new market technology inc

Analyst: Victor Sula, Ph.D. Initial Report

October 17th, 2008

New Market Technology Inc. (OTC: NMKT) 1

Analyst: Victor Sula, Ph.D.Initial Report

October 17th, 2008

Company Introduction

New Market Technology Inc.14860 Montfort Drive, Ste 210Dallas, TX 75254 United States

Phone: 972-386-3372Fax: 214-853-5929www.newmarkettechnology.comir@newmarkettechnology.com

MARKET DATA

SymbolExchangesCurrent PricePrice TargetRatingOutstanding SharesMarket Cap.Average 50-day Volume

Source: Yahoo Finance, Analyst Estimates

NMKTOTC

$0.07$0.54

Speculative Buy212.2 Million$27.1 Million

927,188

NewMarket Technology Inc. (NMKT) is a full-service software de-velopment, systems integration and maintenance provider that also evaluates and incubates new technologies. NMKT has product reseller and integrator partnerships with many prominent software vendors, including Microsoft, Hyperion, SAP, Oracle, Cisco, Sun Microsystems, iPass and Lockheed Martin Overseas Corp. These relationships form the base of NMKT’s business and faciliate its international expansion. In addition, NMKT, searches for innova-tive new technolgies that can be developed into high-margin sales opportunities.

The well-known products of its partners enable NMKT to establish customer relationships that would otherwise be difficult to achieve with lesser-known products and services. NMKT’s ultimate goal is offering its existing customers new products and services based on emerging technologies that would be difficult to market without an existing relationship.

The Company went public in 2002 by reorganizing into an exist-ing Voice over Internet Protocol (VoIP) company. Because of its heritage, NMKT is often mistaken for a simple telecommunications company. However, since 2002, the Company has built product and service offerings that not only include VoIP, but also incorporate healthcare practice management software, municipal wireless so-lutions, offshore outsourcing, multimedia, network security and more. NMKT’s customers include large and small corporations, service providers, universities and government agencies in North America, South America and Asia.

The Company has been ranked by Deloitte as one of the fastest-

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0.10

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0.07

0.06

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NMKT daily

Aug Sep Oct

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October 17th, 2008


growing technology-based businesses in North America for the past four years. In 2006, NMKT ranked No. 1 in Texas, No.3 in the United States, and No. 5 in North America on Deloitte’s Technology Fast 500, a ranking of the 500 fastest-growing technology, media, telecommunications and life sciences companies in North America. The Company grew from less than $1 million in revenues in 2002 to more than $50 million in profitable revenues in 2005. NMKT continued its rapid growth, reporting $77.6 million in revenues and net income of $5.8 million in 2006, and $93.1 million in revenues and net income of $7.3 million in 2007.

NMKT is headquartered in Dallas, Texas, and has offices in Venezuela, Brazil, Chile, Singapore and China.

Stellar revenue growth

The Company has reported robust revenue growth since its reorganization in 2002. In six years, NMKT has grown from less than $1 million in revenue to $93.1 million in 2007 - nearly more than 9,000% revenue growth. The growth is the result of a combination of geographical and market expansion though acquisitions and strong organic growth in NMKT’s core markets. During the first quarter of 2008, NMKT’s revenue increased 15% year-over-year to $20.9 million. Growth continued at a more modest pace in the second quarter with revenues rising 4% year-over-year. The growth was primarily due to increased sales in the Company’s Latin American and Chi-nese systems integration subsidiaries. In the third and fourth quarters of 2008, we expect sales to drive growth in the Company’s North American assets to levels similar to its overseas assets.

Future growth plans call for expansion into the financial acquisition services market, expansion into other de-veloping world markets including Eastern Europe and Africa, and the continued acquisition of complementary businesses. Based on the Company’s growth initiatives and management’s outlook, we expect NMKT to report revenue in the range of $120 million in 2008 and $160 million in 2009.

Improving operating margins despite gross margin contraction

Competition within its core lines of business, as well as the continuing trend toward outsourcing in North Amer-ica, has caused the Company’s gross margins to contract. The systems integration and software development industries have both experienced margin erosion over the past several years, and this trend will likely continue to pose a challenge for NMKT and others. However, the Company also has overseas assets that can be leveraged to combat gross margin declines in its North American business and NMKT is developing its own outsourcing opportunities. In addition, the Company’s development of emerging technology assets could yield much higher margins. We also believe that NMKT’s continued sales growth will enable the firm to realize benefits from econo-mies of scale. For example, second quarter 2008 operating margins rose to 5.4% from 4.0% in the same period last year. In the first quarter of 2008, NMKT’s operating margin increased to 6.3% from 2.9% one year earlier. We think this margin improvement trend is likely to continue for the remainder of 2008 and into 2009.

Solid product offerings in partnership with leading IT companies

As mentioned earlier, NMKT has established reseller agreements and partnerships with some of the world’s leading IT companies. These products open the door to new customer relationships and allow NewMarket to establish a presence in new geographical regions, many of which are outside the United States.

The Company is working to develop its own proprietary emerging technologies that it hopes to sell to its estab-

Investment Highlights


October 17th, 2008



October 17th, 2008


lished customer base. NMKT’s plan is to develop newer technologies that will compliment its existing products and services and drive higher-margin sales. This emphasis on cross-selling new technologies gives the Company an advantage over many traditional systems integration companies.

Business model capitalizing on IP communication technologies

NMKT has developed an innovative business model that focuses on searching for, acquiring, developing and spin-ning off emerging technology companies to generate equity income for its shareholders. Equity income would be in addition to traditional product and service revenues and profits. By developing independently-listed subsidiar-ies, the Company has the opportunity to use shares of its subsidiaries for a variety of purposes. NMKT has become a conglomerate of micro-cap public companies and should benefit from economies of scale and greater bargaining power.

Aggressive acquisition campaign

Since 2002, the Company has built a solid portfolio of technology companies. Its goal is to deploy technology so-lutions over a larger number of industries and to better serve the global marketplace, particularly the America’s and Asian marketplaces. In June 2008, NMKT announced a definitive and binding agreement with FIC of Taiwan to acquire a 75% interest in Everex of Fremont, California, a respected brand name in personal computing and a market leader in producing innovative products. Everex has sold millions of PCs and peripheral components worldwide, and reported 2007 sales of $60 million.

This transaction can be a transformational event for NMKT. First of all, Everex is being acquired to serve as the cornerstone of the Company’s mobility technology solutions initiative. Mobility solutions promise to be a quantum development in the world of technology and personal computing. Secondly, the transaction is likely to substantially increase NMKT’s North American sales to levels comparable to the Company’s Asian and South American sales. A more balanced blend of domestic and overseas sales will likely make future financing transac-tions easier for NewMarket, since many fund-raising efforts in North America can be limited by a predominance of overseas assets.

Managed services strategy enhances revenue potential

NMKT launched a new strategy earlier in 2008 to transition the Company’s revenue to long-term managed services contracts and customer relation-ships. The objective of the managed services strat-egy is to improve the Company’s value by extend-ing the average length of customer relationships and contracts while improving the efficiency of regional operations through the consolidation of back office functions.

By extending the length of contracts, customer ac-quisition costs are reduced and forecasts become more accurate. NMKT’s sales base should become more stable, allowing the Company to focus a greater portion of its efforts on long-term growth


October 17th, 2008


rather than the renewal of shorter term contracts. Since launching the managed services strategy, NMKT has won longer-term contracts with some of its established customers. Most notable are WBA Telecommunications, with a $10.5 million three-year contact, and a $4 million, three-year contract with Movistar, a division of Telefo-nica.

CEO leadership

NMKT’s CEO Philip Verges should be given much of the credit for the Company’s results. Mr. Verges joined the Company (in fact, re-invented the Company) in 2002, bringing entrepreneurial experience, development strat-egy, technology products and system integration relationships that allowed NMKT, in a short period of time, to become one of the industry’s most dynamic players. Mr. Verges’ experience with start-ups and development-stage businesses includes opening a new division for Electronic Data Systems, establishing operations in a new geographic region for another systems integration company, and launching his own business, VergeTech Inter-national, which grew from $0.3 million in revenues in 1997 to $11 million in 2001, finally merging it into what is now NewMarket Technology.

Market opportunity

A favorable industry outlook supports NMKT’s business model. The Company is building a business at the convergence of the telecom and IT industries. Both industries are poised for strong growth over the long-term, which will provide emerging companies with numerous opportunities. According to the Telecommunications Industry Association (TIA), global telecom spending is likely to exceed $2.9 trillion in 2006 and will grow 10% annually over the next several years to $4.2 trillion in 2010. At the same time, IDC forecasts worldwide IT spend-ing will grow 6% annually from $1.2 trillion in 2006 to $1.5 trillion in 2010.Most of the growth is expected to come from NMKT’s target regions and industries, particularly, Asia-Pacific, Latin America and Eastern Europe, as well as the banking, health care, communications and media industries.

NMKT is developing market entry technology products and services, while maintaining a core systems integra-tion base of business. NMKT does business in several market segments, with a focus on Telecommunications, Healthcare and Security. The Company also plans to develop technologies for the financial acquisition services segment.

Technology sector businesses face two substantial industry-wide challenges. The first is the growing global tech-nical labor force, which puts significant pressure on profit margins as technology companies continue to ratchet down expenses and sell products at prices below competitors by employing a technology labor force from developing countries. Secondly, since the collapse of the dotcom investment market, the technology sector has been unable to re-establish consistent investment community interest in technology innovation. Profit margin pressures deter investment community interest and make internal research and development investment less attractive.

The Company’s business strategy focuses on the following:

1) Maintain a core systems integration base of business;

2) Additionally, Find and acquire timely early-stage technology companies;

Business Model


October 17th, 2008


2) Incrementally invest to refine acquired technologies;

3) Concentrate initial sales efforts on focused pilot opportunities;

4) Expand pilot opportunities as warranted to a level that proves market viability;

5) Spin the technology company off as a next stage, stand-alone public company to support expanded

capital formation;

6) Realize support services economies of scale by retaining support service contract functions at NMKT; and

7) Build service and sales capacity in developing economies overseas to take advantage of lowe labor costs and

sell into fast-growing economic regions with less brand name competition than in North America.

To this end, NMKT has introduced a unique business model, which we believe addresses issues such as the glo-balization of the techology work force which are causing profit margin pressures. NMKT holds each technology product and service offering within a subsidiary company. As the product and service offering matures, the Com-pany plans to monetize the value of the technology through an incremental liquidation of stock in the subsidiary. Moreover, by spinning off its maturing subsidiaries, NMKT will generate equity income for its shareholders in addition to traditional product and service revenues and profits.

NewMarket has built a solid portfolio of technology companies. Its businesses are diverse in their geographi-cal reach, products and service. Many of these companies were acquired, but some have been grown internally through start-up efforts, most notably NMKT’s Chinese subsidiary. Readers should note that this subsidiary, for-merly known as NewMarket China, recently changed its name to China Crescent Enterprises (ticker symbol: CCSE).

Technology Portfolio


October 17th, 2008


To date, NMKT’s revenues have been derived from the following product areas:Software licensing;• Long-distance telephone services;• Technical independent consulting; and• Security.•

NewMarket Portfolio of Companies

Source: Company’s presentation

China Crescent Enterprises Inc. (OTCBB: CCSE)

NewMarket Latin America Inc. (OTC: NLAI)

NewMarket Broadband

NewMarket Intellectual Property

Infotel Technologies Ltd.

RKM Suministros S.A.

UniOne Consulting

IP Global Voice

TekVoice Communications Inc.

RedMoon Broadband Inc.

Peoples Republic of China

Brazil, Chile,Venezuela

TX, U.S.

TX, U.S.

Singapore

Venezuela

Brazil, Chile

CA, U.S.

FL, U.S.

TX, U.S.

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Yes

Yes

Hardware VAR OffshoreOutsourcing Multimedia

Software DevelopmentSystems Integration

Wi-Fi & Wi-MAX

Patented Emerging Technology

Software DevelopmentSystems IntegrationSoftware DevelopmentSystems IntegrationSoftware DevelopmentSystems IntegrationVoIP Commercial Solutions

VoIP Commercial Solutions

Wi-Fi & Wi-MAX

Country FocusCompany Name Subsidiary

>51% ownedAffiliate

<51% owned Business Focus


October 17th, 2008


NewMarket sales model

Systems integration

NMKT provides full service systems integration, customization and implementation for a variety of software and hardware products in North America, Asia and Latin America. The Company re-sells, installs, customizes and supports products from Microsoft, SAP, BAAN, Hyperion, SSA Global, etc. In addition, NMKT offers comprehen-sive consulting to identify and implement system solutions or to execute a specific project focused on areas such as forecasting or security enhancement, to name a few.

NewMarket Systems integration subsidiaries:

Sytems Integrations

Traditional Technologies

From companies such as:

Microsoft•Oracle•SAP•Infor•

New Technologies

For example:

VoIP•Wireless•RFID•Security•

NorthAmerica

SouthAmerica

China

SE Asia

Source: Company’s presentation


October 17th, 2008


Telecommunications

NMKT provides Voice-over-IP and traditional phone lines to both business and residential customers, includ-ing the latest complementary voice system services. In addition, the Company offers broadband access to busi-ness and residential customers, as well as Wireless Mesh systems for municipalities and corporate campuses. NMKT’s hardware partners include Cisco, Polycom, 3COM, Linksys and Edgewater.

NewMarket Telecommunications subsidiaries and affiliates:

Security

NMKT offers data integration and customization, as well as security solutions to protect customer’s information and communications. NMKT’s subsidiaries can design, develop, manufacture, install and market specialty prod-ucts, equipment and systems for the safety and security needs of all sectors of the domestic and international marketplace. When commercial off-the-shelf products do not fulfill critical customer requirements, NMKT can design specialized hardware and software solutions.

NewMarket Security subsidiaries:

Healthcare

NMKT has entered the emerging healthcare technology products and services market with products and servic-es that address this market’s demands for increased productivity and security. The Company offers its healthcare clients the latest solutions in practice management, prescription tracking and monitoring.

NewMarket Healthcare partners:

Virtual Health Technologies


October 17th, 2008


In addition, NMKT continues to search for, evaluate and acquire emerging technologies that may provide distinc-tive advantages to customer’s business and enhance the Company’s existing solutions portfolio. NMKT also plans to develop products and services for the financial acquisition services sector.

Everex acquisition

During June 2008, NMKT announced an agreement with FIC of Taiwan to acquire a 75% interest in Everex of Fremont, California. The Company announced the end of September as the target date for completing this transac-tion. While we expect the transaction to be complete during this calendar year, we are not surprised that the trans-action has not closed by the September target date due to the magnitude of the transaction. NMKT also noted that the structure of the acquisition does not entail the issue of any NMKT common stock or a security which would subsequently result in the later issue of NMKT common stock.

The acquisition brings significant WiMax Internet expertise to NMKT and has the added benefit of establishing an ongoing relationship with FIC of Taiwan, one of the largest companies in Asia. This acquisition will give NMKT a jump-start in its mobility technology initiatives with WiMax enabled product and services. Everex recently in-troduced CloudBook, an ultra-mobile, low-cost and lightweight portable computer. A Wi-Max enabled version of the CloudBook is scheduled for release in the first half of 2009. The next generation of WiMax Internet access and mobile computing devices is poised to radically alter the way the world works and plays. The Everex product line and the Company’s mobility strategy position NMKT at the forefront of this trend and significantly enhance many of the Company’s existing emerging market and emerging technology initiatives.

Through this transaction, NMKT will also be able to substantially increase North American sales since Everex al-ready has established revenues in the United States, reporting annual sales of $60 million in 2007. Since expanding into emerging markets worldwide, NMKT’s sales outside of the United States have grown faster than its domestic sales. In addition, NMKT will benefit from improved cash flow and increased overall financial maturity. Also notable is the impact the transaction will have on the Company’s Asian operations, particularly China. Everex is a respected name in computer hardware, which is currently a vital part of China’s infrastructure improvements. As NMKT moves toward higher-margin service offerings, a partnership with an Asian company outside of China will enhance the Company’s strategy, as selling Chinese hardware products in China typically produces only modest profit margins. In turn, NMKT can assist Everex in entering additional markets such as Latin America where NMKT already has established operations.

Telecommunication and IT industries

According to the Telecommunications Industry Association (TIA), global telecom spending is likely to exceed $2.9 trillion in 2006 and will grow 10% annually to $4.2 trillion in 2010. IDC estimated that worldwide end-users spent $1.2 trillion on information technology in 2006 and will increase IT spending 6% annually to $1.5 trillion in 2010.

Industry Outlook


October 17th, 2008


According to IDC, the major share of the growth will come from emerging economies, particularly Asia-Pacific, Latin America and Eastern Europe. Growth in the manufacturing and banking sectors, as well as the health care, communications and media industries, will outpace overall industry growth.

VoIP market

The VoIP market has grown dramatically since the early days of calls made from personal computers. VoIP is an alternative communications technology that can circumvent traditional landlines by translating voice into data packets, transmitting the packets over Internet networks, and reconverting them into voice at the destina-tion. Unlike traditional landline networks, VoIP doesn’t use dedicated circuits for each telephone call. Instead, multiple users can share the same VoIP network simultaneously. These systems are more efficient since the data network is not restricted by the one-call, one-line limitations of traditional telephone networks. This improved network efficiency creates cost savings that can be passed along to consumers as lower phone rates.

At the end of 2004, only 1.8 million VoIP lines were in service across Europe, equivalent to slightly more than 1.0% of households. By mid-year 2007, approximately 22 million European households had VoIP telephone service. The number of U.S. VoIP subscribers has risen from 6.5 million in mid-2006 to 11.8 million in mid-2007 - equivalent to 10% of all U.S. households. According to eMarketer predictions, the number of U.S. VoIP users will climb to 32.6 million in 2010, equal to nearly 40% of all broadband households1.

1. www.researchandmarkets.com/reports/c35746

4.8

3.6

2.4

1.2

0.0

1.6

1.2

0.8

0.4

0.02006 2010 2006 2010

2.9

4.22.9

1.5

Global telecom spending, $ trillion Global IT spending, $ trillion

Sources: http://www.tiaonline.org/media/2004_TIA_Industry_Outlook.pdf, http://www.tiaonline.org/business/media/press_releases/2006/PR06-14.cfm.http://www.idc.com/getdoc.jsp?containerId=202600


October 17th, 2008


Worldwide VoIP service revenues jumped 66% in 2006 to $15.8 billion after more than doubling in 2005, and are expected to triple by 2010, according to Infonetics Research2. About 71% of worldwide VoIP service revenues came from residential/SOHO customers and 29% from business customers in 2006. By 2011, In-Stat predicts the world-wide consumer VoIP market will reach $44 billion.

Across Europe, revenues from VoIP services are growing at a comparable pace. Annual revenues from consumer VoIP services approximated €583 million3 in 2005 and €1.5 billion in 2006. VoIP revenues were estimated to ex-ceed €2.8 billion in 2007. Western European VoIP service providers are expected to generate revenues exceeding €5.4 billion by 2011.

SoftBank is the world’s largest VoIP service provider with an 18% market share, followed by NTT, Vonage, France Télécom and Time Warner Cable.

Another important market for VoIP services involves international calls. VoIP offers an affordable alternative to the high prices charged by Public Switched Telephone Network (PSTN) companies. Based on TeleGeography’s estimates, international VoIP traffic exceeded 50 billion minutes and represented 17% of the global market in 2006, compared with 31 billion minutes and 13.7% of the market in 2004. VoIP minutes will continue to drive traffic away from traditional PSTNs and into IP core backbones, requiring service providers to handle multiple types of traffic as VoIP services and applications continue to proliferate.

2. www.voipmonitor.net/2007/08/09/VoIP+Service+Revenue+Hits+158B+In+2006.aspx3. www.telegeography.com/products/euro_voip/samples/Executive_Summary.pdf

180

160

140

120

100

80

60

40

20

0

2006 2007 2008 2009 2010 2011

37.850

66.1

87.3

115.4

152.6

Worldwide VoIP subscribers (in millions)

Source: web20.telecomtv.com/docs/e9e52ba6-695b-4578-b169-6b4472f71297/The%20Race%20for%20Revenue.pdf


October 17th, 2008


Internet usage

Continued growth in the number of Internet users is expanding the customer base for IP-based services. The number of Internet users already exceeds 1.0 billion worldwide. As of September 30, 2007, there were 1.2 billion Internet users, according to Internet World Stats.

The number of Internet users worldwide is expected to reach 2.0 billion by 2011.

TDMandVoIPTraffic(billionsodminutes)

TDMandVoIPTrafficGrowth

350

300

250

200

150

100

50

0

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

VoIP MinutesTDM MinutesTotal Minutes Growth

30%

25%

20%

15%

10%

5%

0%

Worldwide traffic, billions of minutes

Source: http://www.telegeography.com/wordpress/?m=200712

Internet Usage

Source: www.internetworldstats.com/stats.htm

Europe North America World’s total

809.9 334.5

6,574.6

12.3 % 5.1 %

100.0 %

337.9 232.6

1,244.4

41.7 % 69.5 % 18.9 %

27.2 % 19.8 %

100.0 %

221.5 % 115.2 % 244.7

Population, Mn

(2007 Est.)

Internet Users, Latest Data,

Mn Penetration

(% Population) % Usage of World

User Growth ( 2000-2007 )

% Pop. of World


October 17th, 2008


Broadband usage

Internet telephony is essentially a broadband phenomenon. Increasing broadband penetration rates facilitate the rapid deployment of voice, video and data IP services. Broadband is often called high-speed Internet because of its high data transmission rates. The number of broadband connections worldwide is rising steadily as more users tap high-speed technologies for peer-to-peer (P2P) file sharing systems, music and games downloading, video-on-demand and conference calls.

At the end of the first quarter of 2007, there were an estimated 300 million broadband subscribers worldwide. Last year, the number of broadband subscribers in the OECD countries increased 24% to 221 million4 (June 2007). For every 100 OECD residents, 18.8 had broadband subscriptions, up from 15.1 two years ago. The strongest per capita subscriber growth rates were in Ireland, Germany, Sweden, Australia, Norway, Denmark and Luxembourg. Each of these countries added more than five subscribers per 100 residents in 2007.

The Telecommunications Industry Association (TIA) estimates the total U.S. broadband subscriber base will reach 57 million in 2008, up from 32.5 million in 2004. According to TIA, the United States had fewer than 5 million broadband subscribers in 2001. The number of U.S. subscribers grew 35.4% in 2004 to 32.5 million. The breakdown by broadband technology was as follows: cable modem (17.0 million), DSL (12.6 million), fixed wireless (2.2 mil-lion), fiber-to-the-home (0.2 million), satellite (0.4 million), mobile wireless (3G) (0.1 million) and broadband-over-power line (less than 50,000).

Revenues

The Company is generating revenues by offering technology products and services in the telecommunication, healthcare and security markets. To date, the Company’s revenues have come primarily in the following product areas: hardware sales, software licensing; systems integration; technical independent consulting; and security.

The strong revenue growth reported since NMKT’s inception reflects a combination of geographical and market expansion though strategic mergers and acquisitions. During the first quarter of 2008, NMKT’s revenue increased 15% year-over-year to $20.9 million. Growth continued at a more modest pace in the second quarter of 2008, with revenues improving 4% year-over-year to $22.8 million. This gain was primarily due to increased sales in the Company’s Latin American and Chinese systems integration subsidiaries.

Future revenue growth will come from introducing new products in the financial acquisition services segment, expansion into other emerging markets like Africa, the Middle East and Eastern Europe and the acquisition of complementary businesses. Over the long-term, the Company plans to lay the groundwork for sustainable growth by capitalizing on the IT and telecommunication industries’ strong fundamentals and leveraging acquisitions and organic growth

4. http://cordis.europa.eu/search/index.cfm?fuseaction=news.simpledocument&N_RCN=28639

Financial Analysis


October 17th, 2008


Segments

NMKT has three reporting segments: Services and computer programming services; • Contracts, particularly training contracts and technical support contracts; and • Product sales, which consist of the sale and installation of hardware and software.•

The Services segment provides 89% of total revenues.

Revenues, $ Mn

Source: SEC Filings

Source: SEC Filings

Revenues by segment

Revenues Services revenue Contract revenues Product revenues

Gross Margin Services COS Contract COS Product COS

50.139.13.17.9

37.0%39.0%45.9%23.7%

77.667.83.85.9

28.2%28.9%29.9%19.3%

93.183.33.36.5

27.7%28.9%15.4%18.4%

19.9%22.7%

-14.1%9.8%

-0.5%0.0%

-14.5%-1.0%

2005 2006 2007 2007 vs. 2006


October 17th, 2008


NMKT’s overseas operations are located in Brazil and Chile (UniOne), Venezuela (RKM), China (China Crescent Enterprises) and Singapore (Infotel), and together account for 71.5% of total revenues. The breakdown of revenues by operation is as follows: UniOne, 21%; RKM, 4%; China Crescent Enterprises, 43%; and Infotel, 3.5%.

Income statement

As mentioned earlier in this report, competition within NMKT’s core lines of business, as well as the continuing outsourcing trend in North America, has put pressure on the Company’s gross margins. NMKT’s core capabilities are in industries that have experienced margin contraction over the past several years. However, the Company also has overseas assets that can be leveraged to combat margin compression in North America. NMKT may also develop its own outsourcing capabilities. In addition, the Company’s development of emerging technology as-sets could yield much higher margins. We also assume that with continued growth, NMKT will realize greater benefits from economies of scale.

Liquidity

Since its inception, NMKT has financed operations primarily through equity security sales. NMKT has recently begun to report higher operating cash flows, allowing the Company to scale back its use of external financing. In addition, NMKT has retired some of its interest-bearing debt, thus improving its capital structure, and recently announced the retirement of a $3 million credit facility

* Net income includes foreign currency translation gains. Source: SEC Filings

Operating results

Revenue, $ MnCost of goods sold, % revenueOther operating expenses, % of revenue Operating marginNet margin* Diluted EPS, $

77.671.8%22.4%

5.7%8.5%

0.03

93.172.3%22.1%

5.6%8.5%

0.03

20%0.5%

-0.3%

-0.2%0.0%

0%

21.976.2%19.8%

4.0%2.6%

0.00

22.8 75.0%19.6%

5.4%6.6%

0.00

4%-1.2%-0.2%

1.4%2.6%

20072006 Q2 2007 Q2 2008% Chg % Chg


October 17th, 2008


Revenue forecast

In a recent press release, NMKT management suggested that NMKT could report higher-than-anticipated rev-enue growth in 2008, and revenues exceeding $120 million this year, based on organic growth; the company anticipates revenues potentially exceeding $150 million if acquisitions are included. NMKT has a good track re-cord for customer retention and has been building upon its existing customer base year after year. As of July 31, 2008, the Company had already signed sales contracts with new customers expected to bring in approximately $25 million in new revenues by year-end. These new contracts were not included when NMKT management originally shared 2008 revenue goals. The Company’s historically strong annual growth combined with these new contracts will likely enable NMKT to record the best financial performance in its history this year.

Given the favorable industry outlook, recent Company initiatives and NMKT’s strong integrator and reseller partnerships, we expect the Company to record strong growth over the next five years. We think the Company is on track to exceed $120 million in revenues in 2008 and surpass the $160 million milestone in 2009.

A strong portfolio of technology companies, an innovative business model, the rapid rollout of China and Latin America operations, as well as the pending Everex acquisition, are all factors that support an optimistic growth outlook.

Balance sheet items, $ Mn

Source: SEC Filings.

Cash and equivalentsNet Working Capital

DebtEquity

4.721.6

6.876.2

4.422.5

6.267.2

31-Mar-08 31-Jun-08

Valuation

Revenue forecast, $ Million

Source: SEC Filings, Analyst estimates


October 17th, 2008


Despite the fact that NMKT’s gross margins are under pressure, we expect the Company to gain efficiencies through economies of scale as sales rise and improve product and service margins with its growing portfolio of emerging technologies. These factors should fuel improvements in operating margins and allow the Company to accelerate growth in net income and free cash flow.

Peer Comparison

A number of publicly traded companies have product and service offerings comparable to NMKT and are facing similar challenges. However, NMKT is traded at a significant discount to peer group Price/Earnings and Price/Sales multiples.

EPS forecast, $

Source: SEC Filings, Analyst estimates

Company Name11-Aug-08

Comparative analysis

Source: Yahoo Finance

Electronic Data SystemsAffiliatedComputerServicesAcxiomPerot SystemsComputer SciencesiGATE Corp. Peer median

NewMarket Technology

EDSACS

ACXMPERCSCIGTE

NMKT

2008

24.8550.3714.1917.4645.8410.67

0.13

12,5604,8701,1002,0906,930

575

27

17.5012.9520.5717.6410.6618.7217.57

3.03

2009 2009

14.7911.5817.1015.459.73

15.9315.12

2.18

0.550.730.810.740.392.540.74

0.22

0.540.690.770.690.382.210.69

0.16

Tickersymbol 2008

Price perShare, $

Mrkt. Cap.$ Mn

P/E P/S


October 17th, 2008


We think some discount relative to the peer group is warranted since NMKT has a limited operating history, fo-cuses on emerging and arguably unstable markets in Asia and Latin America, and may use equity for acquisitions, resulting in dilution for its existing shareholders. We value these shares at a 9.3 times forward Price/Earnings multiple, which is less than the peer group’s 15.1 times forward Price/Earnings multiple.

We derive a $0.54 target price for NMKT shares by multiplying a 9.3 times forward Price/Earnings multiple by our $0.059 2009 EPS estimate. We are initiating coverage of NewMarket Technology with a Speculative Buy rating and a $0.54 price target.

Development-stage business

Despite substantial progress over the last six years, NMKT remains in the development stage, with limited prof-itability and resources for acquisitions. Consequently, there are uncertainties related to the Company’s ability to increase revenues through acquisitions and improve profitability.Ability to manage and integrate acquisitions

NMKT has grown through acquisitions, and the Company indicates acquisitions remain an essential component of its business strategy. Significant expenses are often associated with acquisition-related due diligence, and ne-gotiations with acquisition targets. Considerable effort is required to raise financing for acquisitions and much management time is consumed integrating, developing and spinning off acquired companies as viable and self-sufficient businesses. There is no assurance that NMKT will be successful in completing targeted acquisitions or enhancing shareholder value through acquisitions.

Financing could result in share dilution or increase financial risks

The Company anticipates current cash reserves will be sufficient to satisfy its operating needs over the next 12 months. However, NMKT will likely require additional financing in the future to further develop its products and services portfolio, capitalize on acquisition opportunities and respond to competitive challenges. Issuing stock to raise funds dilutes the interests of existing shareholders while debt instruments increase financial risk.

Competition from existing players and solutions

Both the IT and telecom industries are highly competitive and subject to rapid change. A number of companies have products and services similar to NMKT, and some of these competitors have greater customer bases, brand recognition and financial resources.

In addition, rapidly evolving technologies and innovation will require NMKT to make significant ongoing invest-ments in research and development.

Margin erosion

Price competition and the migration of operating facilities to developing countries have compressed industry profit margins. Declines in NMKT’s gross margins offset some of the operating margin gains the Company has re-alized from new technologies and economy of scale benefits. Going forward, we expect NMKT’s revenue growth to create operating leverage that will enable the Company to improve operating and net margins.

Investment Risks


October 17th, 2008


Management

Philip Verges has built the Company from a technology start-up in 1997, to a global business focused on emerging technologies and developing economies. In his first foray into the role of entrepreneur, Mr. Verg-es founded VergeTech (VTI) in 1997, a firm that specialized in providing leading edge technology services. After merging his company with IPVoice Communications in 2002, Mr. Verges devised and implemented the company’s new business strategy of developing market-entry technology products and services into early and mainstream technology products and services through established system integrator relation-ships. This led to the formation of NewMarket Technology.

Since that time, Mr. Verges has been instrumental in NMKT’s successful acquisitions of technology-based businesses in North America, Asia and Latin America, and in the formation of two publicly-traded sub-sidiary companies, China Crescent Enterprises Inc. and NewMarket Latin America. A graduate of the U.S. Military Academy at West Point, Mr. Verges’ early career included time in the Computer Sciences Research and Development Department of General Motors as an employee of Electronic Data Systems (EDS). His initial business start-up experience was at EDS with a new division focused on call center technology for financial institutions. Later, Mr. Verges added to his start-up experience by opening a new geographic region for a $30 million technology services business. Mr. Verges has been recognized by Ernst and Young as an Entrepreneur of the Year Finalist and as a Tech Titan Corporate CEO finalist, sponsored by Deloitte and Touche.

Philip J. Rauch joined NewMarket as CFO in 2006. Prior to that, Mr. Rauch served as COO and CFO for Defense Technology Systems Inc. Previous positions held by Mr. Rauch include vice president of business operations and controller at AboveNet Inc., vice president and CFO of Columbus Construction, and vice president and CFO of Garofalo Electric Co. Mr. Rauch holds a Bachelor of Science degree in economics with honors from the University of Pennsylvania Wharton School of Business, with a concentration in finance and accounting.

James Mandel has been the CEO and a director of Multiband Corp. since October 1998. From October 1991 to October 1996, Mandel served as vice president of systems for Grand Casinos Inc., where his duties included managing the design, development, installation and on-going maintenance for the 2,000 room, $507 million Stratosphere Hotel, Casino and Tower in Las Vegas. Mr. Mandel also managed the systems development of Grand Casino Mille Lacs in Onamia, Minnesota, the Grand Casino Hinckley in Hinckley, Minnesota, and six other casinos nationwide. He also serves as chairman of the board of CorVu Corp. and is a trustee of the Boys and Girls Club of Minneapolis.

Bruce Noller brings more than 25 years of financial, operational and marketing experience to NMKT. Mr. Noller was formerly the president of Noller and Associates Inc. Before he founded his own firm in 1994, he served as vice president for Integrated Control Systems, a worldwide management consulting firm. During that time, Mr. Noller proposed and oversaw engagements within a variety of industries including healthcare, distribution, manufacturing, retail, banking, insurance, mining and telecommunications. Mr. Noller has international management consulting experience in Singapore, Malaysia, China, Canada, Latin America and Europe. Mr. Noller holds an MBA from the University of North Texas.

Philip M. VergesFounder, Chief Executive Officer and Chairman

Philip J. RauchChief Financial Officer & Director

James MandelDirector

Bruce NollerPresident of Managed Services & Director


October 17th, 2008


Hugh G. Robinson is the former chairman and a board member of the Federal Reserve Bank of Dallas, previously serving as an officer in the United States Army, retiring with the rank of Major General. Mr. Robinson is currently a member of the board of directors of CarMax Inc., Aleris International Inc., and a member of the advisory board of TXU Corp. Mr. Robinson is a graduate of the U.S. Military Academy at West Point, and earned a master’s degree in civil engineering at the Massachusetts Institute of Technol-ogy (MIT). He received an honorary Doctorate of Law from Williams College and attended the Harvard Management Program for Executives. Mr. Robinson’s military career included a number of prestigious posts such as serving as aide de camp to President Lyndon B. Johnson. After retiring from the military, Mr. Robinson joined The Southland Corp. as vice president and president of Cityplace Development Corp., a subsidiary of Southland. From 1989 through 2002, Mr. Robinson served as chairman and CEO of The Tetra Group Inc., a Dallas construction management company with divisions in minority business development and affordable housing. Mr. Robinson serves on the board of directors of the North Texas Public Broadcast-ing Co. Inc., the LBJ Foundation Inc. and the Better Business Bureau. He is a member of the Dallas Citizens Council, the National Society of Professional Engineers, the Greater Dallas Chamber and the Dallas Black Chamber.

Hugh G. RobinsonDirector


October 17th, 2008


Appendix: Income statement projections, $

REVENUESServices revenueContract revenueProduct revenueTotal revenue COST OF SALESServices COSContract COSProduct COSTotal cost of sales Gross Margin OPERATING EXPENSES: General and administrative expenses Depreciation and amortizationTotal expenses Income (Loss) from operations OTHER INCOME (EXPENSE): Interest income Interest expense Foreign currency transaction gain (loss) Bad debt expense recoveryInflationeffects Lawsuit settlement Gain on debt forgiveness Other income/(expense)Total other income (expense) Net income (loss) Income (loss) per weighted average common share - basicIncome (loss) per weighted average common share - fully diluted

67,847,2613,847,9455,940,416

77,635,622

48,262,0752,698,2074,792,157

55,752,439

21,883,183

16,635,341786,173

17,421,514

4,461,669

1,023,967(503,714)

13,298

(318,539)(92,124)

01,658,8321,781,720

5,887,493

0.04

0.03

83,280,8213,305,0666,522,229

93,108,116

59,203,1512,795,4615,324,366

67,322,978

25,785,138

19,836,138775,698

20,611,836

5,173,302

623,593(608,928)

(4,474) 0

(248,433)4,293,000

(1,174,788)2,879,970

7,348,832

0.04

0.03

112,429,1084,296,5868,478,898

125,204,592

83,297,1273,720,0317,006,465

94,023,623

31,180,969

21,456,973775,698

22,232,671

8,948,298

623,593(608,928)

(4,474)00000

10,191

8,958,489

0.04

0.04

2006 2007 2008E

150,655,0055,413,698

10,852,989166,921,692

112,070,1154,703,4809,000,834

125,774,429

41,147,263

27,938,566775,698

28,714,264

12,432,999

623,593(608,928)

(4,474)00000

10,191

12,443,190

0.06

0.06

2009E


October 17th, 2008


Disclaimer

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice. The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report. Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

The report is a service of BlueWave Advisors, LLC, a financial public relations firm that has been compensated by the companies profiled. All direct and third party compensation received has been disclosed within each individual profile in accordance with section 17(b) of the Securities Act of 1933. This compensa-tion constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BlueWave Advisors, LLC, and/or its affiliated will hold, buy, and sell securities in the companies profiled. When compensated in shares, all readers should be aware that is our policy to liquidate all shares immediately. We reserve the right to buy or sell the shares of any the companies mentioned in any materials we produce at any time. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BeaconEquity.com is a Web site wholly-owned by BlueWave Advisors, LLC. BlueWave Advisors, LLC has been compensated eight thousand five hundred dollars from Oceanic Consulting, a shareholder of NMKT, as a marketing budget to manage a comprehensive investor awareness program including the creation and distribution of this report as well as other investor relations efforts.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking state-ments are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ ma-terially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or com-pleteness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst

Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Produc-tivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

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