This report contains forward-looking statements 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 the Company's management as well as assumptions made by and information currently available to the Company's 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 the current views of the Company 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 the Company's expectations are set forth in the Company's Amendment No. 2 to Annual Report on Form 10-K/A for the fiscal year ended March 31, 2008 under "Risk Factors," including but not limited to "Recent Losses," "Customers," "Dependence on Key Personnel," "Unpredictable Revenue Patterns," "Competition," and "Risks Associated with Acquisitions," in addition to other information set forth herein and elsewhere in our other public filings with the Securities and Exchange Commission. The forward-looking statements contained in this report speak only as of the date hereof. The Company does 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.

Overview

'mktg, 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.

On June 30, 2008, the Company, through its subsidiary U.S. Concepts LLC, acquired substantially all of the assets of 3 For All Partners, LLC d/b/a mktgpartners ("mktgpartners"), a marketing services company. 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 pursuant to an Asset Purchase Agreement between the Company, U.S. Concepts LLC, mktgpartners and mktgpartners' members. The foregoing summary does not purport to be complete and is subject to and qualified in its entirety by reference to the actual text of the Asset Purchase Agreement, which has been filed as Exhibit 10.4 to the Company's Current Report on Form 8-K filed July 2, 2008.

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; San Francisco, California and Toronto, Ontario.

'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. On September 18, 2008, we changed our name from CoActive Marketing Group, Inc. to 'mktg, inc.'

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.mktg.com. Copies of all reports we file with the Securities and Exchange Commission are available on our Web site.

Restatement of Financial Statements

This Form 10-Q/A reflects a restatement of our consolidated financial statements for the quarter ended June 30, 2008 and fiscal year ended March 31, 2008 as discussed in Note 2 to the financial statements included in Item 1 of this Quarterly Report on Form 10-Q/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 for the quarter ended June 30, 2008 and year ended March 31, 2008, primarily in connection with the calculation and recognition of revenue, including reimbursable and outside production costs and expenses, and properly expensing 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 Amendment No. 2 to our Annual Report on Form 10-K/A for the year ended March 31, 2008, filed with the Securities and Exchange Commission on May 8, 2009.

Results of Operations

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.

The following table presents operating data expressed as a percentage of Operating Revenue for each of the fiscal quarters ended June 30, 2008 and 2007, respectively:

                                           Three Months Ended
                                           June 30, (restated)

                                            2008          2007


Statement of Operations Data:
Operating revenue                          100.0 %      100.0 %
Compensation expense                        89.0 %       81.8 %
General and administrative expense          21.9 %       22.2 %
Operating loss                             (10.9 %)      (4.0 %)
Interest income, net                         0.1 %        0.2 %
Loss before provision for income taxes     (10.8 %)      (3.8 %)
Provision for income taxes                   0.0 %         .8 %
Net loss                                   (10.8 %)      (4.6 %)

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 three months ended June 30, 2008 increased by 3.7% to $22,238,000, compared to $21,442,000 for the quarter ended June 30, 2007. This $796,000 increase in sales reflects growth in the number of events we executed for Diageo.

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. Reimbursable program costs and expenses for the three months ended June 30, 2008 and 2007 were $4,709,000 and $6,659,000, respectively. This $1,950,000 decrease was primarily due to a decrease in the number of events we executed during the three month period ended June 30, 2008 versus the same period in Fiscal 2007.

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 and other program expenses for the three months ended June 30, 2008 were $9,763,000 compared to $7,689,000 for the three months ended June 30, 2007. Outside production and other program expenses can fluctuate greatly from quarter to quarter based on the nature of the projects we execute for our clients.

                                                        Three Months Ended
                                                       June 30, (restated)

              Sales                      2008            %             2007            %

Sales - U.S. GAAP                    $ 22,238,000           100    $ 21,442,000           100

Reimbursable program costs and
outside production expenses            14,472,000            65      14,348,000            67

Operating Revenue - Non-GAAP         $  7,766,000            35    $  7,094,000            33

Compensation Expense. Compensation expense, exclusive of reimbursable program costs and expenses and other program expenses, 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 the three months ended June 30, 2008, compensation expense was $6,909,000, compared to $5,801,000 for the three months ended June 30, 2007, an increase of $1,108,000. The increase in compensation expense for the three months ended June 30, 2008 reflects additional costs associated with recruiting senior talent to support our technology, marketing and finance groups.

General and Administrative Expenses. General and administrative expenses, consisting of office and equipment rent, depreciation and amortization, professional fees, other overhead expenses and charges for doubtful accounts, were $1,702,000 for the three months ended June 30, 2008, compared to $1,579,000 for the three months ended June 30, 2007, an increase of $123,000.

Interest Income, Net. Net interest income for the three months ended June 30, 2008 was $10,000 compared to $15,000 for the three months ended in June 30, 2007. Interest income consists primarily of interest on our money market and CD accounts that paid interest at average rates of approximately 2.85% and 3.25% for the three months ended June 30, 2008 and 2007, respectively.

Loss before Provision for Income Taxes. The Company's loss before the benefit for income taxes for the three months ended June 30, 2008 and 2007 amounted to $835,000 and $271,000, respectively.

Provision for Income Taxes. We did not record a benefit for federal, state and local income taxes for the three months ended June 30, 2008 because any such benefit would be fully offset by an increase in the valuation allowance against the Company's net deferred tax asset established as a result of our historical operating losses. The provision for income taxes for the three months ended June 30, 2007 was comprised of minimum state income taxes and the impact of a change in estimate of the Company's net operating loss carryforward.

Net Loss. As a result of the items discussed above, net loss for the three months ended June 30, 2008 was $835,000 compared to net loss of $325,000 for the three months ended June 30, 2007. Fully diluted loss per share amounted to $.12 for the three months ended June 30, 2008, compared to a loss of $.05 per share in the three months ended June 30, 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 bank financing made available to us, 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 three months ended June 30, 2008 the working capital deficit increased by $2,259,000 to $6,118,000.

On June 26, 2008 the we entered into a Credit Agreement with Sovereign Bank under which we were provided with a three-year revolving credit facility in the principal amount of $2,500,000 for working capital purposes, and a three-year term loan in the amount of $2,500,000 that was used to fund a portion of the purchase price for the assets of 3 For All Partners, LLC.

† 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 our option, the prime rate (5.0% at June 30, 2008) 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 us, plus a margin of 2.25%.
† We are required to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants restrict our ability to pay dividends, limit annual capital expenditures, provide that our "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 we 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 June 30, 2008, we were not in compliance with these financial covenants. In addition, as a result of the restatement of our financial statements, we breached our financial reporting obligations under the Credit Agreement. On April 28, 2009, we entered into a letter agreement with Sovereign Bank pursuant to which Sovereign Bank agreed to enter into an amendment and waiver to the Credit Agreement under which (i) Sovereign Bank waives our past non-compliance with the financial covenants and reporting obligations, (ii) indefinitely suspends our revolving credit facility, (iii) requires us to maintain deposits with Sovereign Bank at all times in an amount not less then the outstanding balance of the term loan as cash-collateral therefor, and (iv) suspends our 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.

At June 30, 2008, we had cash and cash equivalents of $2,772,000, a working capital deficit of $6,118,000, borrowing availability of $2,500,000 under the revolving credit facility, and stockholders' equity of $4,903,000. In comparison, 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, with no line of credit. The decrease of $2,552,000 in cash and cash equivalents from March 31, 2008 to June 30, 2008 was primarily due to the acquisition of fixed assets and cash used in operating activities. Although we currently do not have a revolving credit facility available to us and are required to fully cash collateralize amounts outstanding under our term loan, management believes that cash on hand, together with cash anticipated to be generated from operations, should provide us with adequate financing to fund operations through the end of Fiscal 2010, although there can no assurance in that regard. We may be unable to secure additional financing in the future, if required, on favorable terms or 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.

Operating Activities. Net cash used in operating activities was $1,593,000 and $6,587,000 for the three months ended June 30, 2008 and 2007, respectively. For the quarter ended June 30, 2008, cash used in operating activities primarily reflected our net loss in that period and a decrease in deferred revenue, partially offset by an increase in accrued job costs and collections of accounts receivable. For the prior year, cash used in operating activities primarily resulted from our net loss, and an increase in accounts receivable, during the three months ended June 30, 2007.

Investing Activities. For the three months ended June 30, 2008, net cash used by investing activities amounted to $3,458,000, primarily relating to the cash portion of the purchase price for the assets of 3 For All Partners,
LLC. For the three months ended June 30, 2007, net cash used by investing activities was $172,000, primarily due to the purchase of computer equipment and software.

Financing Activities. For the three months ended June 30, 2008, net cash provided by financing activities amounted to $2,500,000 of bank borrowings utilized to fund a portion of the purchase price for the acquisition of the assets of 3 For All Partners, LLC. For the three months ended June 30, 2007, net cash used in financing activities amounted to $2,000,000 resulting from repayments of bank borrowings.

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain of the estimates and assumptions required to be made relate to matters that are inherently uncertain as they pertain to future events. While management believes that the estimates and assumptions used were the most appropriate, actual results may vary from these estimates under different assumptions and conditions.

Please refer to the Company's 2008 Annual Report on Form 10-K/A for a discussion of the Company's critical accounting policies relating to revenue recognition, goodwill and other intangible assets and accounting for income taxes. During the three months ended June 30, 2008, there were no material changes to these policies.