newmarket technology inc

Analyst: Victor Sula, Ph.D.Initial Report

October 7th, 2009

New Market Technology Inc. (OTCPK: NWMT) 1


October 7th, 2009

Company Introduction

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

Phone: 972-386-3372Fax: 214-853-5929Web Site:www.newmarkettechnology.comE-mail: [email protected]

Symbol

Exchanges

Current Price

Price Target

Rating

Outstanding Shares

Market Cap.

Average 3M Volume

Source: Yahoo Finance, Analyst Estimates

Market Data Sept 25, 2009 2007 2008 2009E 2010E

NWMT

OTCPK

$0.40

$1.42

Speculative Buy

13.8 Million

$5.5 Million

641,458

Revenue, $ Mn.

Gross margin

Operat. margin

Net Margin

Diluted EPS, $

PER

PSR

93.1

27.7%

5.6%

7.9%

0.693

0.58

0.06

95.1

21.4%

0.9%

-31.9%

-2.791

(0.14)

0.06

100.5

20.0%

4.3%

2.0%

0.129

3.10

0.05

110.1

19.0%

4.3%

2.1%

0.143

2.80

0.05

NewMarket Technology Inc. (NWMT) provides systems integration, technology infrastructure services and emerging technologies to customers worldwide. The Company’s focus is 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, NWMT currently has operations in the growing economies of China, Southeast Asia, Brazil and northern Latin America. NWMT is a Microsoft and Oracle partner, distributes various computer hardware and peripherals from brand name partners such as Dell, HP, IBM, Cisco, Sony, Epson, Canon and Sanyo, and is also an authorized reseller of operating systems and software for 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.

The Company has been recognized by Deloitte as one of the top 50 fastest growing technology companies in Texas for six years in a row; rated No. 1 in Texas; No.3 in the United States; and No. 5 in North America in Deloitte’s

12/02/08

volume

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0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

800

600

400

200

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October 7th, 2009


Analyst: Victor Sula, Ph.D. Initial Report

October 7th, 2009


Technology 2006 Fast 500 ranking of the 500 fastest-growing technology, media, telecommunications and life sciences companies in North America. The Company was also rated No. 219 in Software Magazine’s Software 500 ranking of the world’s largest software and service providers.

The Company has grown from less than $1 million in revenues in 2002 to more than $93 million in profitable revenues in 2007, $95 million in revenues for 2008 and anticipates hitting $100 million in sales in 2009. NewMarket’sgrowth is the result of a combination of geographical and market expansion through acquisitions and strong organic growth in NWMT’s core markets. NWMT is headquartered in Dallas, Texas, and has operations in Venezuela, Brazil, Chile, Singapore and China.

Long-term market opportunity

System integration sales are estimated at $20 billion and growing 10% annually, fueled by the continued downsizing of plant engineering staffs, ever-changing technology, increasingly sophisticated projects, and the growing confidence and comfort in the outsourcing of control system and information integration assignments1.

Telecommunication industry revenues were estimated at $3.85 trillion in 2008. While revenues are forecast to decline 3.1% in 2009 and increase only modestly by only 1.2% in 2010, the longer-term outlook is much brighter. Globally, industry experts project a strong spending rebound after 2010, with sales rising 6.4% in 2011 and 7.9% in 20122.

Business model capitalizing on traditional systems integration coupled with emerging technologies

NWMT combines traditional systems integration and support services with leading edge technologies, assisting its clients in maintaining legacy systems while also helping them gain a competitive edge through the latest technology innovations. NWMT continuously seeks out and acquires or becomes a value-added reseller (VAR) for undiscovered emerging technology assets that can be incorporated into its overall product portfolio to complement prevailing industry standard solutions.

Greenfield project enhances solutions portfolio and revenues

In January 2009, the Company began implementing its Greenfield emerging technology business partnership program, through which it identifies and partners with companies that can benefit from NWMT’s infrastructure and resources; assists them in opening up new markets through its strategic relationships; and creates potential equity investments through merger strategies.

As a part of this program, NWMT is partnering with NuMobile Inc. to assist in the creation of a comprehensive, global, mobile computing technology business. NWMT also announced that VirtualHealth Technologies, Inc. and Alternet Systems, Inc. are joining its Greenfield program.

Investment Highlights

1. www.controlsys.org/resources/sysin_market.htm2. www.tiaonline.org/news_events/press_room/press_releases/2009/PR-521_TIA_Forecasts_3_1_Percent_Loss_for_ICT_Industry_in.cfm


October 7th, 2009


Analyst: Victor Sula, Ph.D. Initial Report

October 7th, 2009


Strong sales pipeline

NWMT management notes the Company has $88 million in signed sales contracts or in the sales pipeline with the potential to report 2009 revenues exceeding $100 million. NWMT delivered $43.9 million in profitable revenues in the first half of 2009, has announced new sales contracts of approximately $73 million so far this year, and has another $15 million contract pending. We expect NWMT to produce revenues exceeding $110 million and net earnings of approximately $2.3 million in FY 2010.

Partnerships with leading IT companies

NWMT has reseller agreements and partnerships with many of the world’s leading IT companies. These partnerships open the door to new customers and allow the Company to expand into new geographical regions, many of which are outside the United States. NWMT re-sells, installs, customizes and supports products from Microsoft, Oracle, HP, IBM, SAP, BAAN, SSA Global, among others. During 2009, the Company extended its relationship with Microsoft to include five Microsoft corporate licensing contracts valued at $5.2 million so far and received the prestigious Associate of the Year in Advanced Infrastructure Solutions award at Microsoft’s FOCUS 2009.

CEO leadership

CEO Philip Verges essentially re-invented the Company in 2002 by bringing to NWMT entrepreneurial experience, development strategies, technology products and system integration relationships that enabled NWMT to rapidly emerge as one of the industry’s most dynamic players. Mr. Verges’ experience with start-ups and development-stage businesses includes opening a new division for EDS, establishing operations in a new geographic region for another systems integration company, and launching his own business, VergeTech, Inc., which grew from $0.3 million in revenues in 1997 to $11 million in 2001. This business was merged into what is now NewMarket Technology.

The Company went public in 2002 by merging with an existing Voice over Internet Protocol (VoIP) company. Since then, NWMT has expanded its business model to include three primary activities: systems integration, emerging technology incubation and investment. NWMT provides traditional systems integration services, coupled with cutting-edge technology products that provide its customers with a competitive edge. Concurrently, NWMT seeks out and partners with or acquires undiscovered emerging technology assets that can be incorporated into its product portfolio and complement prevailing industry standard solutions. In 2005, the Company launched operations in Latin America and Asia. A current focus is the emerging economies of East Africa.

NMWT delivers its products and services through a network of solution integration subsidiaries, including China Crescent Enterprises Inc., RKM IT Solutions, UniOne Brazil, UniOne Chile and Infotel Technologies Ltd.

NWMT’s core business is systems integration. Its business is similar to, but smaller than, HP Enterprise Services (former Electronic Data Systems), Perot Systems and Affiliated Computer Systems. The Company is differentiated from a typical systems integration company by its participation in emerging markets of South America, Asia and Africa. This market focus provides exceptional growth opportunities. As a systems integrator, NWMT is certified by Microsoft, IBM, Sun, Sony, Oracle, Hitachi, Cisco, HP and other name brands to resell and maintain their products, provide user training and customize installations.

Business Model


October 7th, 2009


NWMT and its subsidiaries are focused on shifting the Company’s revenue base from short-term, project-based contracts to long-term managed services contracts. The Company has already announced approximately $73 million in new sales contracts this year, including a $30 million contract with Beijing Chuangzhitongda Technology Development and a $33 million outsourcing agreement with WBA (Wireless Broadband Access) Telecommunications, S.A. The Company also has $5.2 million in long-term contracts signed this year supporting strategic Microsoft installations.

NWMT plans to apply for a listing on the OTCQX (where companies such as Adidas, BASF, Peugeot and Benetton are currently listed) and on the OTC Bulletin Board. The move to OTCQX is a first step toward a future NASDAQ or NYSE listing. NWMT is already a fully reporting public company with audited financial reports filed with the SEC.

Corporate strategy

The Company’s business strategy focuses on the following:

Building on its core systems integration business;• Improving its recurring revenue base through longer-term service contracts;• Partnering with or acquiring promising early-stage technology companies whose technology complements • the brand name technology NWMT already sells and supports;Concentrating the initial early-stage technology sales efforts on focused pilot opportunities;•

Source: NewMarket corporate presentation

NewMarket sales model


October 7th, 2009


Expanding the early-stage technology pilot opportunities as warranted to a level that proves market • viability;Realizing support services economies of scale by retaining support service contract functions at NWMT; • Expanding its operations into emerging markets, including the East Africa region; and• Securing a national exchange listing.•

As a part of its growth strategy, the Company plans to extend its reach into high-growth developing economic regions. These developing economies provide a platform for accelerated growth. As these economic regions increase their technology infrastructure needs, purchasing and opportunities to acquire early-stage technology companies can be developed into mainstream technology service and product businesses.

Greenfield program

In January 2009, the Company began implementing its “Greenfield” strategy. As part of this effort, NWMT identifies and partners with emerging technology companies that can:

Benefit from access to NWMT’s infrastructure and resources;• Leverage its strategic relationships to open up potential new markets;• Capitalize on merger strategies that allow for capital raises through equity or debt instruments; and• Benefit from improved return-on-investment opportunities.•

NWMT has already experienced its first success through the new Greenfield program. In March 2009, the Company announced a strategic partnership with NuMobile, Inc. through which NWMT will exchange its investment in security software developer Stonewall Networks for a convertible equity interest in NuMobile.

The Company has also announced partnerships with VirtualHealth Technologies, Inc. and Alternet Systems, Inc. to jointly develop and market their healthcare technology and telecom and Internet solutions, respectively

Through the Greenfield program, NWMT expects to realize:

An expanded pipeline of synergetic solutions;• Increased revenue-generating base;• Reduced capital pressure as it identifies and works with emerging technologies;• Expanded early stage investment opportunities. •


October 7th, 2009


NWMT has built a solid portfolio of technology companies that are diverse in their geographic reach, products and service. Many of these companies were acquired, but some have been grown internally through start-up efforts, most notably NWMT’s Chinese subsidiary.

To date, NWMT has generated revenues from:Systems Integration;• Software licensing;• Technical independent consulting• Security products and services; and• Telecom technology.•

Systems integration and infrastructure services

The Company provides full service systems integration, customization and implementation for a variety of software and hardware products in North America, Asia and Latin America. It re-sells, installs, customizes and supports products from Microsoft, Oracle, HP, IBM, SAP, BAAN, SSA Global and many others. NWMT’s systems integration businesses deliver a company-wide implementation, or a regional one, depending on the customer’s project requirements. In addition, the Company provides comprehensive 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.

Telecommunications

NWMT provides Voice-over-IP and traditional phone lines to both business and residential customers. In addition,

Technology Portfolio

China Crescent Enterprises Inc. (OTCBB: CCTR)

Infotel Technologies Ltd.

RKM Suministros S.A.

UniOne Consulting

RedMoon Broadband Inc.

Peoples Republic of China

Singapore

Venezuela

Brazil, Chile

TX, U.S.

N/A

N/A

N/A

N/A

Yes

Hardware VAROffshore OutsourcingMultimedia

Software DevelopmentSystems IntegrationSoftware DevelopmentSystems IntegrationSoftware DevelopmentSystems Integration

Wi-Fi & Wi-MAX

Yes

Yes

Yes

Yes

N/A

Company Name

NewMarket Portfolio of CompaniesBusiness FocusCountry

FocusSubsidiary >51%

ownedAffiliate <51%

owned

Source: Company’s presentation


October 7th, 2009


the Company supplies broadband access to business and residential customers, from DSL to Wireless T-1, in some areas, as well as Wireless Mesh systems for municipalities and corporate campuses. NWMT’s hardware partners include Cisco, Polycom, 3COM, Linksys and Edgewater.

Emerging technology

NWMT continually seeks to identify, partner with oracquire emerging technologies that provide a unique competitive advantage for its customers. It evaluates emerging technologies across many disciplines, but specifically focuses on its subsidiary, affiliate, and partner products and services that enhance customer telecommunications, security and healthcare technology needs.

Security

NWMT offers data integration and customization, as well as security solutions to protect customer information and communications. The Company’s subsidiaries design, develop, manufacture, install and market specialty products, equipment and systems for customer safety and security needs in the domestic and international marketplace. When commercial off-the-shelf products do not fulfill critical customer requirements, NWMT can design specialized hardware and software solutions. In addition, the Company engineers traditional hardware and software solutions when commercial-off-the-shelf products do not fulfill the critical requirements of enterprise, military or government organizations.

Healthcare

The Company has invested in emerging healthcare technology products and services and is continually evaluating new products that broaden its portfolio of emerging technologies through both acquisitions and partnerships. NWMT assists its clients with the latest solutions in HIPAA compliant medical office systems and prescription tracking and monitoring.

Telecommunications

For the first time in 23 years, the Telecommunications Industry Association (TIA) is projecting a 3.1% decline in revenues in 2009. In 2008, worldwide telecommunications industry revenues exceeded $3.8 trillion. While revenues are likely to remain weak in 2010, with a modest 1.2% increase, the longer-term outlook is much brighter. Globally, TIA projects a strong rebound and revenues up 6.4% in 2011 and increasing 7.9% in 20123.

Challenges resulting from massive budget cuts across organizations have caused industry participants to focus on more effectively alloc

Points-based loyalty programs. While a few have opted to discount their services, most seek to build market share through various promotional and marketing initiatives4.

Industry Outlook

1. www.tiaonline.org/news_events/press_room/press_releases/2009/PR-521_TIA_Forecasts_3_1_Percent_Loss_for_ICT_Indus-try_in.cfm2.0 www.bi-me.com/main.php?c=3&cg=4&t=1&id=39385


October 7th, 2009


The U.S. telecommunication market

U.S. telecom revenues are forecast to decline 5.5% in 2009, and future growth will be at a slower rate as the wireless and wired markets mature. According to TIA, the U.S. telecom industry will grow 7.2% annually from 2008-2011, reaching $1.3 trillion in 20115. Telecommunications revenues are forecast to drop 6.4% over the next two years, but rebound with 14.4% growth from 2011-2012. The effects of President Obama’s Stimulus Package, which carves out investment dollars for broadband, will renew telecom industry growth.

5. www.ciozone.com/index.php/Mobile-and-Wireless/U.S.-telecom-growth-seen-slower-than-global-industry.html

Global telecom revenue, $ trillion

Source: Telecommunications Industry Association.

U.S. telecom revenues, $ trillion

Source: Telecommunications Industry Association.


October 7th, 2009


Emerging markets telecommunications industry growth

A new report entitled “Global Telecom Services Revenue Forecast 2008-2013: Emerging Market Opportunities” by Pyramid Research notes that telecom service revenue growth will remain dynamic through the forecast period. Global mobile penetration, currently estimated at 60%, will climb to 84% by 2013, led by growth in India and China. The report estimates that these two markets will together add 829 million mobile subscriptions from 2009 to 2013, representing 44% of the world’s total net additions during that period. The report also predicts that regional telecom service revenues in Central and Eastern Europe, Asia/Pacific, Africa and the Middle East will rise about 7% annually, while the mature markets of North America and Western Europe are negatively affected by the weak economic environment.

Systems integration market

The systems integration market has evolved in recent years to include numerous service companies focused on specific areas of technology. The systems integration business is estimated to produce $20 billion in engineering services and related hardware and software revenues worldwide and is growing at 10% per year, fueled by the continued downsizing of plant engineering staffs, ever-changing technology, increasingly sophisticated projects, and the growing confidence and comfort in the outsourcing of control system and information integration assignments6.

Accenture and IBM Global Services are the worldwide leaders in systems integration (SI) services. Other leading systems integrators include: Atos Origin, BearingPoint, Capgemini, Cognizant, CSC, Deloitte, EDS, Fujitsu, Hitachi, HP, Infosys, Lockheed Martin, LogicaCMG, Microsoft, Northrop Grumman, Oracle, SAIC, SAP, Siemens Business Services, Tata Consultancy Services, Unisys and Wipro. The U.S. market is dominated by Lockheed Martin, CSC, and SAIC, while in the global market, Japanese SIs such as Fujitsu, Hitachi, and NEC Corp. are major players7.

SI services are considered discretionary spending and budgets are easily slashed during downturns, making this area more vulnerable than other services. According to IDC, the current economic slowdown is impacting systems integrators by making them more sensitive to clients’ concerns for cost savings and enhanced value from technology investments8. On a positive note, demand is robust in the government, healthcare and education markets, which are commonly cited by systems integrators as their best sources of new and continuing business.

6. www.controlsys.org/resources/sysin_market.htm7. www.accenture.com/NR/rdonlyres/DFEA4F51-F715-4599-B8C4-8F2D595A0376/0/IDCWWSIMarketreportSept091.pdf8. www.idc.com/getdoc.jsp?containerId=218126

AfricaAsiaEuropeMiddle EastNorth AmericaLatin AmericaOceania/AustraliaWorld Total

991 million3.8 billion804 million203 million341 million587 million35 million6.8 billion

4.5 million114 million106 million

3 million108 million18 million8 million

361 million

65.9 million704 million402 million48 million

252 million176 million21 million1.7 billion

6.7%18.5%50.1%23.7%74%30%60%25%

1,360%516%283%

1360%133%873%173%362%

Region Population2008 Est.

Internet usersDec. 2000

Internet usersLatest Data

Penetration(% Pop.)

Growth thru 09

Source: www.Internetworldstats.com

World Internet Users and Population Statistics


October 7th, 2009


Internet usage

The Internet is fast becoming a basic feature of today’s civilization. The number of Internet users already exceeds 1 billion worldwide. The continued rollout of broadband and the next generation of high-speed wireless networks is stimulating mobile markets and growth in the number of Internet users expands the customer base for IP-based services. Most analysts expect the 2 billion user milestone to be achieved within the next three to five years.

According to Gartner Group, the number of households with a broadband connection will reach 25% by 2012. Five countries already exceed 60% broadband penetration and the number is expected to grow to 17 countries by 20129. The dominant fixed broadband technology remains DSL with an estimated 66% share of the market10.

VoIP market

The VoIP market has grown dramatically since the early days of calls made from personal computers. 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.

The number of VoIP subscribers in the U.S. has risen from 6.5 million in mid-2006 to 11.8 million in mid-2007—equivalent to 10% of U.S. households and is forecast to climb to 32.6 million and 40% of broadband households in 201011.

9. http://biz.yahoo.com/bw/080724/20080724005341.html?.v=110. www.budde.com.au/buddereports/4566/Regional_-_Broadband_Market_-_Asia_Pacific_-_2008.aspx?r=5111. www.researchandmarkets.com/reports/c35746

Worldwide VoIP Subscriber (in Millions)

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


October 7th, 2009


Worldwide VoIP service revenues jumped 66% to $15.8 billion in 2006, after more than doubling in 2005, and are expected to triple by 2010, according to Infonetics Research12. About 71% of worldwide VoIP service revenues come from residential/SOHO customers and 29% from business customers. By 2011, In-Stat predicts the world-wide consumer VoIP market will generate sales of $44 billion.

RevenuesThe Company is generating revenues from hardware sales, software licensing, systems integration, technical in-dependent consulting, and security services. The strong revenue growth NWMT has generated since its inception reflects a combination of geographical and market expansion through strategic mergers and acquisitions.

Slowed growth in 2008 and the first half of 2009 is attributable to reduced demand for technology and telecom so-lutions due to the global economic crisis. The Company returned to revenue growth in Q2 FY 2009 and anticipates full-year revenues exceeding $100 million.

12. www.voipmonitor.net/2007/08/09/VoIP+Service+Revenue+Hits+158B+In+2006.aspx

Financial Analysis

Revenues, $ Mn

Source: SEC Filings

Revenue by quarters, $ Mn

Source: SEC Filings


October 7th, 2009


Future revenue growth will come from NWMT’s expansion into emerging markets such as Africa, the Middle East and Eastern Europe, the acquisition of complementary businesses, and the introduction of new solutions through its Greenfield program. 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 acqui-sitions and organic growth.

Income statement

Competition within NWMT’s core lines of business has put pressure on the Company’s gross margins. The Com-pany’s core capabilities are in industries that have experienced margin contraction over the past several years. Management expects to improve gross margins going forward by reducing cost of sales as a percentage of sales as NWMT grows and capitalizes on opportunities in emerging markets developed through the Greenfield pro-gram. Developing and promoting emerging technology assets through this program could yield much higher margins.

The Company’s net income grew 43% in Q2 FY09 to $1.2 million (after accounting for the non-controlling interest in a consolidated subsidiary), compared to $843,073 in Q2 FY08. The increase is attributable to revenue growth and expense reductions resulting from headcount optimization in Asia and Latin America.

Comprehensive net income, which is adjusted to compensate for the risk associated with foreign profits and the potential conversion of foreign currency, as well as the change in market value of available-for-sale securities, fell 95% to $97,498 in Q2 FY09 from $1.9 million in Q2 FY08.

At the conclusion of 2008 and in response to prevailing weak economic conditions worldwide, the Company re-evaluated its balance sheet assets and correspondingly wrote down the value of those assets. The write down had a substantial balance sheet impact and corresponding non-cash impact on the 2008 income statement. While the Company generated positive operating income, the impact of non-cash charges on the income statement was to make net income negative for the year.

Liquidity

The Company’s cash balance fell modestly to $4.3 million in June 2009 from $5.0 million in December 2008. The

Revenue, $ MnCost of goods sold, % revenueOther operating expenses, % of revenue

Gross marginOperating marginNet margin

Diluted EPS, $

93.172.3%22.1%

27.7%5.6%8.5%

0.03

22.875.0%19.6%

25.0%5.4%8.3%

0.01

95.178.7%20.4%

21.3%0.9%

-30.9%

-0.14

24.578.4%13.4%

21.6%8.2%0.4%

0.00

2.1%6.4%

-1.7%

-6.4%-4.7%

-39.4%

n/m

7.5%3.4%

-6.2%

-3.4%2.8%

-7.9%

n/m

2007 2008 % Chg % ChgQ2 2008 Q2 2009

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

Operating results


October 7th, 2009


decrease was the result of a combination of cash used in investing activities of $0.5 million, cash used in financing activities of $0.3 million, and the effect of exchange rates on cash of $2.3 million offset by cash provided by oper-ating activities of $2.4 million.

Since its inception, NWMT has financed its expansion primarily through equity sales. The Company will likely need to raise additional cash to implement its 2010 business plan. However, there can be no assurance that the Company will be able to obtain financing on satisfactory terms, if at all, or raise funds through a debt or equity offering.

Revenue forecast

NWMT management notes sales of $88 million signed or in the pipeline and anticipates 2009 revenues will exceed $100 million. NWMT delivered $43.9 million in profitable revenues during the first half of 2009, has announced approximately $73 million in new sales contracts so far this year and has another $15 million contract pending.

The Company has a good track record for customer retention and has been building upon its existing customer base. Revenues have grown from $1.0 million in 2002 to more than $95 million in 2008 and are likely to exceed $100 million in 2009.

Cash and equivalentsTotal Current AssetsTotal Assets

DebtEquity

5.028.651.5

6.833.8

4.327.150.4

5.233.8

31-Dec-08 30-Jun-09

Source: SEC Filings

Balance sheet $ Mn

RevenueCost of revenueGross profitOperating expenses, totalIncome from operationsOther income (expenses)Net income (loss)Diluted EPS

93,108,116 67,322,978 25,785,138 20,611,836 5,173,302 2,175,530 7,348,832

0.693

95,104,801 74,784,778 20,320,023 19,417,652

902,371 (31,242,591)(30,340,220)

(2.791)

100,525,775 80,420,620 20,105,155 15,736,173

4,368,982 (2,327,799)

2,041,183 0.129

110,075,723 89,161,336 20,914,387 16,131,126 4,783,262 (2,522,851) 2,260,411 0.143

2007 2008 2009E 2010E

Source: SEC Filings, Analyst estimates

Revenue and EPS Forecasts, $

Valuation


October 7th, 2009


We project NWMT will generate revenues exceeding $110 million and net earnings approaching $2.3 million in 2010. Despite the fact that gross margins are under pressure, we expect the Company to gain efficiencies through economies of scale that improve operating margins.

Peer Comparison

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

We think some discount relative to the peer group is warranted since NWMT is smaller, focuses on emerging and arguably more volatile markets in Asia and Latin America. We value NWMT at a 9.9 times forward Price/Earnings multiple, which is the lowest in the peer group and below the peer 12.2 times median P/E multiple.

We derive a $1.42 target price for NWMT by multiplying our 9.9 times P/E multiple by our 2010 EPS estimate. Accordingly, we are initiating coverage of NewMarket Technology with a Speculative Buy rating and a $1.42 price target.

Hewlett-Packard CompanyAffiliated Computer ServicesAcxiomPerot SystemsComputer SciencesiGATE Corp. Peers’ median

NewMarket Technology Inc. Discount to peers

HPQACS

ACXMPERCSCIGTE

NWMT

111,4904,610

7373,5907,700

420

5.5

47.0247.25

9.3426.6950.79

7.71

0.40

12.3411.3019.8727.2310.3217.1314.74

3.10-79%

11.0110.2113.5425.66

9.9414.0212.27

2.80-77%

0.990.660.711.420.472.250.85

0.05-94%

0.940.620.691.370.462.110.82

0.05-94%

CompanyNovember 28, 2008

Price$

MarketCap. $ Mn

P/E P/S TickerSymbol 2009E 2010E 2010E 2009E

Source: Yahoo Finance, Analyst estimates


October 7th, 2009


Development-stage business

The Company has shifted gears in recent years to focus on maturing existing operations and improving margins, with an emphasis on securing longer-term, higher margin contracts and efficient management oversight to reduce expenses as a percentage of sales. NWMT is making progress in these areas, especially in its China operations which contribute nearly half of existing revenues.

Ability to manage and integrate acquisitions

NWMT has grown through acquisitions in the past. The Company completed its last acquisition over three years ago and since then has focused on maturing its existing operations and partnering with early-stage, emerging technology companies to enhance its technology portfolio. NWMT may consider later-stage acquisitions of more mature operations in the future.

Financing could result in share dilution or increase financial risks

The Company is not currently seeking investment capital and is concentrating on eliminating long-term debt. However, NWMT may seek to raise additional capital in 2010 after the existing long-term debt has been substan-tially reduced and a listing of its shares on a national exchange is pursued.

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 NWMT, and some of these competitors have large customer bases and greater brand recognition and financial resources.

In addition, rapidly evolving technologies and innovation will require NWMT 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 NWMT’s gross margins have offset some of the operating margin gains realized from new technologies and economy of scale benefits. Going forward, we expect NWMT’s revenue growth to create operating leverage that will enable the Company to improve operating and net margins.

Risks


October 7th, 2009


Bruce Noller brings more than 25 years of financial, operational and marketing experience to NWMT. 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 the healthcare, distribution, manufactur-ing, retail, banking, insurance, mining and telecommunications industries. Mr. Noller has international management consulting experience and has worked in Singapore, Malaysia, China, Canada, Latin Ameri-ca and Europe. Mr. Noller holds an MBA from the University of North Texas.

Bruce Noller Director

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.

James Mandel Director

Philip J. Rauch joined NWMT as CFO in 2006. Prior to that, Mr. Rauch served as COO and CFO for De-fense 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 in economics with hon-ors from the University of Pennsylvania Wharton School of Business, with a concentration in finance and accounting.

Philip J. Rauch Chief Financial Officer & Director

Philip Verges has built the Company from a technology start-up in 1997, to a global business focused on emerging technologies and developing economies. Mr. Verges 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 a new business strategy of developing market-entry technology products and services into early and mainstream technology products and ser-vices through established system integrator relationships. This led to the formation of NewMarket Tech-nology.

Since that time, Mr. Verges has been instrumental in NWMT’s successful acquisition of technology-based businesses in North America, Asia and Latin America, and in the formation of a publicly traded subsid-iary company, China Crescent Enterprises Inc.. 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 experi-ence 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 up a new geographic region for a $30 million technol-ogy 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, in rankings sponsored by Deloitte and Touche.

Philip M. Verges Founder, Chief Executive Officer and Chairman

Management Team


October 7th, 2009


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. He 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 Technology (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 Broadcasting 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. Robinson Director


October 7th, 2009


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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 pro-vided 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).

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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 perfor-mance 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 Finan-cial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity 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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