SOURCE: NewMarket Technology, Inc.

December 23, 2008 11:54 ET

NewMarket Technology, Inc. Expands Emerging Market Technology Strategy in Kenya

CEO Issues Letter to Shareholders Outlining Expansion Strategy in Kenya, Latest Updates on China and Latin America, Exchange Listing and Management Buyback

DALLAS, TX--(Marketwire - December 23, 2008) - NewMarket Technology, Inc. (PINKSHEETS: NMKT) CEO Philip M. Verges today released a letter to shareholders. The letter addresses the Company's upcoming virtual Town Hall scheduled for January, its plans for Kenya, updates on its Chinese and Latin American subsidiaries, a planned management buyback and the Company's progress towards an exchange listing. The letter is included in its entirety below.

Dear Shareholders --

Last week I published a letter to shareholders announcing our upcoming virtual Town Hall scheduled for January. In the letter, I extensively reviewed topics that would not be part of the upcoming Town Hall. The Town Hall will focus on reviewing NewMarket's projected historically high 2008 operational performance and NewMarket's plans for 2009.

In the virtual Town Hall, we will feature our updated strategy for continuing to grow our technology services footprint in additional emerging markets around the world. NewMarket's greatest successes have come from our core technology service offerings in emerging markets, to date in those of Asia and Latin America. Much of our growth has been achieved by acquiring and investing in systems integration companies local to those markets. In each emerging market where NewMarket has acquired and invested in a systems integration company, the acquired company has grown significantly within the first 24 months after the acquisition in most cases. Today, our operations in China produce over $40 million in annual revenue, and our operations in Latin America have grown to over $20 million in annual revenue.

The Emerging Market Opportunity for Technology Service Providers

The Internet and its use is expanding around the world. While those countries recognized as world powers have high per capita Internet usage, in most emerging markets only a fraction of the population has gained access to the Internet. A technology service provider has tremendous growth potential in an emerging market facilitating the inevitable growth of the Internet as consumers and businesses in the region gain access. The growth of the Internet and regional access is just one indicator of technology demand growth in a region, but is one we can, in general, easily identify with when discussing the growth opportunity for technology service providers. For example, the expansion of the Internet drives sales of hardware, such as switches, routers and hubs, as well as PCs and other peripherals, and the sales of the corresponding software applications, from PC software to corporate databases and business software solutions. All of these building block hardware, software and networking technologies have to be sold, installed, often customized, and constantly maintained and updated. That's what NewMarket does as a technology service provider and systems integrator, and the Company has established an impressive track record as an emerging market technology service provider.

Kenya as an Example of the Emerging Market Opportunity

NewMarket has targeted Kenya as an emerging market opportunity. If you will recall, we have been invited to speak at the upcoming African Advanced Level Telecommunications Institute (AFRALTI) WiMax Conference in Nairobi and last year participated in the "Connecting Rural Communities Africa Forum 2007," also in Nairobi. We have been developing the Company's opportunities and relationships for the Kenyan market for some time.

Kenya has fiber-optic cable installed throughout the country, and three submarine cables under construction -- one to Dubai, one to India and one to South Africa. With a population of around 38 million people, Kenya has only about 3 million Internet users today. The groundwork has already been laid for a rapid increase in Internet penetration. NewMarket plans to be prepared to provide the necessary products and services to facilitate and profit from the inevitable Internet usage demand growth and related government and business technology needs in Kenya.

In the upcoming virtual Town Hall, I will discuss our Greenfield strategy for opening new emerging markets -- a strategy we will trial in Kenya.

NewMarket and the Over the Counter Marketplaces

In my previous letter, I addressed in more detail the short selling problems NewMarket has encountered (http://biz.yahoo.com/iw/081217/0461105.html). The NewMarket shareholders have watched revenues and profits increase and share price decrease. NewMarket management cannot single-handedly fix the economic issues impacting the share price, but we can get smarter about avoiding the market abuse that has plagued the share price. NewMarket remains confident that the OTC and OTCBB markets, regardless of all their issues, still provide an excellent opportunity for shareholders to realize a return on investment. OTC and OTCBB listed companies can deliver long-term and short-term returns. However, OTC and OTCBB markets do not generally support a seamless transition for an early stage company to mature into a later stage company and deliver a long-term return. Early stage OTC and OTCBB listed companies can produce exceptional short-term returns generated by milestone events. For example, the early stage company may file a patent, sign a notable contract or perhaps announce a quality board member. None of these milestones will necessarily guarantee long term success for the company, but each milestone is likely to create a short-term share price increase by demonstrating the long-term potential of the company's plan. A milestone share price increase will likely also attract subsequent short selling. Short sellers will bet on the milestone not being adequate to support long-term success. After all, sixty percent of start-ups fail within three years after launching. While making a legitimate bet on an early stage company not succeeding in the long-term, that short sale bet can be illegally waged by failing to legitimately borrow shares. Unchecked short selling creates a counterfeit, artificial supply of shares and the laws of supply and demand often take over and help to drive a share price down.

Nevertheless, a legitimate opportunity exists to purchase shares before a milestone event and take a profit when the milestone is achieved. Legitimate retail investors can make legitimate returns even though illegal short selling will likely continue in the foreseeable future. The challenge is to find and qualify potential milestone events and make winning bets on the right milestone opportunities.

Long-term Profits from Early Stage OTC and OTCBB Investments

Retail investors can also realize excellent long-term returns on OTC and OTCBB quoted companies. OTC and OTCBB quoted companies generally have substantially lower market capitalizations when compared to similar operations listed on exchanges (the OTC and OTCBB are only public quotation systems, not exchanges). Accordingly, as an OTC or OTCBB listed company transitions from its early stage beginnings and manages to have its share price recognized in comparison to its exchange listed brethren, a substantial return can be realized by long-term investors. However, that early stage business that matures, regardless of its operational success, has likely experienced a fair amount of share price volatility (see above on short-term milestone returns) and it has also probably issued a large number of shares in conjunction with fundraising and acquisitions. The shareholder base is correspondingly likely to be weary from the journey that started with a reverse merger and brought the company to its current stage.

The challenge to transition from generating short-term milestone returns to delivering long-term capital appreciation is one of revitalizing the shareholders, and as part of that revitalization, halting the ongoing issuance of stock. Before a shareholder revitalization, short sellers will continue to exploit profit opportunities by demoralizing weary shareholders into giving up hope in a long-term return and otherwise releasing their stock at a loss. The short seller is of course happy to purchase that stock and close out their short position. To anyone that does not believe in short seller manipulation, try to offer an alternative explanation to who is buying stock when others are selling stock while the share price is going down.

NewMarket Long-Term Return, Exchange Listing and Management Buyback

2008 looks to be a historically high year for NewMarket's operations. The Company has continued to grow and is on track to report historically high revenue. Notably, NewMarket has not made an acquisition in over two years, so the Company's growth is the result of increased organic sales. The Company may realize historically high net income as well, however, we have not yet finalized all decisions on how cash produced by operations might be utilized in the best interest of shareholders.

Management is considering the use of some cash produced by operations as part of an effort to reduce or eliminate debt. However, using cash to reduce or eliminate debt is not management's primary strategy to reduce debt, and we maintain that the best use of cash produced by operations is for the ongoing support of operations.

You may recall that the Company entered into a $7 million debt transaction just over one year ago. The $7 million debt transaction consisted of a $4 million term note and a $3 million revolving line of credit. We have already retired the $3 million revolving line of credit, and management has been endeavoring, on behalf of the Company, to borrow the necessary funds for management to replace the $4 million term note. Management's intention is to convert the $4 million term note to a secondary class of equity that would not be convertible to common stock. Management's only exit from that security would be the sale of the Company. The risk of additional common stock being issued to reduce the $4 million debt would be eliminated. If the lender has sold NewMarket stock short to hedge against their risk associated with the loan to NewMarket, then genuine NewMarket shareholders would enjoy the benefit of the senior lender having to buy back stock to cover the short position once their debt was paid in cash.

Management has not at this time completed the retirement of the $4 million term note with the current lender and may not be able to successfully retire the note. Management has secured a lender willing to sponsor management in the proposed transaction and negotiations are underway.

Management has referred to this transaction as a 'buyback,' as management will be buying back a substantial equity position in NewMarket if they are successful. This is not a buyback of common stock from the open market, and we believe this buyback would be more beneficial to the Company's shareholders than a buyback on the open market. The transaction proposed by management would have a substantial operational benefit to the shareholders by eliminating a substantial debt. The transaction would also substantially reduce further common shareholder dilution that could be realized if the current debt with the existing lender were to be serviced in stock.

Subsequent to a transaction removing the current lender and reducing the Company's debt, NewMarket would then initiate steps to move toward an exchange listing. The details associated with the Company's strategy to achieve an exchange listing will vary depending on the final details associated with the potential retirement of the existing term note.

Management is working to align the Company's strong fundamental financial performance and its market valuation to deliver a return on investment to its long-term shareholders. The buyback strategy described herein, and the highlights of management's intention to subsequently move to another exchange are central to our plans to deliver that long-term return.

NewMarket Latin America, Inc. and China Crescent, Inc.

NewMarket Latin America, Inc. and China Crescent, Inc. represent the Company's most substantial emerging market operations and the first operations listed independently as part of the Company's plan to directly share the benefit of its emerging market growth with shareholders.

The consolidation of operations into the Latin American public subsidiary has been slower than anticipated, and the cleanup of past public filings associated with the operations that pre-dated the transaction with NewMarket has been problematic. As the largest shareholder, NewMarket has elected to voluntarily de-register NewMarket Latin America, with the intention of accelerating the cleanup and consolidation. The necessary filings to support a new registration are currently being reviewed. When the registration is complete, the Latin American operations will be consolidated. As the filings are reviewed and finalized for submission, the Company will release an anticipated time frame for the completion.

China Crescent has had a good year operationally, however the stock performance has been disappointing and difficult to understand. From the fundamental financial performance of China Crescent, we anticipated better stock performance to date. The Company's operational base is strong, and we are happy with the progress the company has made this year as it matures and grows independent of NewMarket. For instance, the Company has changed its name this year to better position itself in the Chinese market, its primary place of business, and has transitioned to new leadership, from its entrepreneurial leadership team. The Company has recently announced its plans to increase its footprint in China by increasing its ownership in one of its Chinese operating subsidiaries by 25%. China Crescent has focused on the growing need in China for computer hardware and software since its inception in 2005, and we look forward to the Company's continued growth in 2009. Both NewMarket and China Crescent management are aware of the frustrating stock performance and will continue to focus on improving it in 2009, while continuing to keep our focus on improving and growing the Company's established operational base. China Crescent is scheduled to provide more updates on its plans and activities to its shareholders starting in January. Please look for those updates from China Crescent.

I look forward to sharing more with all of our shareholders in the upcoming virtual Town Hall. I also look forward to kicking off 2009 and providing updates to you all throughout the first quarter. I am confident long-term shareholders will be rewarded for their ongoing commitment, and I am grateful for the support shareholders have shown the Company.

Best Regards during this Holiday Season,

Philip M. Verges
Founder and CEO
NewMarket Technology, Inc.

Corporate E-mail Updates

To be added to NewMarket Technology's e-mail database to receive company updates or to obtain more information on the Company, please send an e-mail to ir@newmarkettechnology.com or call 214-722-3065.

About NewMarket Technology, Inc. (www.newmarkettechnology.com)

NewMarket helps clients maintain the delicate balance between maintaining legacy systems and gaining a competitive edge from the latest technology innovations. NewMarket provides certified systems integration and maintenance services to support the prevailing industry standard solutions from companies such as Microsoft, Oracle, Infor, Cisco Systems, SAP, Siebel and Sun Microsystems. Concurrently, NewMarket continuously seeks to acquire emerging technology assets to incorporate into an overall product portfolio carefully packaged to complement the prevailing industry standard solutions.

NewMarket delivers its portfolio of products and services through its network of Solution Integration subsidiaries in North America and the leading emerging markets around the world to include Latin America, China and Singapore.

NewMarket ranked Number One in Texas, Number Three in the United States and Number Five in North America on Deloitte's 2006 Technology Fast 500, a ranking of the 500 fastest growing technology, media, telecommunications and life sciences companies in North America. Rankings are based on percentage revenue growth over five years, from 2001-2005. The Company grew from less than $1 million in revenue in 2001 to over $50 million in profitable revenue in 2005.

The company has continued its rapid growth, reporting $77.6 million in revenue with a net income of $5.8 million in 2006 and most recently $93.1 million in revenue with a net income of $7.3 million in 2007.

"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.

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