<table>
            <tbody><tr style="FONT-SIZE: 1px">
                <td valign="top" width="5%">
                    <p>&nbsp;</p>
                </td>

                <td valign="top" width="5%">
                    <p>&nbsp;</p>
                </td>

                <td valign="top" width="90%">
                    <p>&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p><font size="2">(1)</font></p>
                </td>

                <td valign="top" colspan="2">
                    <p><font size="2"><u>Organization and Nature of Business</u></font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p>&nbsp;</p>
                </td>

                <td valign="top">
                    <p>&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">‘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 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.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">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.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify"><font size="2">(2)</font></p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2"><u>Going Concern Uncertainty</u></font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company realized net losses of $2,787,693 and $4,893,395 for the years ended March 31, 2009, and 2008, respectively. In addition, as of March 31, 2009, current liabilities exceeded current assets by
                    $8,965,591.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">Subsequent to the end of Fiscal 2009, the Company experienced a reduction in deferred revenues (i.e., advance payments by clients), and were required to repay approximately $1.6 million in advance billings to Diageo as a result of a reduction in our Diageo business, which further negatively impacted our working capital deficit. </font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">As more fully discussed in Note 6, as a result of our failure to comply with various financial and other covenants under the Credit Agreement with Sovereign Bank our credit facility was indefinitely suspended. In August 2009, because of our inability to borrow, the Company terminated the Credit agreement with its bank and paid off the then outstanding term loan balance.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">In view of these matters, realization of the assets on the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements, and the success of its future operations.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">Due to our recent performance, management has taken substantial steps at the end of Fiscal 2009 and thereafter to reduce expenses and to reset the direction of the business into areas and markets consistent with our core capabilities. These steps include the reduction of our workforce by approximately 60 full-time persons in the aggregate and other cost cutting measures which are expected to reduce compensation, general and administrative
                    expenses by approximately $8.6 million in the aggregate on an annual basis, and by $6.2 million in Fiscal 2010.&nbsp;Management’s forecast of its revenues also reflect a decrease of 22% for fiscal 2010 when compared to Fiscal 2009, and a 6% increase in Fiscal 2011 over that forecasted for Fiscal 2010. We expect that the June 30, 2008 acquisition of the assets of mktgpartners will result in increased future revenues but there can be no complete assurance that this will
                    occur.</font></p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify">&nbsp;</p>
                </td>
            </tr>

            <tr>
                <td valign="top">
                    <p align="justify">&nbsp;</p>
                </td>

                <td valign="top" colspan="2">
                    <p align="justify"><font size="2">In light of our pressing cash needs caused by the events described above, on December 15, 2009, the Company consummated a $5 million financing led by an investment vehicle organized by Union Capital Corporation. In the financing, the Company issued $2.5 million in aggregate principal amount of Senior Secured Notes, $2.5 million in aggregate stated value of Series D Convertible Participating Preferred Stock initially convertible into
                    5,319,149 shares of Common Stock, and Warrants to purchase 2,456,272 shares of Common Stock. While the Secured Notes are outstanding the Company will be subject to certain financial covenants. See Note 14 – Subsequent Events for further details.</font></p>
                </td>
            </tr>
        </tbody></table>
<table>
<tbody><tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p><font>(1)</font></p>
</td>
<td>
<p><font><u>Organization and Nature of Business</u></font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>‘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 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.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>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.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p><font>(2)</font></p>
</td>
<td>
<p><font><u>Going Concern Uncertainty</u></font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company realized net losses of $2,787,693 and $4,893,395 for the years ended March 31, 2009, and 2008, respectively. In addition, as of March 31, 2009, current liabilities exceeded current assets by
                    $8,965,591.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>Subsequent to the end of Fiscal 2009, the Company experienced a reduction in deferred revenues (i.e., advance payments by clients), and were required to repay approximately $1.6 million in advance billings to Diageo as a result of a reduction in our Diageo business, which further negatively impacted our working capital deficit. </font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>As more fully discussed in Note 6, as a result of our failure to comply with various financial and other covenants under the Credit Agreement with Sovereign Bank our credit facility was indefinitely suspended. In August 2009, because of our inability to borrow, the Company terminated the Credit agreement with its bank and paid off the then outstanding term loan balance.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>In view of these matters, realization of the assets on the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements, and the success of its future operations.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>Due to our recent performance, management has taken substantial steps at the end of Fiscal 2009 and thereafter to reduce expenses and to reset the direction of the business into areas and markets consistent with our core capabilities. These steps include the reduction of our workforce by approximately 60 full-time persons in the aggregate and other cost cutting measures which are expected to reduce compensation, general and administrative
                    expenses by approximately $8.6 million in the aggregate on an annual basis, and by $6.2 million in Fiscal 2010. Management’s forecast of its revenues also reflect a decrease of 22% for fiscal 2010 when compared to Fiscal 2009, and a 6% increase in Fiscal 2011 over that forecasted for Fiscal 2010. We expect that the June 30, 2008 acquisition of the assets of mktgpartners will result in increased future revenues but there can be no complete assurance that this will
                    occur.</font></p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p> </p>
</td>
</tr>
<tr>
<td>
<p> </p>
</td>
<td>
<p><font>In light of our pressing cash needs caused by the events described above, on December 15, 2009, the Company consummated a $5 million financing led by an investment vehicle organized by Union Capital Corporation. In the financing, the Company issued $2.5 million in aggregate principal amount of Senior Secured Notes, $2.5 million in aggregate stated value of Series D Convertible Participating Preferred Stock initially convertible into
                    5,319,149 shares of Common Stock, and Warrants to purchase 2,456,272 shares of Common Stock. While the Secured Notes are outstanding the Company will be subject to certain financial covenants. See Note 14 – Subsequent Events for further details.</font></p>
</td>
</tr>
</tbody></table>