NewMarket Technology Inc - FORM 10-Q

Attached files

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EX-32.1 - EXHIBIT 32.1 - NewMarket Technology Inc	a6306912ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - NewMarket Technology Inc	a6306912ex31_1.htm
EX-32.2 - EXHIBIT 32.2 - NewMarket Technology Inc	a6306912ex32_2.htm
EX-31.2 - EXHIBIT 31.2 - NewMarket Technology Inc	a6306912ex31_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark-One)

(x)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission file number 000-27917

NewMarket Technology, Inc.

(Exact name of Registrant as Specified in Its Charter)

NEVADA	65-0729900
(State or other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

14860 Montfort Drive, Suite 210

Dallas, Texas 75254

(Address of Principal Executive Offices)

(972) 386-3372

(Issuer’s Telephone Number, Including Area Code)

Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x

No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o

No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes o

No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of May 26, 2010, the registrant had 148,937,549 shares of common stock outstanding.

INDEX

NEWMARKET TECHNOLOGY, INC.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets — March 31, 2010 and December 31, 2009

	Consolidated Statements of Operations — Three Months Ended March 31, 2010, 2009 and 2008

	Consolidated Statement of Changes in Equity — December 31, 2009 through March 31, 2010

	Consolidated Statements of Cash Flows — Three Months Ended March 31, 2010, 2009 and 2008

	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Item 4T.	Controls and Procedures


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 1A.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.	Defaults Upon Senior Securities

Item 4.	Submission of Matters to a Vote of Security Holders

Item 5.	Other Information

Item 6.	Exhibits

SIGNATURES

CERTIFICATIONS

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

NewMarket Technology, Inc.
Consolidated Balance Sheet

ASSETS	March 31, 2010			December 31, 2009
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	4,587,549		$	5,620,946
Accounts receivable		31,524,386			30,644,855
Inventory		2,976,869			3,593,219
Prepaid expenses and other current assets		3,117,413			2,364,068
Total current assets		42,206,217			42,223,088

PROPERTY AND EQUIPMENT, NET		622,667			829,412

OTHER ASSETS
Notes receivable including accrued interest		4,972,877			4,715,183
Investment in unconsolidated subsidiares		1,378,180			1,492,013
Goodwill		13,569,463			13,569,463
Available for sale securities		263,260			303,576
Intangibles		2,597			2,597
Total other assets		20,186,377			20,082,832

Total assets	$	63,015,261		$	63,135,332

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	13,410,534		$	12,683,296
Accrued expenses and other liabilities		2,898,509			2,424,000
Customer deposits		141,339			186,634
Liabilities of discontinued operations		342,033			342,033
Long term debt, current portion		690,348			983,680
Short term debt		2,472,314			3,107,943
Total current liabilities		19,955,077			19,727,586

Long-term debt		834,981			1,131,683

Total liabilities		20,790,058			20,859,269


EQUITY
Preferred stock; $.001 par value; 10,000,000 shares authorized;
Series C 925 and 925; Series E 41 and 41; Series J 3,346
and 4,417; Series K 500 and 500 shares issued and
outstanding at March 31, 2010 and
December 31, 2009, respectively		4			5
Common stock; $.001 par value; 300,000,000 shares authorized;
30,356,105 and 109,466,045 shares issued and outstanding
at March 31, 2010 and December 31, 2009, respectively		109,466			30,356
Deferred compensation		-			(49,375	)
Additional paid-in capital		59,404,130			59,126,561
Accumulated comprehensive income		1,208,513			2,356,330
Accumulated deficit		(22,344,558	)		(22,769,669	)
Total NewMarket Technology, Inc. stockholders' equity		38,377,555			38,694,208
Non-controlling interest		3,847,648			3,584,855
Total equity		42,225,203			42,279,063

Total liabilities and equity	$	63,015,261		$	63,138,332

See accompanying notes to consolidated financial statements.

NewMarket Technology, Inc.
Consolidated Statement of Operations
Three Months Ended March 31,
(Unaudited)

	2010			2009			2008
REVENUE	$	25,652,226		$	19,335,521		$	20,921,762

COST OF SALES		21,713,693			16,315,267			15,796,965

Gross Margin		3,938,533			3,020,254			5,124,797

OPERATING EXPENSES
Selling, general and administrative expenses		3,249,670			3,194,324			3,551,125
Depreciation and amortization		45,435			35,429			231,342
Recovery of bad debt					(50,474	)		-
Total expenses		3,295,105			3,179,279			3,782,467

Income (loss) from operations		643,428			(159,025	)		1,342,330

OTHER INCOME (EXPENSE)
Interest income		130,948			138,845			160,183
Interest expense		(129,022	)		(231,993	)		(189,171	)
Foreign currency transaction gain (loss)		(3,545	)		318			(623	)
Lawsuit settlement expense		-			(20,953	)		-
Other income		211,879			49,131			49,963
Other expense		(16,180	)		(62,798	)		(6,913	)
Total other income (expense)		194,080			(127,450	)		13,439

Net income before income tax and
non-controlling interest		837,508			(286,475	)		1,355,769
Foreign income tax		86,108			55,006			61,975
Non-controlling interest in consolidated subsidiary		326,289			152,180			132,301

Net income		425,111			(493,661	)		1,161,493

Other comprehensive income (loss)
Gain (loss) on available for sale securities		(40,316	)		(14,000	)		-
Foreign currency translation gain		(1,107,501	)		292,561			383,262

Comprehensive income (loss)	$	(722,706	)	$	(215,100	)	$	1,544,755

Income (loss) per weighted-average common share-basic	$	0.01		$	(0.04	)	$	0.11
Income (loss) per weighted-average common share-diluted	$	0.01		$	(0.03	)	$	0.10

Number of weighted average common shares o/s-basic		58,453,265			12,246,309			10,270,438
Number of weighted average common shares o/s-diluted		64,298,592			15,000,000			11,582,338

See accompanying notes to consolidated financial statements.

NEWMARKET TECHNOLOGY, INC.
STOCKHOLDERS' EQUITY
AS OF MARCH 31, 2010
(Unaudited)

											Additional						Accumulated
	Number of Shares					Par Value of Shares					Paid-In			Deferred			Comprehensive			Accumulated			Stockholders'
	Preferred			Common		Preferred			Common		Capital			Compensation			Income			Deficit			Equity

STARTING BALANCE, 12/31/09		5,483			30,356,105	$	6		$	30,356	$	59,126,561		$	(49,375	)	$	2,356,330		$	(22,769,669	)	$	38,694,209

Conversion of preferred stock		(1,071	)		51,128,543		(1	)		51,129		(51,128	)											-

Common stock issued for conversion					13,572,871					13,573		156,427												170,000
of note payable

Common stock issued to settle debt					6,493,506					6,493		73,507												80,000

Common stock issued for trade payables					7,915,020					7,915		98,763												106,678

Amortization of deferred comp.															49,375									49,375

Other comprehensive income (loss)																		(1,147,817	)					(1,147,817	)

Net income (loss)																					425,111			425,111


ENDING BALANCE, 3/31/10		4,412			109,466,045	$	4		$	109,466	$	59,404,130		$	-		$	1,208,513		$	(22,344,558	)	$	38,377,556

NewMarket Technology, Inc.
Consolidated Statement of Cash Flows
Three months ended March 31,
(Unaudited)

	2010			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	425,111		$	(493,661	)	$	1,161,493
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Recovery of bad debt		-			(50,474	)		-
Stock issued for services and amortization of
deferred compensation		49,375			129,800			389,000
Depreciation and amortization		45,435			35,429			231,342
Changes in operating assets and liabilities:		-			-
(Increase) decrease in accounts receivable		(879,531	)		3,570,914			(1,564,541	)
(Increase) decrease in inventory		616,350			212,922			351,680
(Increase) decrease in prepaid expenses		(753,345	)		(1,797,671	)		(52,334	)
Increase (decrease) in accounts payable		620,564			(2,694,297	)		(285,130	)
Increase (decrease) in deposits		(42,295	)		256,484			(399,483	)
Increase (decrease) in taxes payable		-			25,581			109
Increase (decrease) in accrued expenses and other payables		474,509			(112,922	)		(136,343	)
Net cash provided (used) by operating activities		556,173			(917,895	)		(304,207	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in accrued interest receivable		(125,000	)		(125,000	)		-
Notes receivable advances		(132,694	)		-			-
Proceeds from sale of property and equipment		361,213			-			-
Purchase of property and equipment		(11,594	)		-			(10,477	)
Net cash provided (used) by investing activities		91,925			(125,000	)		(10,477	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings		-			-			457,000
Payments on short-term borrowings		(1,225,663	)		-			(587,470	)
Net cash used by financing activities		(1,225,663	)		-			(130,470	)

Effect of exchange rates on cash		(455,832	)		358,130			(39,995	)

Net decrease in cash and equivalents		(1,033,397	)		(684,765	)		(485,149	)

CASH, beginning of period		5,620,946			4,960,869			5,202,244

CASH, end of period	$	4,587,549		$	4,276,104		$	4,717,095

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash	$	-		$	231,993		$	189,171

Non-cash Financing Activities:
Common stock issued to settle debt	$	250,000		$	-		$	-
Common stock issued to settle trade payables	$	106,678
Common stock issued for conversion of preferred stock	$	51,129		$	14,416		$	473

NEWMARKET TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 31, 2010

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:

Unaudited Interim Financial Statements

The accompanying unaudited interim consolidated financial statements include the accounts of NewMarket Technology, Inc., a Nevada corporation (“we”, “our” or the “Company”), and our consolidated subsidiaries. To date, the majority of our sales have been information technology products and services sold domestically and internationally through our wholly-owned and majority owned domestic and foreign subsidiaries. Our headquarters is located in Dallas, Texas.

In June 2009, we filed a certificate of amendment of our Certificate of Incorporation to effect a reverse split of the common stock issued and outstanding on a one new share for twenty old shares basis. These actions were effective in July, 2009 and the Consolidated Balance Sheet, the Statement of Shareholder’s Equity and information presented in the Notes to the Consolidated Financial Statements have been adjusted to reflect the effect of the reverse stock split.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by general accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position at March 31, 2010 and the results of operations and comprehensive income (loss), stockholders’ equity and cash flows for all periods presented. The consolidated results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto of the Company included in our annual report on Form 10-K for the year ended December 31, 2009.

Use of estimates

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and revenues and expenses for the year then ended. Actual results may differ significantly from those estimates.

Principles of consolidation

Our consolidated financial statements include the accounts of NewMarket Technology, Inc., and all our wholly-owned and majority-owned subsidiaries. We use two different methods to report investments in subsidiaries and other companies: consolidation and the equity method.

Consolidation

We use the consolidation method to report its investment in its subsidiaries and other companies when we own a majority of the voting stock of the subsidiary. All inter-company balances and transactions have been eliminated

Equity Method

We use the equity method to report investments in businesses where we hold 20% to 50% voting interest, but do not control operating and financial policies.

Under the equity method, the Company reports:

·	our interest in the entity as an investment on its balance sheets, and

·	our percentage share of earnings or losses on its statement of operations

At March 31, 2010, we did not record any income or loss, nor adjust our investment account, by the net income or loss of the affiliates, as the actual equity percentage paid for the investments was less than 10%, with a concurrent de minimus net income/loss related thereto.

Fair Value Instruments

We adopted the standard that defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. This standard defines fair value as the amount that would be received upon sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which prioritizes the types of inputs to valuation techniques that companies may use to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is given to inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2). The lowest priority is given to unobservable inputs in which there is little or no market data available and which require the reporting entity to develop its own assumptions (Level 3).

The fair values of our cash and cash equivalents, accounts receivable, accounts payable, and lines of credit approximate their carrying amounts due to the short maturities of these instruments.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less and money market instruments to be cash equivalents.

Inventory

Inventory, which consists primarily of finished goods, is stated at the lower of cost or market. Cost is determined using the weighted average method.

Other Assets

Available-for-sale securities consist of 1.4 million shares of the common stock of VirtualHealth Technologies, Inc. and 336,800 shares of Alternet Systems, Inc. (See Note 6). These securities are carried at fair value based upon quoted market prices. Unrealized gains and losses are computed on the average cost basis and are reported as a separate component of comprehensive income, included as a separate item in stockholders’ equity. Realized gains, realized losses and declines in value judged to be other-then temporary, are included in other income (expense).

Property and equipment

All property and equipment is recorded at cost and depreciated over their estimated useful lives, using the straight-line method, generally three, five or seven years. Upon sale or retirement, the costs and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.

Long-Lived Assets and Other Intangible Assets

Long-lived assets, such as property, plant and equipment and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset.

Accounting Standards Codification (“ASC”) 350-10, Intangibles-Goodwill and Other, requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provision of ASC 350. This standard also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

Revenue Recognition

As a result of the multiple acquisitions from 2003 through 2009, we now have three distinct revenue streams: (1) Services, principally programming services. This revenue is recognized as services are provided and billed to the customers. (2) Contract, which is principally an ongoing service revenue stream, such as IT outsourcing, training contracts, technical support contracts, etc. This form of revenue is recognized monthly as earned and billed, and (3), Product sales, which is the sale of hardware and software, generally installed. Sometimes the hardware and/or software are customized under the terms of the purchase contract. This revenue is recognized as the products are delivered and the customer accepts said products. Any portions of such contracts which may include installation, training, conversion, etc. are recognized when such services have been completed. Any ongoing support, training, etc., is separately structured and is accounted for in contract revenue and in accordance with the contracts.

Earnings per share

Earnings per share is calculated in accordance with ASC 260-10, Earnings Per Share. Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted-average number of common shares outstanding during the period presented. Diluted net income (loss) per share for the period is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding during the period, increased by potentially dilutive common shares (“dilutive securities”) that were outstanding during the period. Dilutive securities include stock warrants, convertible debt and convertible preferred stock.

Stock compensation for services rendered

We may issue shares of common stock in exchange for services rendered. The costs of the services are valued according to accounting principles generally accepted in the United States and are been charged to operations as earned.

Foreign Currency Transaction and Translation Gains (Losses)

We have operations located in the People’s Republic of China, Singapore, Venezuela, Brazil and Columbia. We use the United States dollar for financial reporting purposes. Our results of operations and cash flows are translated at the average exchange rates during the period, assets and liabilities are translated at the exchange rates at the balance sheet dates, and equity is translated at the historical exchange rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

Derivative Instruments

ASC 815-10, Derivatives and Hedging, establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at fair value, and that changes in fair value be recognized currently in earnings (loss) unless specific hedge accounting criteria are met.

Stock-based Compensation

We do not currently maintain a stock option plan for our management and employees.

Comprehensive Income

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income (loss) consists of its net income (loss), the change in the currency translation adjustment, and any gain or loss on available-for-sale securities.

Recently Issued Accounting Standards

In October 2009, the Financial Accounting Standards Board (“FASB”) issued ASU 2009-13, Multiple Deliverable Revenue Arrangements (“ASU 2009-13”) which established guidance for accounting for multiple-deliverable revenue arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable; eliminates the residual method of allocation and requires arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and requires a vendor to determine its best estimate selling price in a manner consistent with that used to determine the selling price of the deliverable on a stand-alone basis. This guidance also expands the required disclosures related to a vendor’s multiple-deliverable revenue arrangements. The guidance is effective beginning July 15, 2010 with early adoption permitted. We do not believe the adoption of this standard will have a material impact on our results of operations, financial condition, cash flows or disclosures.

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820-10”), to require additional disclosures regarding fair value measurements. The amended guidance requires entities to disclose additional information regarding assets and liabilities that are transferred between levels of the fair value hierarchy. This guidance is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. We do not believe the adoption of this guidance will have a material impact on our financial statements.

Concentrations of risks - Geographic

As a result of the various acquisitions in 2003 through 2006, we now have offices, employees and customers in a variety of foreign countries. Our four foreign-based subsidiaries are headquartered in Singapore; Caracas, Venezuela; Shanghai, Peoples Republic of China and Sao Paulo, Brazil. For the three months ended March 31, 2010, RKM Suministros, C.A., based in Caracas, Venezuela, represented approximately 6% of our total revenue; Infotel, based in Singapore, represented approximately 2% of our total revenue; China Crescent Enterprises, Inc., based in Shanghai, China, represented approximately 58% of our total and UniOne, based in Sao Paulo, Brazil, represented approximately 15% of our total revenue.

Investment in unconsolidated affiliates/subsidiaries

Our investment in affiliates at March 31, 2010, is composed of an 8% equity position in RedMoon Broadband, Inc., This equity position does not represent a controlling interest in this company.

2. DESCRIPTION OF BUSINESS:

NewMarket Technology, Inc., is a Nevada corporation which conducts business from our headquarters in Dallas, Texas. The Company was incorporated on February 19, 1997 as Nova Enterprises, Inc., changed its name to IPVoice Communications, Inc. in March of 1998, then to IPVoice.com, Inc. in May of 1999, back to IPVoice Communications, Inc. in January of 2001 and to NewMarket Technology, Inc., in July 2004. We are involved in the information technology industry, principally voice-over- internet (VoIP) technology, systems integration, and wireless broadband technology. We currently have domestic operations in Texas and international operations in The People’s Republic of China, Singapore, Venezuela, Colombia and Brazil.

3. STOCKHOLDERS’ EQUITY:

Common stock

The Company has authorized 300,000,000 shares of $0.001 par value common stock. We had 109,466,045 shares of common stock issued and outstanding at March 31, 2010.

During the first quarter of 2010, we issued 79,109,940 shares of common stock as follows:

·	The Company issued 20,066,377 shares of common stock to two parties in exchange for a $250,000 reduction in short-term debt.

·	The Company issued 7,915,020 shares of common stock to two parties for payment of legal services rendered. The shares were valued at $106,678.

·	The Company issued 51,128,543 shares of common stock pursuant to the conversion of 1,071 shares of Series J Preferred Stock.

Preferred stock

The Company has authorized 10,000,000 shares of $0.001 par value preferred stock. Rights and privileges of the preferred stock are determined by the Board of Directors prior to issuance. We had 925 shares of Series C preferred, 41 shares of Series E preferred stock, 3,346 shares of Series J preferred stock, and 500 shares of Series K preferred stock issued and outstanding, at March 31, 2010.

For the three months ended March 31, 2010, we issued 51,128,543 shares of common stock pursuant to the conversion of 1,071 shares of Series J Convertible Preferred Stock.

In April 2009, we entered into a Debt Restructure and Equity Reorganization Comprehensive Agreement ("Debt Restructure") with GreenShield Management Company ("GreenShield"), and ES Horizon, Inc. ("ES Horizon"), a company controlled by our Chairman of the Board. Pursuant to the terms of the Debt Restructure, we issued 750 shares of the newly authorized Series J Convertible Preferred Stock to GreenShield and 500 shares of the newly authorized Series K Preferred Stock to ES Horizon.

Additionally, pursuant to the Debt Restructure, in the third quarter of 2009 GreenShield agreed to exchange 225 shares of Series F Preferred Stock, 835 shares of Series H Preferred Stock and 541 shares of Series I Preferred Stock for an equal number of shares of Series J Convertible Preferred Stock.

In October 2009, we entered into a Debt Restructure Agreement ("Second Debt Restructure") with GreenShield and Timeless Investments, Ltd. ("Timeless"). Timeless held $2.0 million in debt (the "Note Participation") purchased in October 2009 from Valens Offshore SPV II Corp. and Valens Offshore SPV I, Ltd. (see Note 7). Timeless assigned $500,000 of the Note Participation to GreenShield in October 2009. The $2.0 million of total debt had a maturity date of November 10, 2010.

Pursuant to the Second Debt Restructure, Timeless agreed to convert $1.5 million of the Note Participation into 1,500 shares of the Company’s Series J Convertible Preferred Stock. In addition, GreenShield also agreed to convert $500,000 of Note Participation into 500 shares of the Company's Series J Preferred Stock. Both GreenShield and Timeless waived any rights to and forgave any unpaid interest, fees or penalties that may have been due under the Note Participation.

4. STOCK OPTIONS AND WARRANTS:

Stock options

The Company maintains no stock option plan or long-term incentive plan at this time.

Warrants

In November 2007, we entered to a long-term financing arrangement. (See Note 5). Pursuant to the terms of this financing, we issued warrants to purchase a total of 608,656 shares of common stock of the Company to two different parties. These warrants are exercisable at a price of $4.40 per share and expire 5 years from the date of issuance. The warrants were valued at the time of issuance at $536,540 using the Black-Scholes option valuation model.

As of March 31, 2010 the value of all outstanding warrants based on the Black-Scholes valuation model was $0.

5. INDEBTEDNESS:

In November, 2007, we and certain of our subsidiaries entered into a Security Agreement (the “Security Agreement”) withValens U.S. SPV I, LLC (“Valens US”) and Valens Offshore SPV II, LLC (“Valens Offshore,” and together with Valens US, the “Creditor Parties”). Pursuant to the terms of the Security Agreement, we issued a secured convertible term note to Valens US and Valens Offshore in the principal amounts of $1,800,000 and $2,200,000 respectively (collectively, the “Notes”). In addition, we issued a Revolving Note to Valens US, pursuant to which Valens committed to advance up to $3,000,000 to us (the “Revolving Note”).

We granted a security interest to Valens in each of our real or personal, tangible or intangible, property and assets. We also pledged the stock of our subsidiaries and other equity interests owned by us. We also issued warrants to purchase shares of common stock of the Company to Valens Offshore and Valens US which are exercisable at a price of $4.40 per share (see Note 4).

In October 2008, the Revolving Note was cancelled at the request of the Company.

In April 2009, a third party purchased $1.25 million in principal value of the Notes from the Creditor Parties. In October 2009, two parties purchased the remaining principal balance of the Notes from the Creditor Parities. The debt, inclusive of accrued interest, was exchanged for the issuance of certain preferred securities. (See Note 3). Pursuant to this transaction all security interests previously granted to the Creditor Parties was released.

6. AVAILABLE FOR SALE SECURITIES

As of March 31, 2010, we own 1.4 million shares of common stock of VirtualHealth Technologies, Inc. (“VirtualHealth”) and 336,800 shares of AlterNet Systems, Inc. (“AlterNet”). These shares have been classified as available for sale securities in which unrealized gains (losses) are recorded to shareholders’ equity. At March 31, 2010, all shares held by us of VirtualHealth and AlterNet common stock are tradable. Based upon the closing price of $0.17 per share, the market value of the VirtualHealth common shares at March 31, 2010 was $238,000. Based upon the closing price of $0.075 per share, the market value of the AlterNet common shares at March 31, 2010 was $25,260.

7. EARNINGS PER SHARE:

For the Three Months Ended March 31, 2009:

	Income/(Loss) (Numerator)			Shares Denominator)		Per-Share Amount
Basic EPS:
Loss attributable to common stockholders	$	( 493,661	)		12,246,309	$	( 0.04	)
Effect of Dilutive Securities:
Convertible preferred stock		0			2,753,691
Convertible debt		0			0
Diluted EPS:
Loss attributable to common stockholders + assumed conversions	$	( 493,661	)		15,000000	$	( 0.03	)

For the Three Months Ended March 31, 2010:

	Income (Numerator)		Shares (Denominator)		Per-Share Amount
Basic EPS:
Income available to common stockholders	$	425,111		58,453,265	$	0.01
Effect of Dilutive Securities:
Convertible preferred stock		0		5,845,327
Convertible debt		0		0
Diluted EPS:
Income available to common stockholders + assumed conversions	$	425,111		64,298,592	$	0.01

8. DISCONTINUED OPERATIONS:

In October 2003, Intercell International Corp., the predecessor company of our Chinese subsidiary, acquired a controlling 60% equity interest in Brunetti, LLC (“Brunetti”) in exchange for a cash contribution to Brunetti. In January 2004, Intercell acquired the remaining 40% equity interest in Brunetti in exchange for an additional cash contribution to Brunetti. In October 2004, Intercell discontinued the operations of Brunetti and implemented steps to liquidate the assets of Brunetti. In March, 2005, Brunetti filed a voluntary petition for relief in the United States Bankruptcy Court, District of Colorado under Chapter 7 of Title 7 of the U.S. Bankruptcy Code.

In November, 2009, we discontinued the operations of our IP Global Voice/Corsa subsidiary (“IP Global”).

At March 31, 2010, the carrying values of those assets and liabilities (presented as assets and liabilities of discontinued operations) are as follows:

			IPGV/
	Brunetti		Corsa

Cash	$	9,377	$	-
Prepaid expenses		-		121,205
Accounts receivable				171,852
Intangibles				208,426
Fixed assets		-		36,464

Total assets	$	9,377	$	537,947

Accounts payable	$	179,473	$	147,110
Related party payable		25,035		-
Accrued expenses		93,440		424,186
Short-term debt		10,735		-

Total liabilities	$	308,683	$	571,296

Brunetti and IP Global reported no revenues or income during the three months ended March 31, 2010.

9. INCOME TAXES

Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. We have net operating loss carry-forwards for income tax purposes of approximately $18,800,000 which expire beginning December 31, 2117. There may be certain limitations on our ability to utilize the loss carry-forwards in the event of a change of control, should that occur. In addition, we amortize goodwill for income tax purposes, but not for reporting purposes. The amount recorded as a deferred tax asset, cumulative as of March 31, 2010, is $19,807,000, which represents the amount of tax benefits of the loss carry-forwards and goodwill amortization. The Company has established a valuation allowance for this deferred tax asset of $19,807,000. The significant components of the net deferred tax asset as of March 31, 2010 are:

Net operating losses	$	18,800,000
Goodwill amortization		1,007,000
Valuation allowance		(19,807,000	)
Net deferred tax asset	$	0

10. COMMITMENTS AND CONTINGENCIES:

Leases

Our corporate headquarters operates out of approximately 2,800 square feet of leased facilities located at 14860 Montfort Drive, Suite 210, Dallas, Texas 75254. The lease expires on December 31, 2010. The monthly rental payments are $3,100. We have a number of additional leases for office space associated with our subsidiary operating companies.

Litigation

From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. Although the amount of any liability that could arise with respect to currently pending actions cannot be accurately predicted, in the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

11. SUBSEQUENT EVENTS:

In April 2010, we issued 39,471,504 shares of common stock pursuant to the conversion of 375 shares of Series J Convertible Preferred Stock.

In April 2010, we settled a lawsuit with a vendor of our IP Global Voice subsidiary with the issuance of a $715,000 unsecured promissory note with a six month term.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor for Forward-Looking Statements

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this report.

Information contained herein contains forward-looking statements, You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible and assumed future results of operations, including descriptions of our business strategy. The statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or other similar expressions. These statements are based on assumptions that we have made in light of our experience and well as perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financials results or results of operations and could cause actual results to differ materially from those on the forward-looking statements. These factors include, but are not limited to, competition from existing and future competitors, failure to maintain and develop business, failure to increase or maintain the number of customers we have, downturns in the economies and/or industries that we serve, and the failure to attract or keep qualified professionals we employ. These factors and others discussed in detail in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should keep in mind that any forward-looking statements made by us herein, or elsewhere, speaks only as of the date on which we made it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

Links to all of our filings, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, information statements and other material information concerning us are available on the Investor Relations page of our website at www.NewmarketTechnology.com .

Critical accounting policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, bad debts, inventories, warranty obligations, contingencies and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A discussion of our critical accounting policies and the related judgments and estimates affecting the preparation of our consolidated financial statements is included in the Annual Report on our Form 10-K fiscal year 2009. There have been no material changes to our critical accounting policies as of March 31, 2010.

Overview

We believe our strategy, introduced in June of 2002, to package proprietary technology products and services with recognized brand names and to pursue sales in the high demand IP communications, wireless broadband and systems integration markets will be successful. In 2005, we initiated an expansion of our business model through the launch of sister operations in Latin America and Asia. Part of the Company’s growth strategy includes expansion into high-growth developing economic regions. These developing economic regions provide both an environment for accelerated growth as well as a parallel platform for acquiring early stage subsidiary technology companies and developing them into mainstream technology service and product companies. We plan for our long-term growth to be achieved through a combination of acquisitions and organic sales growth.

Recent Developments

The NewMarket Technology Greenfield Partnership Program (the “Greenfield Program”) was introduced by us in 2009 to accelerate and enhance the introduction of new technology innovations into new markets, including those markets with diversified, high growth opportunities. Greenfield Program participant companies were chosen to participate in the partnership program based on their technology and service offerings, in conjunction with the emerging geographic markets in which they operate. We are a re-seller of Greenfield Partnership Program participant company technologies and provide basic back office support to the companies as they establish and grow their operations. Additionally, we provide cross-selling channels for participant companies with complementary technologies. Current Greenfield Program participant companies include AlterNet Systems, Inc. (“AlterNet”), Nova Energy, Inc. (“Nova”) and NuMobile, Inc. (“NuMobile”).

In March 2010, General Hugh G. Robinson (ret.), a member of our Board of Directors since 2006, passed away. We are currently considering potential replacement candidates.

Results of Operations

Three months ended March 31, 2010 compared to three months ended March 31, 2009

Revenue increased 33% from $19,335,521 for the quarter ended March 31, 2009 to $25,652,226 for the quarter ended March 31, 2010. Revenue from our Chinese systems integration subsidiary increased 102% for the quarter. This was offset by a 33% decline in revenue in our domestic subsidiary for the quarter. Revenue was essentially flat in our other subsidiaries compared the same period last year.

Cost of sales increased 33% from $16,315,267 for the quarter ended March 31, 2009 to $21,713,693 for the quarter ended March 31, 2010 due to the corresponding overall increase in sales. Our gross margin, as a percentage of sales was 15% and 16% for the quarters ended March 31, 2010 and 2009, respectively. We plan to continue to pursue strategies to reduce the overall cost of sales as a percentage of sales as the Company grows, such as entering into higher margin outsourcing agreements.

General and administrative expenses increased 2% to $3,249,670 for the quarter ended March 31, 2010 from $3,194,324 for the quarter ended March 31, 2009. The increase is primarily the result of increased expenses in our Chinese operating subsidiary as a result of the acquisition of two new operating subsidiaries in the fourth quarter of 2009.

Depreciation and amortization expense increased 28% from $35,429 for the quarter ended March 31, 2009 to $45,435 for the quarter ended March 31, 2010. Depreciation on fixed assets is calculated on the straight-line method over the estimated useful lives of the assets.

We reported net income of $425,111 for the quarter ended March 31, 2010 after accounting for the non-controlling interest in a consolidated subsidiary, compared to a net loss of $493,661 for the quarter ended March 31, 2009. The increase was due to an increase in operating expenses. Comprehensive net loss, 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, increased from comprehensive net loss of $215,100 for the quarter ended March 31, 2009 to $722,706 for the quarter ended March 31, 2010.

Liquidity and Capital Resources

Our cash balance at March 31, 2010 decreased $1,033,397 from $5,620,946 as of December 31, 2009, to $4,587,549. The decrease was the result of a combination of cash used in financing activities of $1,225,663 and the effect of exchange rates on cash of $455,832, offset by cash provided by operating activities of $556,173 and cash provided by investing activities of $91,925. Operating activities for the three months ended March 31, 2010 exclusive of changes in operating assets and liabilities provided $519,921, as well as a decrease in inventory of $616,350 and an increase in accounts payable and accrued expenses of $1,095,073, offset by an increase in accounts receivable of $879,531 an increase in prepaid expenses of $753,345 and a decrease in deposits of $42,295.

In recent years, we have funded our working capital requirements principally through borrowings under bank lines of credit, term loans, and issuances of common stock in exchange for debt. To the extent our operations are not sufficient to fund our capital requirements, we may enter into additional revolving loan agreements with a financial institution, or attempt to raise additional capital through the sale of additional common or preferred stock or through the issuance of additional debt. To the extent that we raise additional capital or settle existing liabilities through the sale or issuance of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. The current financing environment in the United States is exceptionally challenging and we can provide no assurances that we could raise capital either for operations or to finance an acquisition.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in foreign currency exchange rates, including fluctuations in the functional currency of foreign operations. The functional currency of operations outside the United States is the respective local currency. Foreign currency translation effects are included in accumulated comprehensive income in shareholder’s equity. We do not utilize derivative financial instruments to manage foreign currency fluctuation risk.

ITEM 4T. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. There was no change to our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There was no change to our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved from time to time in various legal actions. We are not currently aware, however, of any actions that management believes would materially adversely affect the business, financial conditions or results of operations. We may be subject to future claims which would cause it to incur significant expenses or damages, including from subsidiaries that have previously been acquired. If we acquire or consolidate additional subsidiaries in the future, we may assume obligations and liabilities of such entities.

We not aware of any contemplated legal proceeding by a governmental authority in which we may be involved.

ITEM 1A. RISK FACTORS

No material changes in the risks related to our business have occurred since the filing of our Annual Report on Form 10-K for the year ended December 31, 2009. You should carefully consider the risk factors set forth in the Annual Report on Form 10-K and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

EXHIBIT NO.	DESCRIPTION OF EXHIBIT

10.1	Annual Report for the year ended December 31, 2009, as filed in Company’s Form 10-K April 23, 2010, and incorporated herein by reference

31.1 *	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 *	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 *	Certification of Philip M. Verges, Chairman and Chief Executive Officer of the Company, pursuant to 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 *	Certification of Philip J. Rauch, Chief Financial Officer of the Company, pursuant to 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002..

* Filed Herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant certifies that it has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

NewMarket Technology, Inc.

(Registrant)

Date: May 26, 2010	By: /s/ Bruce Noller Bruce Noller Chief Executive Officer
	(Principal Executive Officer)


Date: May 26, 2010	By: /s/ Philip J. Rauch Philip J. Rauch Chief Financial Officer (Principal Financial Officer)

NewMarket Technology Inc - FORM 10-Q - May 27, 2010

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NewMarket Technology Inc Reports