NEW YORK, May 21, 2007 (BUSINESS WIRE) -- CoActive Marketing Group, Inc. (NASDAQ Capital Market: CMKG), a full service marketing, sales promotion and interactive services company, today restated its financial results for its fiscal years ended March 31, 2006, 2005 and 2004, and quarter ended June 30, 2006. The Company also reported financial results for its fiscal quarters ended September 30, 2006 and December 31, 2006.

Restatements

The decision to restate the financial statements for the fiscal years ended March 31, 2006, 2005 and 2004, and quarter ended June 30, 2006, was made as a result of management's determination that the Company had incorrectly applied revenue recognition policies to a particular promotional program, resulting in the premature recording of approximately $1.1 million of revenues and approximately $71,000 of related operating expenses during the year ended March 31, 2006. This error resulted in the understatement of revenues by approximately $524,000 and an overstatement of operating expenses by approximately $398,000 in the quarter ended June 30, 2006. In addition, the Company failed to accrue and pay sales and use taxes due to State taxing authorities during the years ended March 31, 2006, 2005 and 2004, the periods for which those taxes were due. The Company's failure to properly accrue sales and use tax liabilities resulted in an understatement of operating and interest expenses of approximately $257,000, $164,000 and $222,000 for the years ended March 31, 2006, 2005 and 2004, respectively, and an understatement of revenues of approximately $39,000 in the year ended March 31, 2006. The Company also improperly accrued approximately $252,000 during the quarter ended June 30, 2006 for sales and use taxes with respect to the years ended March 31, 2006, 2005 and 2004.

The restatement for these errors reduced the Company's net income or increased its net loss, as applicable, as originally reported for the fiscal years ended March 31, 2006, 2005 and 2004, by approximately $770,000 ($.12 per diluted share), $99,000 ($.02 per diluted share) and $133,000 ($.03 per diluted share), respectively. In addition, the restatement for these errors increased the Company's net income as originally reported for the quarter ended June 30, 2006 by approximately $704,000 ($.10 per diluted share).

After reviewing the circumstances leading up to the restatement, the Company believes that the errors were inadvertent and unintentional. In addition, following the discovery of these errors, the Company implemented procedures intended to strengthen its internal control processes and prevent a recurrence of future errors of this nature.

CoActive Regains Nasdaq Compliance

As previously announced, the Company received notifications from Nasdaq indicating that the Company's securities were subject to delisting due to its failure to timely file its Quarterly Reports on Form 10-Q for the periods ended September 30, 2006 and December 31,2006.

Following an appeal to Nasdaq, the Company was granted an extension until May 21, 2007 to become current in its reporting obligations under the Securities Exchange Act of 1934, as amended. With the filing of its financial statements for the quarters ended September 30, 2006 and December 31, 2006, the Company is now in compliance with its reporting obligations.

Operating Results - Nine Months Ended December 31, 2006

For the nine months ended December 31, 2006, the Company reported sales of $76.6 million, compared to sales of $63.9 million for the nine months ended December 31, 2005. Sales, net of reimbursable program costs and expenses, amounted to $45.0 million for the nine months ended December 31, 2006, an increase of 8% over the same period in the prior year. The Company believes that "operating revenue" is a key performance indicator. Operating revenue is defined as sales, less reimbursable program costs and expenses and outside production costs and other direct program expenses. Operating revenue is the net amount derived from sales to customers which the Company believes is available to fund its compensation and general and administrative expenses, debt service and capital expenditures. For the nine months ended December 31, 2006, operating revenue amounted to $28.2 million, compared to $22.1 million for the nine months ended December 31, 2005, an increase of $6.1 million, or 28%.

The Company reported net income and fully diluted earnings per share of $1.7 million and $.24 per share, respectively, for the nine months ended December 31, 2006. This compares to a net loss of $830,000 and a fully diluted net loss per share of $.13 for the nine months ended December 31, 2005.

The Company continues to benefit from the growth in its experiential and sales promotion programs. In particular, during the first two quarters of fiscal 2007, the Company executed its first integrated marketing program containing both experiential and sales promotional elements which generated sales of $6.1 million. In addition, the Company's net loss in the three and nine months ended December 31, 2005, included a charge of $520,000 as a result of the termination of Company's Great Neck, NY office lease.

At December 31, 2006, the Company's working capital deficit improved to $2.1 million, compared to a working capital deficit of $6.6 million at March 31, 2006. The Company also continued to reduce its long-term bank debt. Bank debt amounted to $2.25 million at December 31, 2006, as compared to $3 million at March 31, 2006. Because of the restatement and increased loss for fiscal 2006, the Company is currently in default under its bank debt, which is reflected as a current liability both at December 31, 2006 and March 31, 2006 (as restated).

Outlook - Quarter Ended March 31, 2007 and Fiscal Year 2008

Charlie Tarzian, CoActive's President and Chief Executive Officer commented, "Our core business of serving clients with events, experiential and direct customer marketing has continued to strengthen, as evidenced by the year over year improvement in revenue and profitability through December 31, 2006. We are expanding services to our current clients and adding new client relationships that are characterized by profitable recurring fee revenue, which is more solutions and program related. We have also added a substantial new capability through the incorporation of a business-to-business consulting and marketing resource management practice, which has resulted in the addition of four new clients since the beginning of the calendar year. These changes in business development and services delivery practices are the core of our "New Revenue Model."

"However, to transition to the New Revenue Model, we are realigning a portion of our business that has either been insufficiently profitable and/or single project-oriented. We are changing internal processes to be more effective at lower cost. As a result of these changes, we will experience a greater than usual decrease in revenue in our fourth quarter, in which we will experience a loss. In particular, our expenses for our fourth quarter ending March 31, 2007 will be negatively impacted by: (1) the addition of senior talent to win and support new clients in advance of an anticipated ramp up in sales; (2) the run-off of low value project work and the restructuring of some of the support staff; (3) severance expenses for senior and other staff members in connection with the shift in our business focus; and (4) increased professional fees caused by the Company's restatements.

"We are now well in to our fiscal 2008 year and our prospects are favorable. However, the process of shifting to our New Revenue Model is ongoing. Although we expect strong growth in fee revenue in fiscal 2008, our year over year total revenue for the first half of fiscal 2008 will decline from the prior year, as project work is replaced with our New Revenue Model. Despite the first half decline, we expect fiscal year over year profitability to be stronger, as the revenue mix shift occurs."

Mr. Tarzian concluded, "This is an exciting time at CoActive. As a consumer experience company, we are at the heart of the changes occurring in the world of marketing. We have premier clients, and expect to add additional quality clients as our programs demonstrate real value. To serve our clients effectively, we are adding outstanding team members to extend and implement our New Revenue Model. Most importantly, we are delivering real and measurable value to our clients."

CoActive Marketing Group, Inc. is a full-service marketing, sales promotion, and interactive services company that develops and manages integrated marketing, sales and promotional programs at both national and local levels for consumer product companies. The programs are geared towards growing incremental sales and profits by identifying and addressing key trade, sales and consumer trends.

This press release includes statements which constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this press release are not promises or guarantees and are subject to risks and uncertainties that could cause our actual results to differ materially from those anticipated. These statements are based on management's current expectations and assumptions and are naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward-looking statements. Actual results may vary materially from those expressed or implied by the statements herein. Factors that could cause actual results to differ materially from the Company's expectations are set forth in the Company's Annual Report on Form 10-K/A for the fiscal year ended March 31, 2006 and Quarterly Report on 10-Q for the quarter ended December 31, 2006 under "Risk Factors," including but not limited to "Internal Control Deficiencies," "Default under Senior Credit Agreement," "Unpredictable Revenue Patterns," "Customers," "Competition," "Outstanding Indebtedness; Security Interest," "Need for Additional Funding," "Recent Loss" "Dependence on Key Personnel," "Risks Associated with Acquisitions," "Expansion Risk," and "Control by Executive Officers and Directors" and include the risk that projected business opportunities will fail to materialize or will be delayed. The Form 10-K/A may be obtained by accessing the database maintained by the Securities and Exchange Commission at http://www.sec.gov.

-Financial Tables Follow-

                    CoActive Marketing Group, Inc.
                Consolidated Statements of Operations
                     Three and Nine Months Ended
                             (unaudited)

                      Three Months Ended         Nine Months Ended
                   ------------------------- -------------------------
                   December 31, December 31, December 31, December 31,
                       2006         2005         2006         2005
                                 (restated)                (restated)
                   ------------ ------------ ------------ ------------

Sales              $23,939,000  $20,871,000  $76,610,000  $63,854,000

Operating Income
 (Loss)                 84,000     (379,000)   3,395,000   (1,239,000)
Income (Loss) from
 Continuing
 Operations before
 Provision
 (Benefit) for
 Income Taxes          147,000     (444,000)   3,140,000   (1,430,000)
Provision (Benefit)
 for Income Taxes       59,000     (141,000)   1,256,000     (508,000)
                   ------------ ------------ ------------ ------------
Income (Loss) from
 Continuing
 Operations             88,000     (303,000)   1,884,000     (922,000)
Discontinued
 Operations                  -       54,000     (177,000)     (92,000)
                   ------------ ------------ ------------ ------------
Net Income (Loss)       88,000     (249,000)   1,707,000     (830,000)
                   ============ ============ ============ ============
Basic Earnings
 (Loss) per Share:
 Income (Loss) from
  Continuing
  Operations       $       .01  $      (.05) $       .28  $      (.14)
 Discontinued
  Operations                 -          .01         (.03)         .01
                   ------------ ------------ ------------ ------------
 Net Income (Loss) $       .01  $      (.04) $       .25  $      (.13)
                   ============ ============ ============ ============
Diluted Earnings
 (Loss) per Share:
 Income (Loss) from
  Continuing
  Operations       $       .01  $      (.05) $       .26  $      (.14)
 Discontinued
  Operations                 -          .01         (.02)         .01
                   ------------ ------------ ------------ ------------
 Net Income (Loss) $       .01  $      (.04) $       .24  $      (.13)
                   ============ ============ ============ ============
Weighted Average
 Shares
 Outstanding:
   Basic             6,855,575    6,605,303    6,830,127    6,397,479
   Diluted           7,393,459    6,605,303    7,189,392    6,397,479

                     Consolidated Balance Sheet

                              December 31, 2006     March 31, 2006
                                 (unaudited)          (restated)

Total Assets                        $35,812,000         $42,713,000
Current Debt                          2,250,000           3,000,000
Total Liabilities                    25,131,000          34,137,000
Stockholders' Equity                 10,681,000           8,576,000

SOURCE: CoActive Marketing Group, Inc.

CoActive Marketing Group, Inc.
Charles Tarzian
President and Chief Executive Officer
212-366-3407