DALLAS, TX--(Marketwire - December 23, 2008) - NewMarket Technology, Inc. (
PINKSHEETS:
NMKT)
CEO Philip M. Verges today released a letter to shareholders. The letter
addresses the Company's upcoming virtual Town Hall scheduled for January,
its plans for Kenya, updates on its Chinese and Latin American
subsidiaries, a planned management buyback and the Company's progress
towards an exchange listing. The letter is included in its entirety below.
Dear Shareholders --
Last week I published a letter to shareholders announcing our upcoming
virtual Town Hall scheduled for January. In the letter, I extensively
reviewed topics that would not be part of the upcoming Town Hall. The Town
Hall will focus on reviewing NewMarket's projected historically high 2008
operational performance and NewMarket's plans for 2009.
In the virtual Town Hall, we will feature our updated strategy for
continuing to grow our technology services footprint in additional emerging
markets around the world. NewMarket's greatest successes have come from
our core technology service offerings in emerging markets, to date in those
of Asia and Latin America. Much of our growth has been achieved by
acquiring and investing in systems integration companies local to those
markets. In each emerging market where NewMarket has acquired and invested
in a systems integration company, the acquired company has grown
significantly within the first 24 months after the acquisition in most
cases. Today, our operations in China produce over $40 million in annual
revenue, and our operations in Latin America have grown to over $20 million
in annual revenue.
The Emerging Market Opportunity for Technology Service Providers
The Internet and its use is expanding around the world. While those
countries recognized as world powers have high per capita Internet usage,
in most emerging markets only a fraction of the population has gained
access to the Internet. A technology service provider has tremendous
growth potential in an emerging market facilitating the inevitable growth
of the Internet as consumers and businesses in the region gain access. The
growth of the Internet and regional access is just one indicator of
technology demand growth in a region, but is one we can, in general, easily
identify with when discussing the growth opportunity for technology service
providers. For example, the expansion of the Internet drives sales of
hardware, such as switches, routers and hubs, as well as PCs and other
peripherals, and the sales of the corresponding software applications, from
PC software to corporate databases and business software solutions. All of
these building block hardware, software and networking technologies have to
be sold, installed, often customized, and constantly maintained and
updated. That's what NewMarket does as a technology service provider and
systems integrator, and the Company has established an impressive track
record as an emerging market technology service provider.
Kenya as an Example of the Emerging Market Opportunity
NewMarket has targeted Kenya as an emerging market opportunity. If you
will recall, we have been invited to speak at the upcoming African Advanced
Level Telecommunications Institute (AFRALTI) WiMax Conference in Nairobi
and last year participated in the "Connecting Rural Communities Africa
Forum 2007," also in Nairobi. We have been developing the Company's
opportunities and relationships for the Kenyan market for some time.
Kenya has fiber-optic cable installed throughout the country, and three
submarine cables under construction -- one to Dubai, one to India and one
to South Africa. With a population of around 38 million people, Kenya has
only about 3 million Internet users today. The groundwork has already been
laid for a rapid increase in Internet penetration. NewMarket plans to be
prepared to provide the necessary products and services to facilitate and
profit from the inevitable Internet usage demand growth and related
government and business technology needs in Kenya.
In the upcoming virtual Town Hall, I will discuss our Greenfield strategy
for opening new emerging markets -- a strategy we will trial in Kenya.
NewMarket and the Over the Counter Marketplaces
In my previous letter, I addressed in more detail the short selling
problems NewMarket has encountered
(
http://biz.yahoo.com/iw/081217/0461105.html). The NewMarket shareholders
have watched revenues and profits increase and share price decrease.
NewMarket management cannot single-handedly fix the economic issues
impacting the share price, but we can get smarter about avoiding the market
abuse that has plagued the share price. NewMarket remains confident that
the OTC and OTCBB markets, regardless of all their issues, still provide an
excellent opportunity for shareholders to realize a return on investment.
OTC and OTCBB listed companies can deliver long-term and short-term
returns. However, OTC and OTCBB markets do not generally support a
seamless transition for an early stage company to mature into a later stage
company and deliver a long-term return. Early stage OTC and OTCBB listed
companies can produce exceptional short-term returns generated by milestone
events. For example, the early stage company may file a patent, sign a
notable contract or perhaps announce a quality board member. None of these
milestones will necessarily guarantee long term success for the company,
but each milestone is likely to create a short-term share price increase by
demonstrating the long-term potential of the company's plan. A milestone
share price increase will likely also attract subsequent short selling.
Short sellers will bet on the milestone not being adequate to support
long-term success. After all, sixty percent of start-ups fail within three
years after launching. While making a legitimate bet on an early stage
company not succeeding in the long-term, that short sale bet can be
illegally waged by failing to legitimately borrow shares. Unchecked short
selling creates a counterfeit, artificial supply of shares and the laws of
supply and demand often take over and help to drive a share price down.
Nevertheless, a legitimate opportunity exists to purchase shares before a
milestone event and take a profit when the milestone is achieved.
Legitimate retail investors can make legitimate returns even though illegal
short selling will likely continue in the foreseeable future. The
challenge is to find and qualify potential milestone events and make
winning bets on the right milestone opportunities.
Long-term Profits from Early Stage OTC and OTCBB Investments
Retail investors can also realize excellent long-term returns on OTC and
OTCBB quoted companies. OTC and OTCBB quoted companies generally have
substantially lower market capitalizations when compared to similar
operations listed on exchanges (the OTC and OTCBB are only public quotation
systems, not exchanges). Accordingly, as an OTC or OTCBB listed company
transitions from its early stage beginnings and manages to have its share
price recognized in comparison to its exchange listed brethren, a
substantial return can be realized by long-term investors. However, that
early stage business that matures, regardless of its operational success,
has likely experienced a fair amount of share price volatility (see above
on short-term milestone returns) and it has also probably issued a large
number of shares in conjunction with fundraising and acquisitions. The
shareholder base is correspondingly likely to be weary from the journey
that started with a reverse merger and brought the company to its current
stage.
The challenge to transition from generating short-term milestone returns to
delivering long-term capital appreciation is one of revitalizing the
shareholders, and as part of that revitalization, halting the ongoing
issuance of stock. Before a shareholder revitalization, short sellers will
continue to exploit profit opportunities by demoralizing weary shareholders
into giving up hope in a long-term return and otherwise releasing their
stock at a loss. The short seller is of course happy to purchase that
stock and close out their short position. To anyone that does not believe
in short seller manipulation, try to offer an alternative explanation to
who is buying stock when others are selling stock while the share price is
going down.
NewMarket Long-Term Return, Exchange Listing and Management Buyback
2008 looks to be a historically high year for NewMarket's operations. The
Company has continued to grow and is on track to report historically high
revenue. Notably, NewMarket has not made an acquisition in over two years,
so the Company's growth is the result of increased organic sales. The
Company may realize historically high net income as well, however, we have
not yet finalized all decisions on how cash produced by operations might be
utilized in the best interest of shareholders.
Management is considering the use of some cash produced by operations as
part of an effort to reduce or eliminate debt. However, using cash to
reduce or eliminate debt is not management's primary strategy to reduce
debt, and we maintain that the best use of cash produced by operations is
for the ongoing support of operations.
You may recall that the Company entered into a $7 million debt transaction
just over one year ago. The $7 million debt transaction consisted of a $4
million term note and a $3 million revolving line of credit. We have
already retired the $3 million revolving line of credit, and management has
been endeavoring, on behalf of the Company, to borrow the necessary funds
for management to replace the $4 million term note. Management's intention
is to convert the $4 million term note to a secondary class of equity that
would not be convertible to common stock. Management's only exit from that
security would be the sale of the Company. The risk of additional common
stock being issued to reduce the $4 million debt would be eliminated. If
the lender has sold NewMarket stock short to hedge against their risk
associated with the loan to NewMarket, then genuine NewMarket shareholders
would enjoy the benefit of the senior lender having to buy back stock to
cover the short position once their debt was paid in cash.
Management has not at this time completed the retirement of the $4 million
term note with the current lender and may not be able to successfully
retire the note. Management has secured a lender willing to sponsor
management in the proposed transaction and negotiations are underway.
Management has referred to this transaction as a 'buyback,' as management
will be buying back a substantial equity position in NewMarket if they are
successful. This is not a buyback of common stock from the open market,
and we believe this buyback would be more beneficial to the Company's
shareholders than a buyback on the open market. The transaction proposed
by management would have a substantial operational benefit to the
shareholders by eliminating a substantial debt. The transaction would also
substantially reduce further common shareholder dilution that could be
realized if the current debt with the existing lender were to be serviced
in stock.
Subsequent to a transaction removing the current lender and reducing the
Company's debt, NewMarket would then initiate steps to move toward an
exchange listing. The details associated with the Company's strategy to
achieve an exchange listing will vary depending on the final details
associated with the potential retirement of the existing term note.
Management is working to align the Company's strong fundamental financial
performance and its market valuation to deliver a return on investment to
its long-term shareholders. The buyback strategy described herein, and the
highlights of management's intention to subsequently move to another
exchange are central to our plans to deliver that long-term return.
NewMarket Latin America, Inc. and China Crescent, Inc.
NewMarket Latin America, Inc. and China Crescent, Inc. represent the
Company's most substantial emerging market operations and the first
operations listed independently as part of the Company's plan to directly
share the benefit of its emerging market growth with shareholders.
The consolidation of operations into the Latin American public subsidiary
has been slower than anticipated, and the cleanup of past public filings
associated with the operations that pre-dated the transaction with
NewMarket has been problematic. As the largest shareholder, NewMarket has
elected to voluntarily de-register NewMarket Latin America, with the
intention of accelerating the cleanup and consolidation. The necessary
filings to support a new registration are currently being reviewed. When
the registration is complete, the Latin American operations will be
consolidated. As the filings are reviewed and finalized for submission,
the Company will release an anticipated time frame for the completion.
China Crescent has had a good year operationally, however the stock
performance has been disappointing and difficult to understand. From the
fundamental financial performance of China Crescent, we anticipated better
stock performance to date. The Company's operational base is strong, and
we are happy with the progress the company has made this year as it matures
and grows independent of NewMarket. For instance, the Company has changed
its name this year to better position itself in the Chinese market, its
primary place of business, and has transitioned to new leadership, from its
entrepreneurial leadership team. The Company has recently announced its
plans to increase its footprint in China by increasing its ownership in one
of its Chinese operating subsidiaries by 25%. China Crescent has focused on
the growing need in China for computer hardware and software since its
inception in 2005, and we look forward to the Company's continued growth in
2009. Both NewMarket and China Crescent management are aware of the
frustrating stock performance and will continue to focus on improving it in
2009, while continuing to keep our focus on improving and growing the
Company's established operational base. China Crescent is scheduled to
provide more updates on its plans and activities to its shareholders
starting in January. Please look for those updates from China Crescent.
I look forward to sharing more with all of our shareholders in the upcoming
virtual Town Hall. I also look forward to kicking off 2009 and providing
updates to you all throughout the first quarter. I am confident long-term
shareholders will be rewarded for their ongoing commitment, and I am
grateful for the support shareholders have shown the Company.
Best Regards during this Holiday Season,
Philip M. Verges
Founder and CEO
NewMarket Technology, Inc.
Corporate E-mail Updates
To be added to NewMarket Technology's e-mail database to receive company
updates or to obtain more information on the Company, please send an e-mail
to
ir@newmarkettechnology.com or call 214-722-3065.
About NewMarket Technology, Inc. (
www.newmarkettechnology.com)
NewMarket helps clients maintain the delicate balance between maintaining
legacy systems and gaining a competitive edge from the latest technology
innovations. NewMarket provides certified systems integration and
maintenance services to support the prevailing industry standard solutions
from companies such as Microsoft, Oracle, Infor, Cisco Systems, SAP, Siebel
and Sun Microsystems. Concurrently, NewMarket continuously seeks to acquire
emerging technology assets to incorporate into an overall product portfolio
carefully packaged to complement the prevailing industry standard
solutions.
NewMarket delivers its portfolio of products and services through its
network of Solution Integration subsidiaries in North America and the
leading emerging markets around the world to include Latin America, China
and Singapore.
NewMarket ranked Number One in Texas, Number Three in the United States and
Number Five in North America on Deloitte's 2006 Technology Fast 500, a
ranking of the 500 fastest growing technology, media, telecommunications
and life sciences companies in North America. Rankings are based on
percentage revenue growth over five years, from 2001-2005. The Company grew
from less than $1 million in revenue in 2001 to over $50 million in
profitable revenue in 2005.
The company has continued its rapid growth, reporting $77.6 million in
revenue with a net income of $5.8 million in 2006 and most recently $93.1
million in revenue with a net income of $7.3 million in 2007.
"SAFE HARBOR STATEMENT" UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
This press release contains forward-looking statements that involve risks
and uncertainties. The statements in this release are forward-looking
statements that are made pursuant to safe harbor provision of the Private
Securities Litigation Reform Act of 1995. Actual results, events and
performance could vary materially from those contemplated by these
forward-looking statements. These statements involve known and unknown
risks and uncertainties, which may cause NewMarket's actual results in
future periods to differ materially from results expressed or implied by
forward-looking statements. These risks and uncertainties include, among
other things, product demand and market competition. You should
independently investigate and fully understand all risks before making
investment decisions.
Contact Information: Contact:
NewMarket Technology, Inc.
Investor Relations
ir@newmarkettechnology.com
214-722-3065
http://www.newmarkettechnology.com