"However, at this point they moved the goal posts and asked for considerably more money, a lot more."
Peterborough United chairman Darragh MacAnthony has set a fee of ?2m plus ?1m add-ons for the club's top scorer.
McNally added: "We had a further meeting today and we haven't been able to agree anything and it looks like it's not meant to be - that's football, we move on.
"But you never say never, as who knows what might happen in the summer."
Mackail-Smith, 27, remains at Posh where he has scored 27 goals this season in all competitions.
Source: BBC Sport
Source: BBC Sport