MAAL Marketing Alliance Inc (PK)

FY 2014 Third Quarter Financial Highlights (all comparisons to the prior year period)

• Revenues were $6,869,504 compared to $8,513,742, due to lower insurance distribution revenue and lower construction revenues versus prior period
• Net operating revenue (gross profit) decreased to $1,774,704, compared to $2,351,801
• Operating income was $222,699, compared to $1,328,846
• Operating EBITDA (excluding investment portfolio income) was $387,278, compared to $1,490,859
• Net income of $252,145, or $0.04 per share, as compared to net income of $864,706, or $0.14 per share

The Marketing Alliance, Inc. (OTC: MAAL) (“TMA”), today announced financial results for its fiscal 2014 third quarter and nine months ended December 31, 2013.

Mr. Timothy M. Klusas, TMA’s Chief Executive Officer, stated, “Despite an unfavorable comparison to the prior year we were pleased with our results given the business conditions of the quarter and fiscal year-to-date. Our insurance distribution business declined in revenue versus the prior year quarter as we continued to adjust to changes in product offerings from our insurance carrier partners. Historically, during the third quarter TMA benefits from calendar year-end reconciliations of our annual distribution agreements with carriers. However, we experienced lower than anticipated production levels, which affected our revenue and margins. We focused on operating profitability while exploring new opportunities for growth during the quarter, and will continue to provide value for our distributors in support of helping their businesses grow during this time.

“Our land improvement business was also adversely affected by the weather compared to the prior year, as the early onset of winter drastically reduced our working season this year and its associated potential revenues. During the quarter, due to TMA’s capital position, the Company’s Board of Directors authorized a 13.7% increase in its annual cash dividend to shareholders of record as of December 20, 2013. We believe this demonstrated TMA’s ongoing commitment to its shareholders.”

Mr. Klusas provided additional details below on each of the Company’s operations for the third quarter of the fiscal 2014 year:

• Insurance Distribution Business: “In our insurance distribution business, we continued to assist our customers in utilizing our broad selection of life insurance products and carriers in response to industry changes. As we have mentioned in previous quarters, our results have been affected by life insurance carriers changing their product lines in reaction to current interest rate and regulatory conditions (a notable example was changes in reserving methodologies). In turn, this has lead to our distributors revising their product mix to adjust to market conditions. When these revisions by our distributors occur faster than we can create new opportunities with carriers, it becomes very difficult for us to achieve our planned levels to drive our revenue and profit margins. Some of the revisions were caused by the discontinuance of products while others were caused by in-force rate increases that reduced demand for those products. While this dislocation may lead to short-term fluctuations, especially as we witnessed in this quarter, we feel it creates long-term benefits as our distributors are able to offer a wider array of products and thus be less susceptible to these product and carrier changes. For this, I commend our distributors for their flexibility and professionalism in adapting their practices to highlight different carriers’ products. Recently, we have been pleased with the increasingly favorable trends from new carriers and look to develop new carrier suppliers.
• Earth Moving (Land Improvement – Construction): “Our land improvement business historically had two periods, during the first and third fiscal (second and third calendar) quarters, where it could actively enter a farmer’s field and provide excavating (tiling) and terracing services to increase the farm’s crop yield. The year began with a wet spring that caused a late start to the growing season, pushing back planting, which carried through the growing season and delayed the harvest well into the third quarter of the fiscal 2014 year. The delayed harvest further set the business back when an early winter arrived and brought an end to the working season, which was essentially shortened from both directions. An early winter froze the ground and resulted in interruptions of the services we were able to provide. We are determined to continue our efforts to develop alternative uses of our equipment during the down periods. In addition, we continue to strive to improve operational efficiencies and are pleased with our [directional] progress.
• Family Entertainment: “We have been pleased with the performance of this business. We continued to add upgrades at our two locations, such as video game machines which were added at the end of the previous quarter in one location, and during this quarter at the second location. We expect these items to help to enhance our customers’ experience while also creating new revenue streams and bringing more customers into the stores.”

Fiscal 2014 Third Quarter Financial Review

• Total revenues for the three-month period ended December 31, 2013 were $6,869,504, as compared to $8,513,742 in the prior year quarter. The decrease was due to a $1,189,302 decrease in insurance distribution revenue and a $501,469 decline in construction revenue, offset by a $46,533 increase from the two family entertainment facilities.
• Net operating revenue (gross profit) for the quarter was $1,774,704, compared to net operating revenue of $2,351,801 in the prior-year fiscal period. Gross profit in the prior year period would have been increased by $295,000 if that same amount had not been included in direct and indirect construction expenses versus being included in operating expenses. Going forward, the Company believes the current quarter classification of this cost is more accurate.
• Operating income was $222,699, compared to operating income of $1,328,846 reported in the prior-year period. This change was due in part to the factors discussed above in each of the businesses and increases in operating expenses that exceeded the increase in net operating revenue.
• Operating EBITDA (excluding investment portfolio income) for the quarter was $387,278 compared to $1,490,859 in the prior-year period. A note reconciling operating EBITDA to operating income can be found at the end of this release.
• Net income for the fiscal 2014 third quarter was $252,145, or $0.04 per share, as compared to net income of $864,706, or $0.14 per share, in the prior year period. (Operating EPS and Net EPS are stated after giving effect to the 100% stock split effective February 28, 2014 for all periods. Shares outstanding increased to 6,024,200 from 3,012,100 with this stock split, and per share information has been retroactively adjusted to account for the split.)
• Investment gain, net (from investment portfolio) for the third quarter ended December 31, 2013 was $227,105, as compared to investment gain, net of $42,682, for the same quarter of the previous fiscal year.

Fiscal 2014 Nine Months Financial Review

• Total revenues for the nine months ended December 31, 2013 were $20,120,001, compared to $21,953,101 in revenues for the prior-year period.
• Net operating revenue (gross profit) was $5,605,937, which compares to net operating revenue of $5,774,537 in the prior-year fiscal period.
• Operating income was $977,639 compared to $2,161,989 for the prior-year period.
• Operating EBITDA (excluding investment revenue) for the nine months was $1,455,271 versus $2,561,896 in the prior-year period. A note reconciling Operating EBITDA to Operating Income can be found at the end of this release.
• Net income for the nine months ended December 31, 2013 was $729,964, or $0.12 per share, compared to $1,432,567 or $0.24 per share, in the prior-year period. (As noted above, per share information has been retroactively adjusted to account for the 100% stock split effective February 28, 2014.)

Balance Sheet Information

• TMA’s balance sheet at December 31, 2013 reflected cash and cash equivalents of approximately $6.5 million, working capital of $12.9 million, and shareholders’ equity of $14.0 million; compared to $6.0 million, $12.7 million, and $13.3 million, respectively, at March 31, 2013.

About The Marketing Alliance, Inc.

Headquartered in St. Louis, MO, TMA operates three business segments. TMA provides support to independent insurance brokerage agencies, with a goal of providing members value-added services on a more efficient basis than they can achieve individually. The Company also owns an earth moving and excavating business and two children’s play and party facilities. Investor information can be accessed through the shareholder section of TMA’s website at:http://www.themarketingalliance.com/shareholder-information.

TMA’s common stock is quoted on the OTC Markets (http://www.otcmarkets.com) under the symbol “MAAL”.

Forward Looking Statement

Investors are cautioned that forward-looking statements involve risks and uncertainties that may affect TMA's business and prospects. Any forward-looking statements contained in this press release represent our estimates only as of the date hereof, or as of such earlier dates as are indicated, and should not be relied upon as representing our estimates as of any subsequent date. These statements involve a number of risks and uncertainties, including, but not limited to: the product lines, and the prices and other terms and characteristics of the product lines, offered by life insurance carriers; the desirability of carrier product lines the desirability of carrier product lines to our distributors and their customers; expectations of the economic environment; material adverse changes in economic conditions in the markets we serve and in the general economy; future regulatory actions and conditions in the states in which we conduct our business; the integration of our operations with those of businesses or assets we have acquired or may acquire in the future and the failure to realize the expected benefits of such acquisition and integration. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

Three-months ended     Nine-months ended December 31, December 31,

2013

      2012 2013       2012   Commission revenue $ 5,877,841 $ 7,067,143 $ 16,946,100 $ 18,663,515 Construction revenue 630,415 1,131,884 2,190,939 2,929,089 Family entertainment revenue 361,248 314,715 982,962 360,497 Total revenues 6,869,504 8,513,742 20,120,001 21,953,101   Distributor related expenses: Distributor bonuses and commissions 4,210,579 4,542,643 11,680,431 12,363,989 Business processing and distributor costs 343,556 520,340 1,156,763 1,662,827 Depreciation 3,145 4,068 8,833 11,417 4,557,280 5,067,051 12,846,027 14,038,233 Costs of construction: Direct and indirect costs of construction 374,363 960,043 1,227,032 1,820,772 Depreciation 86,712 91,065 265,744 272,244 461,075 1,051,108 1,492,776 2,093,016   Family entertainment costs of sales: 76,445 43,782 175,261 47,315     Net operating revenue 1,774,704 2,351,801 5,605,937 5,774,537   Operating Expenses 1,552,005 1,022,955 4,628,298 3,612,548   Operating income 222,699 1,328,846 977,639 2,161,989   Other income (expense): Investment gain, net 227,105 42,682 257,055 148,514 Interest expense (29,750) (34,283) (80,395) (79,119) Gain on sale of assets (3,184) - 8,196 - Interest rate swap, fair value adjustment 4,265 - 19,570 -   Income before provision for income taxes 421,135 1,337,245 1,182,065 2,231,384   Provision for income taxes 168,990 472,539 452,101 798,817   Net income $ 252,145 $ 864,706 $ 729,964 $ 1,432,567   Average Shares Outstanding 6,024,200 6,024,200 6,024,200 6,024,200   Operating Income per Share $ 0.04 $ 0.22 $ 0.16 $ 0.36 Net Income per Share $ 0.04 $ 0.14 $ 0.12 $ 0.24

Note: * - Operating EPS and Net EPS stated after giving effect to the 100% stock split for shareholders effective February 28, 2014 for all periods. Shares outstanding increased to 6,024,200 from 3,012,100 with this stock split and have been retroactively adjusted to account for the split.

Consolidated Selected Balance Sheet Items         As of Assets 12/31/13       3/31/13 Cash & Equivalents $ 6,453,033 $ 6,007,286 Investments 4,394,572 4,237,026 Receivables 8,845,734 9,251,879 Other 652,518 621,312 Total Current Assets 20,345,857 20,117,503   Property and Equipment, Net 1,596,275 1,652,031 Intangible Assets, net 313,940 960,899 Other 1,373,368 801,576

Total Non-Current Assets

3,283,583 3,414,506   Total Assets $ 23,629,440 $ 23,532,009   Liabilities & Stockholders' Equity Total Current Liabilities $ 7,493,899 $ 7,463,975 Long Term Liabilities

2,112,553

2,775,010

  Total Liabilities 9,606,452 10,238,985   Stockholders' Equity 14,022,988 13,293,024   Liabilities & Stockholders' Equity $ 23,629,440 $ 23,532,009

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal year 2014 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2014 third quarter operating income of $222,699 and depreciation and amortization expense of $164,579 for a sum of $387,278. Fiscal year 2013 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2013 third quarter operating income of $1,328,846 and depreciation and amortization expense of $162,013 for a sum of $1,490,859. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

Fiscal year 2014 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2014 nine month operating income of $977,639 and depreciation and amortization expense of $477,632 for a sum of $1,455,271. Fiscal year 2013 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2013 nine months operating income of $2,161,989 and depreciation and amortization expense of $399,907 for a sum of $2,561,896. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

The Company uses Operating EBITDA as a measure of operating performance. However, Operating EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP, and when analyzing its operating performance, investors should use Operating EBITDA in addition to, and not as an alternative for, income as determined in accordance with GAAP. Because not all companies use identical calculations, its presentation of Operating EBITDA may not be comparable to similarly titled measures of other companies and is therefore limited as a comparative measure. Furthermore, as an analytical tool, Operating EBITDA has additional limitations, including that (a) it is not intended to be a measure of free cash flow, as it does not consider certain cash requirements such as tax payments; (b) it does not reflect changes in, or cash requirements for, its working capital needs; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Operating EBITDA does not reflect any cash requirements for such replacements, or future requirements for capital expenditures or contractual commitments. To compensate for these limitations, the Company evaluates its profitability by considering the economic effect of the excluded expense items independently as well as in connection with its analysis of cash flows from operations and through the use of other financial measures.

The Company believes Operating EBITDA is useful to an investor in evaluating its operating performance because it is widely used to measure a company’s operating performance without regard to certain non-cash or unrealized expenses (such as depreciation and amortization) and expenses that are not reflective of its core operating results over time. The Company believes Operating EBITDA presents a meaningful measure of corporate performance exclusive of its capital structure, the method by which assets were acquired and non-cash charges, and provides additional useful information to measure performance on a consistent basis, particularly with respect to changes in performance from period to period.

The Marketing Alliance, Inc.Timothy M. Klusas, 314-275-8713Presidenttklusas@themarketingalliance.comwww.themarketingalliance.comorInvestor RelationsAdam Prior, 212-836-9606Senior Vice Presidentaprior@equityny.comorTerry Downs, 212-836-9615Associatetdowns@equityny.com