DALLAS, TX--(Marketwire - October 2, 2009) - NewMarket Technology, Inc. (
PINKSHEETS:
NWMT)
today released a letter to shareholders from CEO Philip Verges. NewMarket
is a fully reporting company compliant with SEC regulations and plans to
list on the OTCQX within the next 30 days as well as applying to list on
the OTCBB. The Company reported $43 million in profitable revenue through
the first six months of 2009 after reporting $95 million in revenue for
2008. NewMarket has forecasted $100 million in profitable revenue for 2009
and anticipates record financial results in the fourth quarter.
"We expect October to be an exciting month," said Philip Verges, CEO and
Founder of NewMarket Technology, Inc. "We have implemented a number of
programs and initiatives to get ready for a major kick-off in October to
make the jump from over-the-counter start-up to delivering long-term
returns through a national exchange listing strategy. We plan to continue
growing rapidly. We plan to continue introducing new technologies and
opening operations in new emerging markets. The shareholder letter today
is intended to both tell you how we plan to accomplish these tasks as well
as how we plan to deliver a return on investment. This is just the first
of several major releases we have planned for October. Beacon Research
should be releasing an analyst report on the Company shortly. Our CFO is
preparing an 8-K filing on our upcoming dividend plan. These are just two
examples of what we have planned for October. It's going to be an exciting
month."
The shareholder letter released today is included in its entirety below.
Dear Fellow Shareholders -
NewMarket was founded in 1997 on a vision of introducing new technologies
to new markets. After more than a decade of entrepreneurial evolution, I
would characterize NewMarket today as an emerging market systems integrator
selling a mix of brand name technologies combined with new innovative
technologies.
That definition is a mouthful and has some terms that might seem vague or
confusing. Let me take a few paragraphs here to break down the explanation
of NewMarket's business into four basic components and explain each
component. What is an emerging market? What is a systems integrator? What
is a reseller? What is the Greenfield program?
Emerging Markets
An emerging market is an up-and-coming regional economy. Brazil is widely
recognized as an emerging market, as is China. Most of the world outside
of North America and Europe has the potential to be an emerging market. In
other words, most of the world has plenty of room for economic growth.
That economic growth opportunity includes plenty of room for infrastructure
expansion such as new roads, new telecom transport and new water
distribution and plenty of room for new jobs. With new jobs, plenty of
room for increases in per capita income. In most of the world, outside of
North America and Europe, the stage is set for high growth. NewMarket is
looking for those emerging market regions that have the political stability
and the onset of basic infrastructure ready to reasonably support rapid
growth. We are in China and Brazil. We are in Central America and
Southeast Asia and now we are in Africa.
Systems Integration
A systems integrator installs the information and telecommunication
technologies that make business operations more efficient and more
competitive. In addition to installing those technologies, a systems
integrator provides maintenance on those technologies, to include the
installation of periodic upgrades and the repair of inevitable system bugs.
Systems integrators frequently customize commercial technology solutions to
suit specific customer requirements. Systems integrators also often train
people, often client employees, in the use of the technologies. EDS, Perot
Systems and Affiliated Computer Systems are widely recognized systems
integrators. We are similar to these companies, just smaller today and
more focused on the world's emerging markets.
Reseller
The technologies installed by systems integrators are frequently the
products of separate technology companies. Accordingly, systems
integrators are frequently technology resellers. EDS, for instance resells
hardware and software from companies such as Microsoft, Cisco and Oracle,
to name only a few. Similarly, NewMarket is a reseller for many of the
same brand name hardware and software companies. To be a reseller a
company usually has to comply with specific qualifications set by the
product company such as having some set number of engineers with certain
qualifications. In addition to being a reseller for large, brand name
technology product companies, NewMarket is a reseller for small technology
companies with new innovative solutions. We consider the new innovative
technologies we sell as a source of differentiation in the systems
integration market. The new innovative technologies also often come with
better sales margin potential than the large brand name products that we
sell.
The Greenfield Program
The challenge with new innovative technologies is that they frequently
require investment. In the past, NewMarket has been a primary investor in
the innovative new technologies that we sell. We have utilized our stock
to access investment for innovative new technologies. We have found
over-the-counter stock a good and reliable source of accessing investment
for higher risk, early stage technology opportunities. Regardless of the
reliability of the
over-the-counter market for accessing early stage investment, we found
delivering a long-term return on our last early stage technology investment
and simultaneously investing in the next early stage technology difficult,
if not impossible.
Instead of seeking investment from the sale of NewMarket stock to develop
innovative new technologies, we created the Greenfield program. Within the
Greenfield program, we create partnerships with innovative technology
companies and help them to use over-the-counter market fundraising
strategies of their own. NewMarket adds value to the partner innovative
technology company by being a reseller of their technology in addition to
providing basic back office support. It is also our hope that the
partnership will directly benefit NewMarket shareholders by providing an
ongoing pipeline of high-quality early stage investment opportunities.
Milestone Investment Cycle
While an early stage investment opportunity in an over-the-counter publicly
quoted company might seem simple and straight forward, the realization of a
potential return can be counterintuitive. Certainly an early stage
investment has an elevated degree of risk. After all, the early stage
company might not make it to a later stage. However, even when an early
stage company survives to a later stage, the anticipated increase in share
price and the corresponding return on investment can be elusive.
In my experience, over-the-counter share prices and market capitalizations
rarely correspond to fundamental financial values. Share price is
sometimes higher than what might seem warranted by the financial
performance and at other times, share price is lower than what might seem
warranted by financial performance. As I shared in my last shareholder
letter, I am not the only one with this perspective. In the September 7th
issue of Forbes, in an article titled "The Hedge Fund Shuffle," Nathan
Vardi, a regular Forbes contributing writer, describes penny stocks as "...
shares in companies whose market values are completely disconnected from
fundamentals like earnings and book value..." Regardless of the share
price, the trading volume might be very low, which makes the share price,
high or low, less relevant. With low trading volume, an investor might not
be able to buy stock and make an investment, or sell stock in order to
realize a return. I nevertheless remain a firm believer that the
over-the-counter market provides a tremendous market opportunity for
inventors and for entrepreneurs to source capital for early stage and
higher risk investments in early stage business plans. I equally believe
that the
over-the-counter market is a tremendous market opportunity for retail
investors to potentially enjoy a high rate of return on investments.
However, I believe that inventors and entrepreneurs should plan for
incremental investments in the range of $100,000 to $1,000,000 to fund
their business plans and retail investors should look for optimal returns
with an investment strategy that includes small investments with short
horizon expectations. I refer to the framework referencing the
relationship between an over-the-counter early stage business and a retail
investor as the milestone investment cycle.
Milestone Investment Cycle Case Study
To further explain the milestone investment cycle and suggest a
corresponding investment strategy, I will use a hypothetical example that I
think you may find to have some similarities to over-the-counter investment
experiences you may have had in the past. I will highlight the story of an
entrepreneur and inventor that has designed a technology he believes can
change the way we all work and play. He starts a company and names it the
"Better Way."
To raise money to build his design into a real technology solution, he
reverse merges a Better Way into an over-the-counter shell company. He
then sells stock to raise his first $100k. With the first $100k he
develops and demonstrates his prototype. The prototype demonstration
serves as a milestone event that creates optimism amongst over-the-counter
retail investors that the Better Way might truly bring a technology product
into production that changes the way we all work and live. That optimism
is reflected by an increased number of over-the-counter investors buying
stock. The increased demand for stock results in an increased share price.
However, the increased share price attracts the attention of speculators
that know statistically, 60% of all start-ups do not sustain operations
beyond three years. These speculators anticipate that the Better Way will
just be another statistic and in-turn, the speculators look to profit from
the increased share price by selling short in anticipation that the
optimism will be short lived. The speculators anticipate that the
increased demand will equally be short lived and that the share price will
likewise decrease providing the speculator the opportunity to purchase
stock at a lower price to fill the short sale made at a higher price. In
fact, the short sale itself contributes to overcoming the increased demand
by increasing the apparent supply of stock. In the end, the Better Way
increased share price is short lived. That is until Better Way raises its
next $100k and submits a patent application and the initial provisional
patent drives a second milestone event that creates optimism amongst
over-the-counter retail investors and the cycle begins all over again...
and again and again.
An ongoing competition continues in perpetuity between optimistic investors
betting on the potential of an early stage company to be one of the 40%
that sustain beyond three years and the speculators betting that the early
stage company is more likely to be a sixty percenter. The result is the
volatile price per share ups and downs that, in my experience, are common
on the over-the-counter markets. Because the price per share does not go
up and stay up, Better Way has to issue more stock to raise each
incremental $100k dollar investment than originally anticipated. Even if
Better Way is ultimately victorious in building a successful business that
sustains beyond three years and manages to actually change the way we all
work and play, Better Way has issued so many shares along the way that the
supply of stock may just be too great. Finding adequate demand to purchase
the stock in volumes that would increase the share price to correspond with
the underlying fundamental financial value may simply be too monumental.
Fixing Over-the-Counter Volatility or Adopting an Investing Strategy to
Profit From Volatility
Some over-the-counter market participants claim that share price volatility
and the failure of sustained increased share prices could be overcome if
companies would not continuously issue stock. "Dilution" is often voiced
as though it were a four letter dirty word. I believe it is not realistic
to expect over-the-counter listed companies not to issue stock when the
primary purpose of listing publicly is to access capital for a business
plan. I frequently advise other business owners if they don't need capital
for their business plan, or if they can find another source of capital for
their business plan, then don't list publicly. Companies list publicly for
the purpose of accessing resources for their business plan and accessing
such resources results in the issue of new stock.
Other over-the-counter market participants claim that share price
volatility and the failure of sustained increased share prices could be
overcome if effective short sale regulations where implemented. These
participants often believe that those screaming "dilution" as though it
were a dirty word are actually the ones shorting the company's stock. The
idea is that short sellers are causing the decrease by 1) artificially
increasing the supply of stock with counterfeit stock sales and 2) creating
fear, uncertainty and doubt amongst the optimistic investors with
accusations and rumors directed at the management team of the subject
over-the-counter company. One of those rumors includes the blame of
"dilution" directed at the management team as the cause for decreasing
share prices.
Early stage companies in need of capital are not likely going to stop
issuing stock and short-selling regulations are not likely to change
short-selling tactics any time soon. However, good early stage
opportunities will continue to seek capital for their business plans by
listing on the over-the-counter market and retail investors can realize a
high rate of return on investment in early stage investment opportunities.
Small Investments, Short Horizons and Profits
The over-the-counter market attracts large volumes of retail investors. The
over-the-counter trading volume in the U.S. markets for the month of August
was nearly $11 billion. Our intent at NewMarket is to provide high-quality
investment opportunities through the Greenfield program. Opportunities
that provide NewMarket with a high potential for generating high margin
systems integration contracts, while at the same time providing NewMarket
shareholders with an additional opportunity for a high potential rate of
return on investment. We want to improve that opportunity by shedding
light on what we see as the stock trading dynamic on the over-the-counter
markets. We are communicating to you what we see is the framework of what
we are calling the milestone investing cycle. The over-the-counter trading
volume would not generate $11 billion in a single month, if retail
investors were not at least occasionally enjoying a periodic return on
investment. With the Greenfield program and the milestone investing cycle
framework, we would like to see investors in the NewMarket family of
companies enjoying more consistent and regular returns. We hope this
information can help investors adopt investing strategies that optimize
profits within the milestone investing cycle. We believe the
over-the-counter market can generate attractive returns on small
investments with return horizons that parallel the milestone cycle.
Long Term Investments
The milestone investing cycle framework does not mean we do not believe in
a long-term return on investment potential in the over-the-counter market.
On the contrary, we want to believe all of the NewMarket family of
companies and Greenfield partners will make it into the forty percentile.
We want all our companies and partners to make it past the statistical
three year sustainability hurdle and become a company that changes the way
we all work and play. However, we believe the milestone investment cycle
framework provides an opportunity for a return on investment even if a
company is overcome by statistics and one of our companies or partners does
not make it past the three year sustainability barrier. Most
over-the-counter companies will have some milestone successes and create
milestone returns even if they don't make it past the three year
sustainability barrier. If one of our companies or partners succeeds past
the three year barrier, than they have the potential to deliver milestone
returns and a long-term return. We will continue in our diligent efforts
to help them deliver both.
Best Regards,
Philip
Philip Verges
CEO and Founder
NewMarket Technology, Inc.
Corporate Information and E-mail Updates
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Company, please visit
www.newmarkettechnology.com.
About NewMarket Technology, Inc. (
www.newmarkettechnology.com)
NewMarket is a reporting company with audited financial reports filed with
the SEC. NewMarket provides systems integration, technology infrastructure
services and emerging technology worldwide. NewMarket has a focus on
providing technology and support services to rapidly growing economies
where technology purchasing is on the rise. In addition to its base of
operations in North America, NewMarket has operations today in the growing
economies of China, Southeast Asia, Brazil and Northern Latin America. Last
year the Company reported over $40 million in revenue from Asia and over
$20 million in revenue from Latin America. Overall, NewMarket reported over
$95 million in revenue for 2008.
Across the globe, NewMarket is a Microsoft and Oracle partner, distributes
various computer hardware and peripherals from brand partners such as Dell,
HP, IBM, Cisco, Sony, Epson, Canon and Sanyo and is also an authorized
reseller of operating systems and various software from companies such as
Red Hat, Sybase, IBM, BEA, Veritas and others. Additionally, the Company
works with emerging technologies such as mobile computing, various security
and wireless broadband technologies.
NewMarket's rapid growth since 2002 has placed the Company on the Deloitte
Technology Fast 500 for 5 consecutive years. NewMarket was recognized as
the third fastest growing technology company in the United States in 2006
and the number one fastest growing technology company in North Texas for
two years in a row.
"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
214-722-3065
ir@newmarkettechnology.com