Phil's responses to Deashus' questions:
http://ragingbull.lycos.com/mboard/boards.cgi?board=NCTI&read=130740
After the review of 10K, I only had a couple questions pertaining to it, I also asked a couple others that were being bantered around on RB. So, here's Philip Verges's response to the 5 questions.
I will re-post it later to make sure everyone has a chance to see it.
Sent: Monday, April 25, 2005 10:13 AM
Subject: 10K questions and others
My comments:
Thanks for a great year (results-wise). Securing deals to make the 25 mil was quite astounding.
AND to do it while showing a profit, very well done.
Unfortunately, pps has yet to reflect the company's performance. So far there's much speculation about naked shorting and MM manipulation. That's what I seem to see in the day's trading pattern. Stock holders are beginning to lose hope, if not lost already.
Which brings me to my first question...
1. What benefit is going to the AMEX if we are being naked shorted. What do they do differently or control that we are presently not benefitting from? Specialists keep track of thre trading--not far flung market makers. There is more accountability in the trading on AMEX vs. OTCBB. THe listing will not stop ALL naked shorting--but it will reduce it.
PV:
Two items – the specialist environment is a much more controlled environment than an electronic board. One specialist will execute all trades rather than 30 some odd market makers. More importantly, short positions must be disclosed. The OTCBB does not mandate the disclosure of short positions. Read the Pink Sheets petition to the SEC to enhance the investor disclosure requirements to better understand the short disclosure issue. If you don’t have it Rick can get it for you.
2. CONVERTIBLES and RESTRICTED shares.. Is anyone keeping track of these as far as time frame for when they become elidgible to trade? We seem to be taking it on the chin with the shorts badly enough without an uncontrolled exodus from those wishing to cash out when elidgible. This is how an incubator collapses in on itself, isn't it?
PV:
Yes we are certainly tracking the convertible and restricted shares. Most of them are in the hands of very friendly holders. That is, most shares are held by the principles of subsidiary companies that need ongoing financing from NewMarket as well as the assistance to publicly list their subsidiary. I do not anticipate any issue with an optimal management of these convertibles and restricted positions. We do have a handful of third parties uninterested in the future performance of NewMarket. We accordingly manage these relationships appropriately. We offer them incentive to hold or leak their positions and we are minimally accommodating to any party not willing to cooperate in mutual best interest.
3. In the 10k, page 43 at bottom... % of revs (by company) was listed but Netsco, Xiptel, and Redmoon weren't mentioned. The 3 that were mentioned were DCI, Infotel, and RKM. They totaled only 47% of total revs.
PV:
Netsco sells through DCI so revenues are combined in DCI. Netsco revenues are small. Xiptel sells through NewMarket – an IPVoice legacy situation – so revenues are combined in NewMarket. Xiptel revenues have been small until recently. Redmoon revenues have not yet been consolidated into our finanicals. Redmoon has only been listed as an investment on our balance sheet. We own only a minority interest and will in first quarter include Redmoon revenues for the first time according to our percentage of ownership.
4. Logicorp deal is under renegotiation. The details of the previous deal were $1.9 mil for the remaining 49% of the company if they do $18 mil in revs for the year. Who wanted to renegotiate and why?
PV:
Logicorp is under renegotiation for two reasons. One, Logicorp has significant debt. Logicorp management’s representation of the debt is different then what we have discovered when dealing directly with the debt holders. Management was over optimistic in their assessment of the receptivity of the debt holder’s willingness to work out of existing indebtedness. It is not unusual for NewMarket to acquire distressed service providers. All of the service providers we have acquired to date have been distressed. It is not unusual for management of the acquired company to be over optimistic as to their company’s prospects. Accordingly, NewMarket leaves room to renegotiate original agreements once we get into the reality of operations. All of our original acquisitions of service companies have been adjusted post the original acquisition. Secondly, the renegotiation is part of an overall restructuring strategy to consolidate all of our services business into a streamlined operation. The high tech subsidiaries will remain as independent subsidiaries, but we plan to consolidate VTI, RKM, Infotel, Logicorp and correspondingly eliminate and divest of unnecessary redundancies.
5. Basher's comments are around the "conspiracy theory" we all are fabricating to make excuses for a company's failing stock price.
AND 2 UCC liens against DCI by Marquette commercial fin. and Segic company for a loan deal with Phil that went bad. I know the latter is BS but what about the liens?
The Marquette lien is in associating with a healthy and performing credit line that DCI utilizes to finance purchasing associated with specific purchase orders DCI receives from L3 Communications. If I recall correctly we announced this credit line last year when we established it as we believed getting conventional financing was big deal. The Segic lien is inappropriate. As part of the contemplated lien, Segic had a term permitting a lien on any asset. This lien term was contemplated to provide risk mitigation for Segic. Segic funded $250,000 dollars of a potentially $3 million dollar security purchase agreement. Subsequent to the execution of the agreement, it became apparent that the agreement would was not legal based on recent registration rejections from the SEC. Similar agreements had been previously accepted, but are now not being accepted. The issue is post registration funding. As structured, the agreement permitted $2 million dollars to be funded after the registration statement became effective. The regulation concerning post registration funding was grey in that it defined the time frame as a “short period of time” in which all funds must be received after a registration statement became effective. The SEC’s recent registration rejections set the “short period of time” at five days. Segic will not agree to reduce the amount their investment and/or provide the entire investment in five days. We have been unable to find another compromise. NewMarket has put the $250,000 plus interest (even taking into account Segic charges us a 10% placement fee) into an escrow account with our attorneys pending a mutual release. We have subsequently filed suit against Segic for a judgment declaring the purchase agreement void. I am not sure this is a scandal. It is a pain in the ass.
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