NewMarket Technology (fka NWMT)

[my02cents]

PV Should Publish Downside - Missed $75M

Here is an example where, on October 18, 2005, PV starts to have doubts about achieving the $75M revenue goal. He communicates this in an email to an investor (Exhibit A). That same day, Phil releases a Letter to shareholder (Exhibit B). Yet, in the PR, Phil does not mention anything about possibly missing the $75M figure.

I think it would have helped tremendously if PV would have stated in the Letter, or better yet, in a separate PR, that NMKT was in trouble of meeting the $75M revenue figure due to being "behind on the ramp up of one or two large contracts that will keep us from realizing our $75 million revenue objective – although that is not yet off the table." You can find this quote in the email (Exhibit A.) under "Company Issues".

PV is one to project future revenues. But, IMO, he hides when the events surrounding the projection change. If PV is going to make revenue projections, then he might want to outline the assumptions that the projection is based upon. Then, if one or more of these assumptions do not come to pass, PV should issue another PR stating as much and the affect the missed assumption will have on the revenue projection.

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Exhibt A. Email from PV

By: brutusisgod
18 Oct 2005, 01:33 PM EDT
Msg. 65577 of 65594
Jump to msg. #
not sure if you've seen this.

Dear Fellow Shareholders -

We are trading at a 52-week low. The Company is receiving an increased number of calls and e-mails regarding various speculations as to the cause of the current share price. I share everyone’s frustration with the share price, but I do not share some shareholders' concerns. I have the benefit of working at NewMarket everyday and I am aware of all that is right with the Company. I encourage all shareholders to contact the Company with their questions and concerns or to attend one of the Company’s presentations to hear first hand about both the Company’s progress and issues.

Transaction Value vs. Fundamental Value

Today I am publishing an open letter regarding NewMarket’s transition from a transactional valued company into a fundamentally valued company -- in other words--valued by our last press release versus valued by our fundamental financial foundation (Complete Letter Below). NewMarket has had its share of transactional share price increases and subsequent price corrections. However, NewMarket has also been building an underlying fundamental financial foundation that has yet to be fully realized in our share price.

Company Issues

We are behind on our American Stock Exchange listing and we are behind on the issue of our first dividend. We may even be behind on the ramp up of one or two large contracts that will keep us from realizing our $75 million revenue objective – although that is not yet off the table. The expansion of our management team has not kept up with the expansion of our business. Some individuals that have received stock in exchange for investment or services are selling their stock prior to two years of ownership which is reflected in some recent Reg144 transactions. We have temporarily lower profits during this rapid revenue expansion phase as we are investing heavily in growth -- not just through acquisition--but also in the necessary infrastructure before the first sales. In addition, our acquisition activity involves additional one-time expenses beyond the normal day-to-day operational costs.

Except for the suggestion that I might be hiding more information specific to these issues or that I might be inappropriately profiting from these issues (see Management Integrity and Raging Bull below) I think I have covered most of the issues. We are not an issue-free company, like most other companies are not issue-free.

We have grown revenue over 2000% in less than three years. We have maintained profitability (albeit currently modest) throughout the three years. We have increased our shareholder equity over 500% to $26 million. We have established an innovative business model for continuously introducing new technologies that is beginning to demonstrate long-term viability potential.

Investor Patience ?

Each investor has to decide for themselves if the balance of issues and progress weighs on the side of investment patience. I know your assessment of management’s capability and integrity is central to this decision. I am aware that not many CEO’s openly discuss their organization’s issues at risk of tarnishing shareholders’ assessment of their capability. I am also aware that several anonymous posters on Raging Bull would have you believe my intentions are less than honorable. I recognize the public market backdrop of management integrity has recent notable blemishes that might cause someone to take pause at the suggestion of management impropriety.

Business Viability

When it comes to micro-cap, high growth and start-up companies, I believe a balanced communication of progress and issues is critical. I would be suspicious of the company that has reported no issues. We encourage shareholders to contact us to discuss these issues in more detail to satisfy any further concern. I am certain that none of these issues put the Company’s viability at risk.

Management Integrity

Management integrity, particularly in the public markets, is under close scrutiny today as a result of recent and very publicized transgressions. I like to believe the NewMarket management team is forthright, hardworking and sincere. I personally try to make as many public appearances as possible to give shareholders an opportunity to judge first hand the character and ethics of management. I also spend a good deal of time talking to, or corresponding with, shareholders regarding questions and concerns in an effort to give shareholders the opportunity to test management integrity. While I am ready to accept responsibility for the Company’s delays, I cannot accept responsibility for an issue of which I am unaware. Nothing is more disheartening then to talk to a former shareholder that exited their position for an assumed or perceived issue. Again, I encourage shareholders to contact the Company with their concerns, questions and feedback.

Raging Bull

In response to the Raging Bull accusations attacking management integrity, I would respond by saying “file suit.” I will be ecstatic to finally discover the name and address of these anonymous mud slingers and file a counter suit. If they prefer, they could send their name and address to the Company and I would save them the time of waiting on a countersuit. They are abusing the Constitution of the United States by hiding behind First Amendment Rights in order to commit slander. This is not a violation to be taken lightly. I assume they are committing slander with a secondary motive, but perhaps they are simply John Hinckley-types that lack the imagination to find a more interesting object of their time-consuming obsession than myself. However, the results are the same -- impugning management’s reputation and character with the apparent intention to have an impact on some shareholders' investment decisions.

My message here to shareholders is to communicate with the Company and judge for yourselves. NewMarket could not have achieved its current success without the support of its shareholders. Companies list their equity publicly to create a marketable security that can be leveraged as a tool to grow the Company. The contract with shareholders is that the company will leverage that marketable security, the stock of the company, to ultimately make the stock more valuable by making the company itself more valuable. I am committed to delivering on this contract, as is everyone working here at NewMarket. Communicate with the Company and judge for yourself.
http://www.ragingbull.lycos.com/mboard/boards.cgi?board=NMKT&read=65577

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Exhibit B. Newsletter

DALLAS, Oct 18, 2005 (BUSINESS WIRE) -- NewMarket Technology Inc. (NMKT)today released an open letter from its CEO and Chairman, Philip Verges, chronicling the Company's experience on the Over The Counter Bulletin Board (OTCBB) exchange and its current challenge to transition from a company recognized for its next press release versus its underlying financial fundamentals.

The letter is included in its entirety below:

Dear fellow shareholders and investors in the emerging technology market,

It is an exciting time for NewMarket Technology. A business plan forged just over three years ago to refresh a failing dot com casualty has grown into one of today's fastest growing innovative technology firms in North America. In the aftermath of the late 90's hyperactive technology IPO market, marked by big ideas with big losses and inflated share prices, NewMarket answered Wall Street's call for "fundamental" financial performance. The Company has grown from $2.3 million in annual revenue in 2003 to $25 million in 2004 and is on track to post its third consecutive profitable year with well over 2000% three year sales growth.

While NewMarket has logged substantial growth and built a respectable "fundamental" foundation highlighted by $26 million in shareholder equity, Wall Street has yet to take notice. This is due in part to the investment restrictions regarding Over the Counter Bulletin Board (OTCBB) securities that are placed on many if not most money managers. The share price of our OTCBB traded stock does not yet reflect the intrinsic business value or NewMarket's rapid growth, sustained profitability or growing shareholder equity. That will change. Undervalued companies do not remain unrecognized for long, but often become "discovered" after some positive catalysts.

Transaction Value vs. Fundamental Value

Today, NewMarket is trading at a 52 week low despite its improving fundamentals. The OTCBB exchange is known for its tendency to yield rapid returns for transactional events, while being slow to recognize fundamental improvements. Oftentimes, a press release regarding a sales contract, a planned merger or a new investment can result in a one day or one week share price increase measured in a double, if not triple digit percentage increase. Such share price increases usually correct to the pre-announcement price shortly thereafter. NewMarket from time to time has experienced its own one day and one week share price appreciation events resulting from notable announced transactions.

Share price increases on fundamental growth take longer to realize, but are ultimately more sustainable than transactional increases. NewMarket has experienced a number of notable transactional share price increases and subsequent corrections over the last three years. This volatility, although attractive to some investors, by definition does not offer sustainable strength to the long-term investor. While experiencing some volatility, NewMarket has at the same time been quietly building the fundamentals of the Company to support a simultaneous and continued future share price appreciation for the long-term investor.

Growing Up on the OTCBB: The Transition from Transaction to Fundamental

NewMarket is in a transition from being recognized for its transactional value to being recognized for its fundamental value. Some OTCBB investors look for transactional opportunities, while others look for the diamond in the rough fundamental investments. As NewMarket matures, we are experiencing fewer transactional share price swings. Transactional investors are likely moving on to new opportunities. Longer-term, fundamental investors may be accumulating shares to take advantage of the low share price resulting from this change over.

While transactional share price swings are slowing down, the Company has not seen its last transactional share price swing and it has hardly begun to realize its fundamental appreciation. NewMarket is on the verge of notable market recognition that will likely impact both transactional and fundamental share price dynamics. The Company is signing larger sales contracts than ever before, making acquisitions with more cash than stock than ever before, and forging partnerships with multinational, billion dollar corporations, with some developments yet to be announced. Impending transactional events of note will likely bring dramatic transaction share price increases, but they will also continue to gain the attention of new long-term, fundamental investors.

Timing for a Fundamental Valuation: The Outlook for 2006

2006 promises to be the best year for technology sales since the collapse of the dot com market. Non-financial corporate balance sheets are heavy with cash, with some industry estimates placing overall non-financial corporate balance sheet liquidity at $2 trillion. Technology investment intended to enhance future productivity and profitability is historically high on the list of capital expenditures for corporations with high cash balances.

In addition to benefiting from a general environment conducive to technology sales, NewMarket also has a specific edge in Latin America and China.

Latin America, and particularly Venezuela's cash reserves, are increasing with oil prices at historic highs. NewMarket owns the number one Microsoft partner in Venezuela. Prior to acquiring this Venezuelan company, its historical annual sales were approximately $2 million per year. Under NewMarket's corporate umbrella, Venezuela operations alone are anticipated to contribute $10 million in sales this year with current contract negotiations ongoing that could make sales from Venezuela even more dramatic next year. Significantly, our overall presence in Latin America has expanded to a total of five countries offering additional growth opportunities.

NewMarket has also established operations this year in China and has already signed $24 million in annual recurring sales contracts. China is well known as the fastest growing economy in the world and is undergoing arguably the fastest infrastructure build up in history. For example, over 15,000 road projects are anticipated to be complete by the 2008 Olympics with over 50% of the world's concrete being shipped to China. China is planning on making a good impression on the world when it becomes the center of global attention during the 2008 Olympic Games. Infrastructure spending to include technology infrastructure in China will be high now through 2008 and beyond as China again becomes the center of global attention with the World Fair in Shanghai.

This is indeed a very exciting time for NewMarket. We are in a transition from being recognized for our transactional value to being recognized for the fundamental value we have quietly been building over the last three years. We have experienced tremendous growth over the last three years and are preparing to enter what could be the best year for technology sales growth since the collapse of the dot com market.

We are trading at a 52 week low, with no sustained market capitalization growth in 18 months while our shareholder equity has otherwise increased 500% to $26 million and our sales have grown over 2000% to a current annualized revenue run rate of $60 million. We are committed to our continued diligent building of shareholder value. We also firmly believe NewMarket is currently poised to be "discovered" by Wall Street as an undervalued company with basic financial fundamental strength greater than what the current share price reflects.

Best Regards,
Philip Verges
CEO and Chairman
NewMarket Technology Inc.
http://money.excite.com/jsp/nw/nwdt_ge.jsp?news_id=cmt-291b3833&feed=cmt&date=20051018