,395	)
Changes in working capital and other		(3,009,774	)		6,380,231			3,370,457

(3)	Summary of Significant Accounting Policies
	(a)	Principles of Consolidation
		The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. In addition, through May 22, 2006, the consolidated financial statements included the accounts of a variable interest entity, Garcia Baldwin, Inc. d/b/a MarketVision (“MarketVision”), an affiliate that provided ethnically oriented marketing and promotional services. The Company owned 49% of the common stock of MarketVision. A third party owned the remaining 51%. The third party owned portion of MarketVision was accounted for as a minority interest in the Company’s consolidated financial statements. As disclosed in Note 10, the Company sold its 49% interest in MarketVision in May 2006, and all amounts relating to MarketVision have been reclassified as discontinued operations in the Company’s financial statements for the 2007 year. All significant intercompany balances and transactions have been eliminated in consolidation.

26

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(3)	Summary of Significant Accounting Policies (Continued)
	(b)	Use of Estimates
		The preparation of the 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 the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances. Actual results could differ from those estimates. See also Note 3(k) re: Revenue Recognition
	(c)	Fair Value of Financial Instruments
		The carrying value of all financial instruments classified as a current asset or liability is deemed to approximate fair value due to the short maturity of these instruments and interest rates that approximate current market rates.
	(d)	Cash and Cash Equivalents
		Investments with original maturities of three months or less at the time of purchase are considered cash equivalents. Due to the short-term nature of the cash equivalents, the carrying value approximates fair value. At March 31, 2008 the Company had approximately $4,434,000 of cash on hand in excess of FDIC insurance limits.
	(e)	Accounts Receivable and Credit Policies
		The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. In addition to reviewing delinquent accounts receivable, management considers many factors in estimating its general allowance, including historical data, experience, customer types, credit worthiness, and economic trends. From time to time, management may adjust its assumptions for anticipated changes in any of those or other factors expected to affect collectibility. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote.
	(f)	Unbilled Contracts in Progress/Accrued Job Costs
		Unbilled contracts in progress represent revenue recognized in advance of billings rendered based on work performed to date on certain contracts. Accrued job costs are also recorded for such contracts to properly match costs and revenue.
	(g)	Deferred Contract Costs
		Deferred contract costs represent direct contract costs and expenses incurred prior to the Company’s related revenue recognition on such contracts. Notwithstanding the Company’s accounting policy with regard to deferred contract costs, labor costs for permanent employees are expensed as incurred.

27

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(3)	Summary of Significant Accounting Policies (Continued)
	(h)	Property and Equipment
		Property and equipment are stated at cost. Depreciation on furniture, fixtures and computer equipment is computed on the straight-line method over the estimated useful lives of the assets, which range from three to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. Funds received from a landlord to reimburse the Company for the cost, or a portion of the cost, of leasehold improvements are recorded as deferred rent and amortized as reductions to rent expense over the lease term.
	(i)	Goodwill and Other Intangible Assets
		Goodwill consists of the cost in excess of the fair value of the acquired net assets of the Company’s subsidiaries. The Company’s other intangible assets consist of an Internet domain name and related intellectual property rights. At March 31, 2008 and 2007, the Company had approximately $7,357,000 of goodwill and a $200,000 carrying value related to the internet domain name.
		Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Impairment tests require the comparison of the fair value and carrying value of reporting units. Measuring fair value of a reporting unit is generally based on valuation techniques using multiples of earnings. The Company assesses the potential impairment of goodwill and other intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Upon completion of such annual review, if impairment is found to have occurred, a corresponding charge will be recorded. The Company has determined that it has three reporting units representing its subsidiaries and as a result of the Company’s annual test to determine whether goodwill and other intangible assets have been impaired as of March 31, 2008, the Company did not identify any indication of goodwill impairment of its reporting units or intangible assets.
	(j)	Revenue Recognition
		The Company’s revenues are generated from projects subject to contracts requiring the Company to provide its services within specified time periods generally ranging up to twelve months. As a result, on any given date, the Company has projects in process at various stages of completion. Depending on the nature of the contract, revenue is recognized as follows: (i) on time and material service contracts, revenue is recognized as services are rendered and the costs are incurred; (ii) on fixed price retainer contracts, revenue is recognized on a straight-line basis over the term of the contract; (iii) on fixed price multiple services contracts, revenue is recognized over the term of the contract for the fair value of segments of the services rendered which qualify as separate activities or delivered units of service; to the extent multi-service arrangements are deemed inseparable, revenue on these contracts is recognized as the contracts are completed; (iv) on certain fixed price contracts, revenue is recognized on a percentage of completion basis, whereby the percentage of completion is determined by relating the actual cost of labor performed to date to the estimated total cost of labor for each contract; (v) on certain fixed price contracts, revenue is recognized on the basis of proportional performance as certain key milestones are delivered. Costs associated with the fulfillment of projects are accrued or deferred and recognized proportionately to the related revenue in order to ensure a matching of revenue and expenses in the proper period. Provisions for anticipated losses on uncompleted projects are made in the period in which such losses are determined.

28

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(3)	Summary of Significant Accounting Policies (Continued)
	(k)	Reimbursable Program Costs and Expenses
		Pursuant to contractual arrangements with some of its clients, the Company is reimbursed for certain program costs and expenses. These reimbursed costs are recorded both as revenues and as operating expenses. Such costs may include variable employee program compensation costs. Not included in reimbursable program costs and expenses are certain compensation and general and administrative expenses which are recurring in nature and for which a certain client fee arrangement provides for payment of such costs. These costs are included in compensation and general and administrative expenses on the statements of operations.
		In July 2000, the Emerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board (“FASB”) released Issue 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”). Additionally, in January 2002, the EITF released Issue 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred” (“EITF 01-14”). EITF 99-19 and EITF 01-14 provide guidance on when client reimbursements, including out of pocket expenses, should be characterized as revenue. Pursuant to such standards, the Company records such client reimbursements as revenue on a gross basis.
	(l)	Deferred Rent
		Deferred rent consists of (i) the excess of the allocable straight line rent expense to date as compared to the total amount of rent due and payable through such period, and (ii) funds received from landlords to reimburse the Company for the cost, or a portion of the cost, of leasehold improvements. Deferred rent is amortized as a reduction to rent expense over the term of the lease.
	(m)	Accounting for Stock-Based Compensation
		On April 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004) – “Share-Based Payment” (“SFAS No. 123R”), which requires the Company to measure all employee stock-based compensation awards using a fair value method and record the related expense in the financial statements over the period during which an employee is required to provide service in exchange for the award. SFAS No. 123R also amends FASB Statement No. 95, “Statement of Cash Flows,” to require that excess tax benefits, as defined, realized from the exercise of stock options be reported as a financing cash inflow rather than as a reduction of taxes paid in cash flow from operations. The Company elected to use the modified prospective transition method, which requires that compensation cost be recognized in the financial statements for all awards granted after the date of adoption as well as for existing awards for which the requisite service has not been rendered as of the date of adoption. For each award that has a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. Stock based employee compensation expense for the years ended March 31, 2008 and 2007 was $433,532 and $292,996 respectively.
	(n)	Income Taxes
		The provision for income taxes includes federal, state and local income taxes that are currently payable. Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

29

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(3)	Summary of Significant Accounting Policies (Continued)
	(n)	Income Taxes (Continued)
		On April 1, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). There was no impact on the Company’s consolidated financial position, results of operations or cash flows at March 31, 2008 and for the year then ended as a result of implementing FIN 48. At the adoption date of April 1, 2007 and at March 31, 2008, the Company did not have any unrecognized tax benefits. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of April 1, 2007 and March 31, 2008, the Company had no accrued interest or penalties related to income taxes. The Company currently has no federal or state tax examinations in progress.
	(o)	Net (Loss) Income Per Share
		Basic (loss) earnings per share is based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed on the same basis, including if dilutive, common share equivalents, which include outstanding options and restricted stock. For purpose of computing diluted earnings per share, 446,209 common share equivalents were assumed to be outstanding for the year ended March 31, 2007. For the years ended March 31, 2008 and 2007, stock options and warrants to purchase approximately 487,016 and 1,848,000 shares of common stock were excluded from the calculation of diluted earnings per share as their inclusion would be anti-dilutive. The weighted average number of shares outstanding consist of:

	2008
	(restated)		2007
Basic		6,935,806	6,837,533
Dilutive effect of options and restricted stock		—	446,209
Diluted		6,935,806	7,283,742

(p)

Recent Accounting Standards Affecting the Company

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. In February 2008, the FASB released FASB Staff Position (FSP FAS 157-2 – Effective Date of FASB Statement No. 157) which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. Management currently believes that the adoption of this statement will not have a material impact on the Company’s financial statements.

30

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(3)	Summary of Significant Accounting Policies (Continued)
	(p)	Recent Accounting Standards Affecting the Company (continued)
		In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value that are currently required to be measured at historical costs. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions for which are required to be applied prospectively. Management currently believes that the adoption of this statement will not have a material impact on the Company’s financial statements.
		In December 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Management currently believes that the adoption of this statement will not have a material impact on the Company’s financial statements.
		In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for annual periods beginning after December 15, 2008. Management currently believes that the adoption of this statement will not have a material impact on the Company’s financial statements.
		In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. Management currently believes that the adoption of this statement will not have a material impact on the Company’s financial statements.

31

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(3)	Summary of Significant Accounting Policies (Continued)
	(p)	Recent Accounting Standards Affecting the Company (continued)
		In May 2008, the FASB issued Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. Prior to the issuance of SFAS 162, GAAP hierarchy was defined in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards (SAS) No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.
		SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. Management currently believes that the adoption of this statement will not have a material impact on the Company’s financial statements.
	(q)	Reclassifications
		Certain amounts as previously reported have been reclassified to conform to current year presentation.
(4)	Property and Equipment
	Property and equipment consist of the following:

	2008
	(Restated)		2007
Furniture, fixtures and computer equipment	$	5,138,711	$	4,461,692
Leasehold improvements		4,215,467		4,213,241
		9,354,178		8,674,933
Less: accumulated depreciation and amortization		5,924,426		5,291,965
	$	3,429,752	$	3,382,968

	Depreciation and amortization expense on property and equipment for the years ended March 31, 2008 and 2007 amounted to $632,461 and $852,948 respectively.
(5)	Notes Payable - Bank
	At March 31, 2007 the Company’s term bank borrowings amounted to $2,000,000 and there were no borrowings outstanding under the revolving line of credit. On June 20, 2007, the Company repaid all bank borrowings, which totaled $1,762,000. Additionally, the Company substituted a $450,000 standby letter of credit issued by its prior lender with a cash security deposit to its landlord. The $450,000 security deposit is included in other assets in the March 31, 2008 balance sheet. (See Note 13.)

32

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(6)	Stockholders’ Equity
	(i) Stock Options
	Under the Company’s 1992 Stock Option Plan (the “1992 Plan”), employees of the Company and its subsidiaries and members of the Board of Directors were granted options to purchase shares of common stock of the Company. The 1992 Plan was amended on May 11, 1999 to increase the maximum number of shares of common stock for which options may be granted to 1,500,000 shares. The 1992 Plan terminated in 2002, although options issued thereunder remain exercisable until the termination dates provided in such options. Options granted under the 1992 Plan were either intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or non-qualified options. Grants under the 1992 Plan were awarded by a committee of the Board of Directors, and are exercisable over periods not exceeding ten years from date of grant. The option price for incentive stock options granted under the 1992 Plan must be at least 100% of the fair market value of the shares on the date of grant, while the price for non-qualified options granted to employees and employee directors is determined by the committee of the Board of Directors. At March 31, 2008, there were 27,500 options issued and outstanding, expiring from April 2008 through April 2011, under the 1992 Plan.
	On July 1, 2002, the Company established the 2002 Long-Term Incentive Plan (the “2002 Plan”) providing for the grant of options or other awards, including stock grants, to employees, officers or directors of, consultants to, the Company or its subsidiaries to acquire up to an aggregate of 750,000 shares of Common Stock. In September 2005, the 2002 Plan was amended so as to increase the number of shares of common stock available under the plan to 1,250,000. Options granted under the 2002 Plan may either be intended to qualify as incentive stock options under the Internal Revenue Code of 1986, or may be non-qualified options. Grants under the 2002 Plan are awarded by a committee of the Board of Directors, and are exercisable over periods not exceeding ten years from date of grant. The option price for incentive stock options granted under the 2002 Plan must be at least 100% of the fair market value of the shares on the date of grant, while the price for non-qualified options granted is determined by the Committee of the Board of Directors. At March 31, 2008, there were 438,750 options, expiring from June 2008 through September 2017, issued under the 2002 Plan that remained outstanding. Any option under the 2002 Plan that is not exercised by an option holder prior to its expiration may be available for re-issuance by the Company. As of March 31, 2008, the Company had 326,898 options or other awards available for grant under the 2002 Plan.
	The maximum contractual option period for any of the Company’s options is ten years. The Company uses the Black-Scholes model to estimate the value of stock options granted under SFAS No. 123R. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of options. The assumptions presented in the table below represent the weighted-average of the applicable assumptions used to value stock options at their grant date. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on the historical exercise experience of the Company’s employees. In determining the volatility assumption, the Company considers the historical volatility of its common stock.

33

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(6)	Stockholders’ Equity (Continued)
	(i) Stock Options (continued)
	The per share weighted-average fair value of stock options granted on their respective date of grant using the modified Black-Scholes option-pricing model and their related weighted-average assumptions are as follows:

	2008		2007
Risk-free interest rate	4.36	%	5.06	%
Expected life – years	5.19		2.85
Expected volatility	62.1	%	55.2	%
Expected dividend yield	0	%	0	%

A summary of option activity under all plans as of March 31, 2008, and changes during the two-year period then ended is presented below:

	Weighted average exercise price		Number of options			Weighted average remaining contractual term		Aggregate intrinsic value
Balance at March 31, 2006	$	2.65		1,766,305
Granted (A)	$	1.62		115,000
Exercised	$	1.22		(371,380	)
Canceled	$	2.78		(758,050	)
Balance at March 31, 2007	$	3.07		751,875
Granted (B)	$	2.31		80,000
Exercised		—		—
Canceled	$	3.56		(365,625	)
Balance at March 31, 2008 (vested and expected to vest)	$	2.55		466,250			4.12	$	153,863
Exercisable at March 31, 2008	$	2.56		446,250			3.73	$	142,800

(A)	Represents options granted to purchase 5,000 shares at an exercise price of $1.90. These options vest evenly over five years, beginning February 9, 2008. Also represents currently exercisable options granted to purchase 30,000 shares at an exercise price of $1.70 and 80,000 shares at an exercise price of $1.57.
(B)	Represents options granted to our non-employee directors - 40,000 shares at an exercise price of $2.26 per share and 40,000 shares at an exercise price of $2.35 per share. Fifty percent of the shares became exercisable on the date of grant and the remaining shares vest within one year from the date of grant.

34

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(6)	Stockholders’ Equity (Continued)
	(i) Stock Options (continued)
	The weighted-average grant-date fair value of options granted during the years ended March 2008 and 2007 was $1.32 and $.71, respectively. No options were exercised during Fiscal 2008. In Fiscal 2007, 371,380 options were exercised with an intrinsic value of approximately $209,500 generating approximately $453,700 of cash proceeds.
	Total unrecognized compensation cost related to unvested stock option awards at March 31, 2008 amounted to $2,195 and is expected to be recognized over a weighted average period of one year. Total compensation cost for the option awards amounted to $104,240 and $121,112 for the years ended March 31, 2008 and 2007, respectively.
	(ii) Warrants
	At the end of March 31, 2008 there were outstanding warrants to purchase an aggregate of 40,766 shares of common stock at an exercise price of $3.68 per share held by one individual. These warrants were to expire on April 30, 2007. In April 2007, in consideration of services provided, the expiration date of these warrants was extended to April 30, 2010.
	(iii) Restricted Stock
	As of March 31, 2008, pursuant to the authorization of the Company’s Board of Directors and certain Restricted Stock Agreements, the Company had awarded 464,352 shares (net of forfeited shares) of common stock under the Company’s 2002 Plan to certain employees. Grant date fair value is determined by the market price of the Company’s common stock on the date of grant. The aggregate value of these shares at their respective grant dates amount to approximately $1,123,901 and are recognized ratably as compensation expense over the vesting periods. The shares of common stock granted pursuant to such agreements vest in various tranches over one to five years from the date of grant.
	The shares awarded to employees under the restricted stock agreements vest on the applicable vesting dates only to the extent the recipient of the shares is then an employee of the Company or one of its subsidiaries, and each recipient will forfeit all of the shares that have not vested on the date his or her employment is terminated.
	As of March 31, 2008, pursuant to the authorization of the Company’s Board of Directors and certain Restricted Stock Agreements, the Company had awarded 300,000 shares of common stock that were not issued under the Company’s 2002 Plan. These shares include the award of 200,000 shares to the Company’s Chief Executive Officer as described below.

35

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(6)	Stockholders’ Equity (Continued)
	(iii) Restricted Stock (continued)
	On October 9, 2006, pursuant to a Restricted Stock Agreement and as approved by the Company’s Board of Directors, the Company awarded 200,000 shares of common stock to its newly appointed President and Chief Executive Officer. Such shares were not issued under the Company’s 2002 Plan. The fair value of these shares was determined by the market price of the Company’s common stock on the date of grant. The value of the shares at the grant date amounted to approximately $380,000. The shares will vest in one installment on October 9, 2011 provided the recipient is then employed by the Company. In addition, as set forth in the Restricted Stock Agreement, the shares will be subject to earlier incremental vesting to the extent the Company’s shares of common stock trade above specified thresholds for a minimum period of 20 consecutive trading days during the term of his employment with the Company. The accelerated vesting will occur as follows:

Share Price Threshold	Percentage of Shares Vested
$3.00	20%
$4.00	40%
$5.00	60%
$6.00	80%
$7.00	100%

A summary of all non-vested stock activity as of March 31, 2008, and changes during the two years then ended is presented below:

	Weighted average grant date fair value		Number of shares			Aggregate Intrinsic Value		Weighted average remaining contractual term
Unvested at March 31, 2006	$	2.13		190,000
Granted	$	1.81		678,750
Vested	$	2.13		(30,000	)
Forfeited	$	1.86		(102,500	)
Unvested at March 31, 2007	$	1.87		736,250
Granted	$	2.65		359,352
Vested	$	1.96		(81,180	)
Forfeited	$	1.99		(361,250	)
Unvested at March 31, 2008	$	2.22		653,172		$	431,094		3.82

36

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(6)	Stockholders’ Equity (Continued)
	(iii) Restricted Stock (continued)
	Total unrecognized compensation cost related to unvested stock awards at March 31, 2008 amounted to $1,169,267 and is expected to be recognized over a weighted average period of 3.77 years. Total compensation cost for the stock awards amounted to $329,992 and $71,844 for the years ended March 31, 2008 and 2007, respectively
(7)	Income Taxes
	The components of income tax provision from continuing operations for the years ended March 31, 2008 and 2007 are as follows:

	2008
	(restated)		2007
Current:
State and local	$	20,639	$	101,450
Federal		25,886		18,765
		46,525		120,215
Deferred:
State and local		25,421		58,734
Federal		144,054		393,063
Change in valuation allowance		4,535,319		—
		4,704,794		451,797
	$	4,751,319	$	572,012

The differences between the provision for income taxes from continuing operations computed at the federal statutory rate and the reported amount of tax expense attributable to income from continuing operations before provision for income taxes for the years ended March 31, 2008 and 2007 are as follows:

	2008
	(restated)			2007
Statutory Federal income tax		(34.0	)%		34.0	%
State and local taxes, net of Federal benefit		(3.6	)		4.6
Permanent differences		(16.8	)		4.9
Stock compensation		210.4			—
Valuation allowance		3,192.2			—
Other		(4.0	)		(10.7	)
Effective tax rate		3,344.2	%		32.8	%

37

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(7)	Income Taxes (Continued)
	The tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities that are included in net deferred tax asset are as follows:

	2008 (restated)			2007
Deferred tax (liabilities) assets:
Current:
Unbilled revenue	$	(1,216,327	)	$	(385,566	)
Allowance for doubtful accounts		155,108			142,317
Accrued compensation		660,184			—
		(401,035	)		(243,249	)
Non-current:
Goodwill, principally due to differences in amortization		383,576			1,656,873
Net operating loss carryforwards		3,459,382			2,938,063
Share-based payment arrangements		781,491			—
Other		311,905			341,478
		4,936,354			4,936,414
Valuation allowance		(4,535,319	)		—
		401,035			4,936,414
Net deferred tax asset	$	—		$	4,693,165

	At March 31, 2008, the Company had federal net operating loss carry-forwards of approximately $8,335,000 that begin to expire March 31, 2024.
	In assessing the realizability of deferred tax assets, management considers, in light of available objective evidence, whether it is more likely than not that some or all of such assets will be utilized in future periods. For financial reporting purposes, the Company has incurred losses for fiscal years 2004 through 2008 aggregating $5,961,000. The Company must generate approximately $11,340,000 of aggregate taxable income, exclusive of any reversals or timing differences, to fully utilize its net deferred tax asset. Accordingly, based upon the available objective evidence, particularly the Company’s history of losses, the Company has provided for a full valuation allowance against its net deferred tax asset at March 31, 2008.
(8)	Significant Customer
	For the years ended March 31, 2008 and 2007, Diageo North America, Inc. (“Diageo”) accounted for approximately 65% and 53%, respectively, of the Company’s revenues. At March 31, 2008 and 2007, Diageo accounted for 62% and 64%, respectively, of the Company’s accounts receivable.

38

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(9)	Employee Benefit Plan
	The Company has a savings plan available to substantially all salaried employees which is intended to qualify as a deferred compensation plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees may contribute up to 15% of their eligible compensation, up to the maximum amount allowed by law. The Company at its sole discretion may from time to time make discretionary matching contributions as it deems advisable. The Company’s current policy is to match its employee’s contributions to the 401(k) Plan at the rate of 50%, with the maximum matching contribution per employee being the lower of 2.5% of salary or $5,750 in any calendar year. For the years ended March 31, 2008 and 2007, the Company made discretionary contributions of approximately $148,000 and $181,000, respectively.
(10)	Investment in MarketVision
	On May 22, 2006, the Company sold its 49% interest in MarketVision back to MarketVision for $1,100,000. In connection with the sale, the Company recorded a pre-tax gain of approximately $175,000 and an after tax loss of approximately $127,000 in fiscal 2007. The after tax loss reflects a tax provision of approximately $302,000 on the sale and reflects the estimated tax due as a result of the sale. This tax provision reflects the difference in the book and tax basis of the Company’s holdings in MarketVision and resulted in a corresponding reduction in the Company’s deferred tax asset on its consolidated balance sheet. The after tax loss of approximately $127,000 is included in the computation of the loss from discontinued operations in the Company’s consolidated statement of operations. The results of operations for MarketVision for the period April 1, 2006 through May 22, 2006 have been reclassified to discontinued operations, on a net of tax basis. Summarized financial information for MarketVision, reflected as discontinued operations, is as follows:
	Results of Operations for the period April 1, 2006 through May 22, 2006:

Sales	$	1,197,677
Operating expenses:
Reimbursable program costs and expenses		617,663
Outside production and other program expenses		151,184
Compensation expense		397,082
General and administrative expenses		163,705
Total operating expenses		1,329,634
Operating (loss)		(131,957	)
Interest (expense)		(1,963	)
Benefit for income taxes		32,591
Minority interest		51,679
Net (loss)	$	(49,650	)

39

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(11)	Related Party Transactions
	(a)	In connection with the Company’s acquisition of Optimum, the Company entered into a lease agreement with Thomas Lachenman, a former director of the Company and former owner of Optimum, for the lease of the Cincinnati principal office of Optimum. The lease provides for an annual rental, adjusted annually based upon changes in the local consumer price index. Rent expense under this lease amounted to approximately $178,000 and $173,000 in 2008 and 2007, respectively. The lease expires in December 2010.
	(b)	On June 14, 2006, the Board of Directors accepted the resignation of John Benfield, the Company’s Chief Executive Officer, and appointed Marc C. Particelli, a member of the Company’s Board of Directors, to serve as Chief Executive Officer and Chairman of the Board on an interim basis. Both Mr. Benfield’s resignation and Mr. Particelli’s appointment were effective as of July 12, 2006.
		In connection with his appointment as interim Chief Executive Officer, the Board and Mr. Particelli entered into an employment agreement pursuant to which Mr. Particelli was to be paid an annual salary of $250,000 for devoting approximately 50% of his working time to the Company. In addition, for his agreement to serve as interim Chief Executive Officer, the Board approved the grant to Mr. Particelli of a five-year stock option to purchase 80,000 shares of the Company’s common stock at a price of $1.57 per share (the market price of the common stock on the date the grant was authorized), 40,000 which vested immediately and the balance vesting upon the earlier of the selection by the Company of a permanent Chief Executive Officer or June 20, 2007. Accordingly, in October 2006, upon the appointment of the Company’s new Chief Executive Officer, the remaining 40,000 shares of unvested options pursuant to this agreement became vested.
		In addition, in connection with his resignation, the Company entered into an agreement with Mr. Benfield pursuant to which Mr. Benfield continued to be paid his salary and receive the same benefits previously provided to him by the Company for a period of one year following his termination. The Company recorded a pre-tax charge of approximately $330,000 during the year ended March 31, 2007 in connection with its obligations under the agreement with Mr. Benfield.
	(c)	On October 9, 2006, the Company entered into a three year employment agreement with Charles Tarzian under which Mr. Tarzian joined the Company as its President and Chief Executive Officer, replacing Marc C. Particelli, who had been serving as Chairman of the Board and Chief Executive Officer on an interim basis. The employment agreement with Mr. Tarzian is for a three-year term and provides Mr. Tarzian with:
		•	An annual base salary of $375,000.
		•	An annual bonus based on the achievement of annual performance targets approved by the Company’s Board of Directors.
		•	An award of 200,000 shares of the Company’s common stock under a Restricted Stock Agreement. The shares will vest in one installment on October 9, 2011 provided Mr. Tarzian is then employed by the Company. In addition, as set forth in the Restricted Stock Agreement, the shares will be subject to earlier incremental vesting to the extent the Company’s shares of common stock trade above specified thresholds for a minimum period of 20 consecutive trading days during the term of his employment with the Company.

40

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(11)	Related Party Transactions (Continued)
		•	Up to an additional 50,000 shares of restricted Common Stock per year based on the achievement of annual targets approved by the Company’s Board of Directors.
		In addition, pursuant to the employment agreement, in the event that Mr. Tarzian’s employment is terminated by the Company without “Cause” or by Mr. Tarzian for “Good Reason”, Mr. Tarzian will be entitled to six months severance pay. In connection with Mr. Tarzian’s appointment as President and Chief Executive Officer, the Company’s Board of Directors approved compensation for Mr. Particelli, as the Company’s non-executive Chairman of the Board following such appointment, in the amount of $100,000 per annum.
		On February 23, 2009, the Company’s Board of Directors accepted the resignation of Mr. Tarzian, effective March 1, 2009, as the Company’s Chief Executive Officer. In addition, Mr. Tarzian resigned from the Company’s Board of Directors.
		Pursuant to certain Restricted Stock Agreements, the Company previously granted Mr. Tarzian 250,000 shares of common stock under its 2002 Plan. In connection with his resignation, 240,000 shares of non-vested stock were forfeited.
(12)	Leases
		The Company has several non-cancelable operating leases, primarily for property, that expire through 2015. One of the Company’s facilities is leased from the former owner of Optimum, who is also a former director of the Company. This lease expires in December 2010. The Company incurred rent expense under this related party lease in Fiscal 2008 and 2007 in the amounts of approximately $178,000 and $173,000, respectively. Rent expense for the years ended March 31, 2008 and 2007 amounted to approximately $1,314,000 and $1,456,000, respectively. Future non-cancelable minimum lease payments under all of the leases as of March 31, 2008 are as follows:

Year ending March 31,
2009	$	1,292,000
2010		726,000
2011		152,000
2012		1,000
2013		1,000
Thereafter		—
	$	2,172,000

In October, 2008 the Company exercised its one-time option to terminate early its sublease for its principal office space in New York, effective October 25, 2009, and paid a non-refundable cancellation fee of $342,182 to the landlord. The Company anticipates that relocating its New York offices to other New York office space will result in cost savings, as the lease payments for its current space are subject to contractual increase above the currently estimated market rate for such space. The lease payments disclosed in the above schedule do not reflect future costs associated with the Company’s new office space.

41

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(13)	Subsequent Events
	Revolving Line of Credit
	On June 26, 2008, the Company entered into a Credit Agreement (the “Credit Agreement”) with Sovereign Bank (the “Lender”). Pursuant to the Credit Agreement, the Lender provided the Company with (i) a $2.5 million term loan (the “Term Loan”), which was funded in full on June 30, 2008 in connection with the acquisition of 3 For All Partners LLC, and (ii) a $2.5 million revolving credit facility (the “Revolving Credit Facility”). Borrowings under the Revolving Credit Facility are used for working capital purposes. The Term Loan and Revolving Credit Facility have been guaranteed by the Company’s subsidiaries and are secured by substantially all of their assets pursuant to a Security Agreement entered into by the Company and its subsidiaries in favor of the Lender. Pursuant to the Credit Agreement, among other things:
	•	All outstanding loans under the Credit Agreement will become due on June 30, 2011 (the “Maturity Date”).
	•	The Term Loan will be repaid in 12 consecutive quarterly installments commencing on September 30, 2008. The first 11 installments will be in the amount of $168,750, with a final payment in the amount of $643,750 being due on the Maturity Date.
	•	Interest accrues on outstanding loans under the Credit Agreement at a per annum rate equal to, at the Company’s option, the prime rate from time to time in effect (but in no event less than the Federal Funds Rate plus one-half percent), or a LIBOR rate selected by the Company, plus a margin of 2.25%.
	•	The Company is required to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants restrict the Company’s ability to pay dividends, limit annual capital expenditures, provide that the Company’s “Consolidated Debt Service Coverage Ratio” cannot be less than 1.5 to 1.0 as of the end of any fiscal quarter, that its “Consolidated Leverage Ratio” can not exceed 2:25 to 1:00 at the end of any fiscal quarter, and that the Company can not incur a “Consolidated Pre-Tax Net Loss” in excess of $500,000 in the aggregate in any period of two consecutive fiscal quarters.
	As of each of June 30, September 30 and December 31, 2008, the Company was not in compliance with one or more of these financial covenants. In addition, as a result of the restatement described in Note 2 above, the Company breached its financial reporting obligations under the Credit Agreement. On April 28, 2009, the Company and the Lender entered into a letter agreement pursuant to which the Lender agreed to enter into an amendment and waiver to the Credit Agreement under which (i) the Lender waives the Company’s past non-compliance with the financial covenants and reporting obligations, (ii) indefinitely suspends the revolving credit facility, (iii) requires the Company to maintain deposits with the Lender at all times in an amount not less then the outstanding balance of the term loan as cash-collateral therefor, and (iv) suspends the Company’s obligation to comply with the financial covenants in the future during the period in which the revolving credit facility is suspended and the term loan is fully cash-collateralized.
	Acquisition of 3 For All Partners, LLC
	On June 30, 2008, the Company, through its wholly-owned subsidiary U.S. Concepts LLC, acquired substantially all of the assets of 3 For All Partners, LLC, d/b/a mktgpartners (“mktgpartners”) pursuant to an Asset Purchase Agreement between the Company, U.S. Concepts LLC, mktgpartners and mktgpartners’ members. Founded in 2003, mktgpartners focuses on entertainment and sports marketing, experiential marketing and promotional media, and is headquartered in New York, with additional offices in Chicago, San Francisco and Toronto.

42

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(13)	Subsequent Events (Continued)
	Acquisition of 3 For All Partners, LLC (continued)
	The consideration for the acquisition consisted of $3.25 million in cash and 332,226 common shares (the “Share Consideration”) of the Company’s common stock, valued at approximately $1,000,000. In addition the Company incurred $98,251 in direct acquisition costs.
	In connection with the acquisition, the Company hired all of mktgpartners’ employees and issued 166,113 shares of restricted common stock of the Company, valued at approximately $500,000, to certain of those employees. The restricted shares vest annually in equal installments over five years.
	Pursuant to the Asset Purchase Agreement, $750,000 of the cash consideration and the entire Share Consideration were deposited into an escrow account to be held for a period of 18 months to satisfy indemnification claims, if any, that may be made by the Company under the Asset Purchase Agreement. In addition, as more fully set forth in the Asset Purchase Agreement, all or a portion of the escrowed consideration will be subject to release to the Company upon the occurrence of certain specified events under the Asset Purchase Agreement, including the termination of employment (other than due to death or by the Company without cause), of certain key employees of mktgpartners during the first year following the closing of the acquisition, and the failure to achieve “Gross Margin” targets during the 12 month period following the closing.
	The following table summarizes the preliminary allocation of the $3,348,251 purchase price utilizing the estimated fair values of the assets acquired at June 30, 2008. The Company is currently in the process of obtaining third-party valuations of certain intangible assets, therefore the allocation of the purchase price is subject to adjustment.

Purchase price - cash	$	3,250,000
Direct acquisition costs		98,251
Total purchase price (excluding share consideration)	$	3,348,251
Property and equipment	$	44,809
Goodwill and other intangible assets		3,303,442
Total asset acquired	$	3,348,251

The $3,303,442 of goodwill and other intangible assets were assigned to the US Concepts, LLC reporting unit, all of which is expected to be deductible for income tax reporting purposes.

43

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(13)	Subsequent Events (Continued)
	Acquisition of 3 For All Partners, LLC (continued
	Pro Forma Results of Operations (unaudited)
	The following pro forma results of operations for the years ended March 31, 2008 and 2007 have been prepared as though the acquisition of mktgpartners had occurred as of the beginning of the earliest period presented (April 1, 2006). This pro forma financial information is not indicative of the results of operations that the Company would have attained had the acquisition of mktgpartners occurred at the beginning of the periods presented, nor is the pro forma financial information indicative of the results of operations that may occur in the future:

	2008
	(restated)			2007
Pro forma sales	$	97,874,193		$	107,579,143
Pro forma loss	$	(4,378,087	)	$	(186,686	)
Pro forma basic loss per share	$	(.63	)	$	(.03	)
Pro forma diluted loss per share	$	(.63	)	$	(.03	)

(14)	Selected Quarterly Consolidated Financial Data (Unaudited)
	Set forth below is quarterly data with respect to each fiscal quarter in the Company’s fiscal years ended March 31, 2007 and 2008. As a result of the errors described in Note 2 “Restatement of Financial Statements”, previously reported consolidated Statements of Operations for each of the fiscal quarters in the fiscal year ended March 31, 2008 have been restated.

	First Quarter Ended June 30, 2007
	As previously reported			Effect of Restatement			As restated
Sales	$	20,408,420		$	1,033,668		$	21,442,088
Operating expenses		20,789,818			938,409			21,728,227
Operating (loss) income		(381,398	)		95,259			(286,139	)
Net (loss)	$	(246,236	)	$	(78,741	)	$	(324,977	)
Net (loss) per common share:
Basic	$	(.04	)	$	(.01	)	$	(.05	)
Diluted	$	(.04	)	$	(.01	)	$	(.05	)
Weighted average common shares:
Basic		6,923,751						6,923,751
Diluted		6,923,751						6,923,751

	Second Quarter Ended September 30, 2007
	As previously reported		Effect of Restatement			As restated
Sales	$	17,831,661	$	(3,355,758	)	$	14,475,903
Operating expenses		16,482,178		(2,195,078	)		14,287,100
Operating income		1,349,483		(1,160,680	)		188,803
Net income	$	821,598	$	(641,614	)	$	179,984
Net income per common share:
Basic	$	.12	$	(.09	)	$	.03
Diluted	$	.12	$	(.09	)	$	.03
Weighted average common shares:
Basic		6,929,311					6,929,311
Diluted		7,091,856					7,091,856

44

‘mktg, inc.’
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2008 AND 2007

(14) Selected Quarterly Consolidated Financial Data (Unaudited) (Continued)

	Third Quarter Ended December 31, 2007
	As previously reported		Effect of Restatement			As restated
Sales	$	24,144,613	$	(398,863	)	$	23,745,750
Operating expenses		22,860,032		341,463			23,201,495
Operating income		1,284,581		(740,326	)		544,255
Net income	$	840,060	$	(334,368	)	$	505,692
Net income per common share:
Basic	$	.12	$	(.05	)	$	.07
Diluted	$	.12	$	(.05	)	$	.07
Weighted average common shares:
Basic		6,940,510					6,940,510
Diluted		7,181,518					7,181,518

	Fourth Quarter Ended March 31, 2008
	As previously reported		Effect of Restatement			As restated
Sales	$	23,137,998	$	(1,967,882	)	$	21,170,116
Operating expenses		22,543,543		(697,192	)		21,846,351
Operating (loss) income		594,455		(1,270,690	)		(676,235	)
Net (loss) income	$	71,414	$	(5,325,508	)	$	(5,254,094	)
Net (loss) income per common share:
Basic	$	.01	$	(.77	)	$	(.76	)
Diluted	$	.01	$	(.77	)	$	(.76	)
Weighted average common shares:
Basic		6,950,706					6,950,706
Diluted		7,074,628					6,950,706

Selected quarterly consolidated financial data for the year ended March 31, 2007 is presented below:

	First Quarter Ended June 30, 2006		Second Quarter Ended September 30, 2006		Third Quarter Ended December 31, 2006		Fourth Quarter Ended March 31, 2007
Sales	$	27,021,465	$	25,650,355	$	23,938,534	$	19,269,604
Operating expenses		25,485,242		23,875,271		23,854,374		20,678,400
Operating income (loss)		1,536,223		1,775,084		84,160		(1,408,796	)
Net income (loss)	$	756,362	$	862,912	$	88,126	$	(711,349	)
Net income (loss) per common share:
Basic	$	.11	$	.13	$	.01	$	(.10	)
Diluted	$	.11	$	.12	$	.01	$	(.10	)
Weighted average common shares:
Basic		6,785,054		6,849,751		6,855,575		6,859,751
Diluted		7,012,784		7,161,932		7,393,459		6,859,751

45

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
	Not Applicable.
Item 9A(T).	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

          Our management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our “disclosure controls and procedures” as defined in Exchange Act Rule 13a-15(e) as of March 31, 2008 in connection with our filing of this Annual Report Form 10-K/A. Based on that evaluation, and in light of the material weakness described below which required the restatement of our financial statements for the year then ended as described elsewhere in this report, our Principal Executive Officer and Principal Financial Officer concluded that as of March 31, 2008 our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

Management’s Report On Internal Control Over Financial Reporting (Restated)

          Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our management, with the participation of our Chief Executive Officer and Principal Financial Officer, evaluates the effectiveness of our internal control over financial reporting. This evaluation is based on the framework 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 a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

          In connection with the preparation of the consolidated financial statements as of and for the quarter ended September 30, 2008, management determined that a number of clerical and accounting errors had been made in preparing its financial statements for the year ended March 31, 2008, as well as the subsequent fiscal quarter ended June 30, 2008, primarily in connection with the calculation and recognition of revenue, including reimbursable and outside production costs and expenses, and properly recording general and administrative expenses in the periods in which they were incurred. In addition, certain expense items were incorrectly classified as deferred contract costs instead of general and administrative expenses. As a result of these errors, we have restated our consolidated financial statements for the year ended March 31, 2008 and the interim periods within that year by filing this Form 10-K/A. Please see Note 2 to the Consolidated Financial Statements included as Item 8 to this Form 10-K/A for a complete description of the effects of the restatement on our financial statements.

          The errors described above, including in particular the failure to maintain effective controls over revenue recognition and related expense classifications, have been identified by management as constituting material weaknesses in its internal control over financial reporting which was in existence as of March 31, 2008 and affected the financial reporting for the periods within that fiscal year. Specifically, we did not maintain effective controls to ensure that the revenue recognition template being utilized to calculate revenue earned for the period maintained its mathematical integrity from period to period. In addition, we did not maintain effective controls to ensure that certain expenses incurred in connection with client projects were properly reflected as an operating expense instead of being classified as a deferred contract cost. These control deficiencies resulted in the restatement of our annual and interim financial statements for the fiscal year ended Mach 31, 2008, as well as the interim financial statements for the quarter ended June 30, 2008.

46

          The above deficiencies and related errors, which were identified by management and brought by management to the attention of our auditors and Audit Committee, are believed to have been inadvertent and unintentional, and related in part, among other things, to a change in our accounting software during Fiscal 2008 and personnel changes. In addition, following the discovery of these errors, we have begun implementing remedial measures in order to improve and strengthen our internal control over financial reporting and avoid future misstatements of our financial statements. As of the date of filing this Amendment No. 2, the remedial measures we have implemented include the following:

• We have restructured our accounting and finance departments so that reporting and oversight responsibilities are clearly defined;

• We have shifted the responsibility and maintenance of our revenue recognition worksheets from our customer management teams to the accounting department, and added additional processes designed to ensure that revenue and related costs attributable to client programs are effectively accounted for;

• We have increased the level of supervision over our accounting and finance personnel;

• We have modified and simplified the job cost module of our accounting software so that it can be more effectively utilized; and

• We have made changes to our employee expense reimbursement procedures.

          We are monitoring the effectiveness of these measures, and may take further action as we deem appropriate to further strengthen our internal control over financial reporting. However, we do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been or will be detected.

          This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

          There has been no change in our internal control over financial reporting during the quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART III

The information required to be disclosed in Part III (Items 10, 11, 12, 13 and 14, and fees and services) will be incorporated by reference from the Company’s definitive proxy statement if filed prior to July 30, 2008 or, if such proxy statement is not filed by such date, such information will be disclosed by amendment to this Form 10-K prior to July 30, 2008.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

          (a) The following documents are filed as part of this Report.

               1. Financial Statements:

	Page
Index to Financial Statements	18
Report of Independent Registered Public Accounting Firm - Successor	19
Report of Independent Registered Public Accounting Firm - Predecessor	20
Consolidated Financial Statements:
Balance Sheets as of March 31, 2008 (Restated) and 2007	21
Statements of Operations for the years ended March 31, 2008 (Restated) and 2007	22
Statements of Stockholders’ Equity for the years ended March 31, 2008 (Restated) and 2007	23
Statements of Cash Flows for the years ended March 31, 2008 (Restated) and 2007	24
Notes to Consolidated Financial Statements	25

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3. Exhibits:

Exhibit
Number	Description of Exhibits.
3.1	Certificate of Incorporation, as amended, of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the three month period ended September 30, 1999, initially filed with the Securities and Exchange Commission on November 22, 1999).
3.2	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on December 4, 2007).
10.1*	‘mktg, inc.’ Marketing Group, Inc. 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit A to Registrant’s Definitive Proxy Statement initially filed with the Securities and Exchange Commission on July 29, 2002).
10.2	Stock Purchase Agreement, dated as of May 22, 2006, by and between the Registrant, Yvonne Garcia and Market Vision (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 22, 2006, filed with the Securities and Exchange Commission on May 22, 2006).
10.3*	Employment Agreement dated June 20, 2006 between Registrant and Marc C. Particelli (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June 14, 2006, filed with the Securities and Exchange Commission on June 20, 2006).
10.4*	Agreement dated June 19, 2006 between Registrant and John P. Benfield (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated June 14, 2006, filed with the Securities and Exchange Commission on June 20, 2006).
10.5*	Employment Agreement dated October 9, 2006 between Registrant and Charles Tarzian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 9, 2006, filed with the Securities and Exchange Commission on October 10, 2006).
10.6*	Restricted Stock Agreement dated October 9, 2006 between Registrant and Charlie Tarzian (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated October 9, 2006, filed with the Securities and Exchange Commission on October 10, 2006).
10.7*	Form of Indemnification Agreement for Directors and Officers, dated as of November 8, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 8, 2006, filed with the Securities and Exchange Commission on November 14, 2006).
10.8*	Agreement, dated as of March 27, 2007, between the Registrant and Paul Amershadian (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated March 28, 2007, filed with the Securities and Exchange Commission on April 2, 2007).
10.9*	Employment Agreement dated April 2, 2007 between Registrant and Brian Murphy (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 2, 2007, filed with the Securities and Exchange Commission on April 6, 2007).
10.10*	Agreement, dated as of April 30, 2007, between the Registrant and Erwin Mevorah (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 30, 2007, filed with the Securities and Exchange Commission on April 30, 2007).

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10.11*	Letter Agreement dated as of September 28, 2007, between the Registrant and Fred Kaseff (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 15, 2007, filed with the Securities and exchange Commission on October 16, 2007).
10.12*	Registered Stock Agreement dated October 15, 2007 between Registrant and Fred Kaseff incorporated by reference to Exhibit 10.2 to the Registrant’s Report on Form 8-K dated October 15, 2007, filed with the Securities and exchange Commission on October 16, 2007).
14	Registrant’s Code of Ethics (incorporated by reference to Exhibit 14 to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004, initially filed with the Securities and Exchange Commission on July 22, 2004).
21	Subsidiaries of the Registrant (incorporated by reference to Exhibit 14 to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006, initially filed with the Securities and Exchange Commission on July 12, 2006).
23.1	Consent of Parente Randolph, LLC
23.2	Consent of Lazar Levine & Felix LLP
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act.
31.2	Certification of Principal Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act.
32.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act.
32.2	Certification of Principal Accounting Officer pursuant to Rule 13a-14(b) of the Exchange Act.
*	Indicates a management contract or compensatory plan or arrangement

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SIGNATURES

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

‘mktg, inc.’
By:	/s/ James R. Haughton
	James R. Haughton
	Senior Vice President- Controller
	(principal financial officer)
	Dated: May 8, 2009

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