Summary of NEWMARKET TECHNOLOGY INC

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

Safe Harbor for Forward-Looking Statements

We have made forward-looking statements in this Form 10-Q under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the "Notes to Consolidated Financial Statements." In addition, our representatives or management may make other written or oral statements that constitute forward-looking statements. Forward-looking statements are based on management's beliefs and assumptions and on information currently available to them. These statements often contain words like believe, expect, anticipate, intend, contemplate, seek, plan, estimate or similar expressions. We make these statements under the protection afforded them by Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements involve risks, uncertainties and assumptions, including those discussed in this report. We operate in a continually changing business environment, and new risk factors emerge from time to time. We cannot predict those risk factors, nor can we assess the impact, if any, of those risk factors on our business or the extent to which any factors may cause actual results to differ materially from those projected in any forward-looking statements. Forward-looking statements do not guarantee future performance, and you should not put undue reliance on them.

Forward-looking statements can generally be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," or "anticipates" or the negative of these terms or other comparable terminology, or by discussions of strategy, plans or intentions. Statements contained in this report that are not historical facts are forward-looking statements. Without limiting the generality of the preceding statement, all statements in this report concerning or relating to estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are necessarily estimates reflecting our best judgment based upon current information and involve a number of risks and uncertainties. Other factors may affect the accuracy of these forward-looking statements, and our actual results may differ materially from the results anticipated in these forward-looking statements. While it is impossible to identify all relevant factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to, those factors or conditions described in "Management Discussion and Analysis or Plan of Operation" as well as changes in the regulation of the IP telephony industry at either or both of the federal and state levels, competitive pressures in the IP telephony industry and our response to these factors, and general conditions in the economy and capital markets. For a more complete discussion of these and other risks, uncertainties and assumptions that may affect us, see the company's annual report on Form 10-K for the fiscal year ended December 31, 2007.

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 2007. There have been no material changes to our critical accounting policies as of September 30, 2008.

Overview

NewMarket Technology is in the business of developing market entry technology products and services into early and mainstream technology products and services. NewMarket has introduced a unique business model to this end with two substantial differentiating features.

1) we believe the NewMarket business model overcomes the profit margin pressure facing the technology service sector resulting from the globalization of the technology labor force and,

2) we believe the business model enhances the return on investment opportunity for shareholders through eventually generating the issuance of equity dividends.

In general, the component functions of the NewMarket business model are to:

1) find and acquire timely early stage technology companies;

2) incrementally invest to market refine the acquired technology offering;

3) concentrate initial sales efforts on focused pilot opportunities;

4) expand pilot opportunities to a level that prove market viability;

5) spin the technology company out into a next stage, standalone company to support expanded capital formation;

6) maintain the support service economy of scale by retaining support service contract functions at NewMarket Technology; and

7) build service and sales capacity in developing economies oversees to take advantage of reduced labor expense and to sell into fast growing economic regions with less brand name competition than in North America.

Technology sector businesses face two substantial market wide systemic issues. The first is the growing global technical labor force is creating significant profit margin pressure as technology companies continue to ratchet down expenses and sell at prices below their competition by employing the ever growing technology labor force from developing economic countries around the world. The global technology labor force is growing and technology companies will continue to chase each other's downward spiraling labor expense, in turn, continuing to squeeze technology company profit margins for the foreseeable future. Secondly, since the collapse of the dotcom investment market, the technology sector has not been able to re-establish consistent investment community interest in technology innovation. Profit margin pressure deters investment community interest at the same time making internal research and development investment an unlikely alternative. Technology innovation is critical to the technology sector. Updated technology products with enhanced features and performance that replace last generation products are a significant and critical portion of the overall technology market.

We believe NewMarket improves technology product and service profit margins by combining traditional product and service revenues with income monetized from the overall business value of a technology offering. The equity value is usually a factor of the future earnings potential of a new technology. Earnings potential is generally derived by projecting the currently realized revenue and earnings of a product or service offering, within its market entry customer scope, across the entire market of potential customers that are likely future candidates for the new product or service offering. NewMarket contains each technology product and service offering within a subsidiary company. As the product and service offering matures, NewMarket plans to monetize the overall value of the technology offering through an incremental liquidation of stock in the subsidiary company housing the now mature product or service offering. The revenue and profits of the now mature product or service offering combined with the income from the incremental sale of stock in the associated subsidiary will provide NewMarket with a profit margin advantage.

The NewMarket corporate structure that enables the incremental sale of subsidiary stock in order to boost product and service revenues and profits is also the aspect of the NewMarket business model that attracts investment in technology product and service innovation. In addition to selling stock in subsidiary companies to combine equity income with traditional product and service revenue and profits, the subsidiary structure provides an attractive long term and incremental return on investment opportunity for both institutional and retail common shareholders. When a subsidiary company is positioned for incremental liquidation through an independent public listing or the sale of subsidiary stock to a third-party company, NewMarket will issue subsidiary stock to common shareholders through a dividend declaration. By issuing stock in subsidiary companies to NewMarket common shareholders, NewMarket believes it will enhance long-term return opportunity for common shareholders by adding dividend returns to NewMarket stock appreciation, if any. The ability of NewMarket common shareholders to liquidate subsidiary stock issued in a NewMarket dividend creates incremental return opportunities that can be immediately realized without liquidating NewMarket stock.

We believe the NewMarket Technology business opportunity is perpetuated by the ongoing demand for technology innovation. New technologies likewise require ongoing investment. However, since the 2001 collapse of the high tech IPO market, new technologies have struggled to find investment and investors have not found an attractive start-up investment model.

NewMarket Technology has set out to replace the high tech IPO market with the micro-cap public market. The technology start-ups are appropriately much smaller organizations with more reasonable start-up goals. The required capital investments are correspondingly smaller.

In order to create a meaningful organization through smaller investments, the counter strategy to smaller investments is more investments. NewMarket is concentrating on Internet Protocol (IP) Communication Technologies. The Company currently has several market sector concentrations each leveraging a core expertise in IP Technology such as Telecommunications and Broadband Wireless. NewMarket creates multiple investment and return opportunities around a single technology concentration.

The combination of multiple companies creates an inherent economy of scale opportunity. While the company is currently concentrating on several market sectors, it is building only one support service organization. Installation, integration, ongoing development, maintenance and customer service support are all folding under one organization to support all three markets. NewMarket has already begun to substantially reorganize its current support service operations to optimize the inherent economy of scale opportunity.

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.

Recent Developments

In February 2008, the Company executed a letter-of-intent with Worldwide Strategies, Inc. ("Worldwide") under which the Company would acquire a 51% interest in Worldwide in exchange for the assumption of existing debt. Worldwide is a development stage business which has developed a proprietary marketing process and system to provide clients with call-center software platforms. The proposed acquisition is part of the Company's announced strategy to consolidate its mobile computing business. It is anticipated that this transaction will close in the fourth quarter of 2008.

Future plans call for acquiring companies that augment and complement current products and customers. Such plans involve various risks to future business operations and financial condition. If the Company fails to perform adequate due diligence, NewMarket may acquire a company or technology that:

(a) is not complementary to the business;

(b) is difficult to assimilate into the business;

(d) involves substantial additional costs exceeding estimated costs.

In addition, the Company also faces the following risks in connection with its acquisitions:

(a) the Company may spend significant funds conducting negotiations and due diligence regarding a potential acquisition that may not result in a successfully completed transaction;

(b) the Company may be unable to negotiate acceptable terms of an acquisition;

(c) if financing is required to complete the acquisition, the Company may be unable to obtain such financing on reasonable terms, if at all; and

(d) negotiating and completing an acquisition, as well as integrating the acquisition into our operations, will divert management time and resources away from our current operations and increase our costs.

Results of Operations

Three months ended September 30, 2008 compared to three months ended September 30, 2007

Net sales increased 38% from $23,433,925 for the quarter ended September 30, 2007 to $32,379,164 for the quarter ended September 30, 2008. This increase was primarily due to increased sales in our domestic and Chinese systems integration subsidiaries.

Cost of sales increased 41% from $18,578,261 for the quarter ended September 30, 2007 to $26,217,589 for the quarter ended September 30, 2008. This increase was primarily due to the corresponding increase in overall sales. Our gross margin, as a percentage of sales was 19% and 21% for the quarters ended September 30, 2008 and 2007, respectively. Management plans to continue to pursue strategies to reduce the overall cost of sales as a percentage of sales as the company grows. Management intends to leverage increased purchasing volume to improve purchasing contracts and reduce the overall cost of sales. Management also intends to implement resource utilization strategies that can demonstrate notable savings when applied over higher volumes of production.

General and administrative expenses increased 18% to $3,719,802 for the quarter ended September 30, 2008 from $3,150,886 for the quarter ended September 30, 2007 . A decrease in general and administrative expenses in our Chinese subsidiary was offset by an increase in overhead expenses in our Latin American and domestic subsidiaries.

Depreciation and amortization expense increased 60% from $149,101 for the quarter ended September 30, 2007 to $239,172 for the quarter ended September 30, 2008. Depreciation on fixed assets is calculated on the straight-line method over the estimated useful lives of the assets.

Net income increased 12% from $1,560,806 for the quarter ended September 30, 2007 to $1,753,918 for the quarter ended September 30, 2008. Net income represented 5.4% and 6.7% of net sales for the quarters ended September 30, 2008 and 2007, respectively. Comprehensive net income, which is adjusted to compensate for the risk associated with foreign profits and the potential conversion of foreign currency, increased 73% from $1,018,009 for the quarter ended September 30, 2007 to $1,763,056 for the quarter ended September 30, 2008. Comprehensive net income represented 5.4% and 4.3% of net sales for the quarters ended September 30, 2008 and 2007, respectively.

Nine months ended September 30, 2008 compared to nine months ended September 30, 2007

Net sales increased 20% from $63,459,722 for the nine months ended September 30, 2007 to $76,069,467 for the nine months ended September 30, 2008. This increase was primarily due to increased sales in our domestic and Chinese systems integration subsidiaries.

Cost of sales increased 19% from $49,797,214 for the nine months ended September 30, 2007 to $59,092,154 for the nine months ended September 30, 2008. This increase was primarily due to the corresponding increase in overall sales. Our gross margin, as a percentage of sales was 22% and 21% for the nine months ended September 30, 2008 and 2007, respectively. Management plans to continue to pursue strategies to reduce the overall cost of sales as a percentage of sales as the company grows. Management intends to leverage increased purchasing volume to improve purchasing contracts and reduce the overall cost of sales. Management also intends to implement resource utilization strategies that can demonstrate notable savings when applied over higher volumes of production.

General and administrative expenses increased 13% to $11,400,162 for the nine months ended September 30, 2008 from $10,114,354 for the nine months ended September 30, 2007. The increase was due primarily to an increase in staff and overhead expenses related to sales expansion efforts in the Company's Chinese subsidiary.

Depreciation and amortization expense increased 41% from $565,614 for the nine months ended September 30, 2007 to $797,357 for the nine months ended September 30, 2008. Depreciation on fixed assets is calculated on the straight-line method over the estimated useful lives of the assets.

Net income increased 36% from $2,766,209 for the nine months ended September 30, 2007 to $3,758,484 for the nine months ended September 30, 2008. Net income represented 4.9% and 4.4% of net sales for the nine months ended September 30, 2008 and 2007, respectively. Comprehensive net income, which is adjusted to compensate for the risk associated with foreign profits and the potential conversion of foreign currency, increased 74% from $2,761,709 for the nine months ended September 30, 2007 to $4,819,131 for the nine months ended September 30, 2008. Comprehensive net income represented 6.3% and 4.4% of net sales for the nine months ended September 30, 2008 and 2007, respectively

Liquidity and Capital Resources

The Company's cash balance at September 30, 2008 decreased $407,336 from $5,202,244 as of December 31, 2007, to $4,794,908. The decrease was the result of a combination of cash used in investing activities of $1,779,167, cash used in financing activities totaling $283,108, and the effect of exchange rates on cash of $327,426, offset by cash provided by operating activities of $1,982,365. Operating activities for the nine months ended September 30, 2008 exclusive of changes in operating assets and liabilities provided $5,936,546 as well as an increase in accounts payable of $779,614, offset by an increase in accounts receivable, inventory and other assets $4,100,052 and a decrease in accrued expenses and other liabilities of $633,743.

On November 30, 2007, the Company and certain of its subsidiaries including, IP Global Voice, Inc, Netsco, Inc., NewMarket Broadband, Inc., NewMarket Intellectual Property, Inc and NewMarket China, Inc., entered into a Security Agreement (the "Security Agreement") with LV Administrative Services, Inc. (the "Agent") as administrative and collateral agent for Valens U.S. SPV I, LLC ("Valens US") and Valens Offshore SPV II, LLC ("Valens Offshore," and together with the Agent and Valens US, the "Creditor Parties"). Pursuant to the terms of the Security Agreement, the Company 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, the Company issued a Revolving Note to Valens US, pursuant to which Valens has committed to advance up to $3,000,000 to the Company (the "Revolving Note").

The Notes and the Revolving Note bear interest at a rate equal to the "prime rate" published in The Wall Street Journal plus two percent (2%), per annum (the "Contract Rate"), provided however that the Contract Rate shall not at any time be less than nine percent (9%) per annum. The unpaid principal and accrued interest under the Notes and the Revolving Note are due and payable on November 30, 2010 (the "Maturity Date"). The interest on the Notes and the Revolving Note is payable monthly, in arrears, commencing on December 1, 2007.

The Notes require amortizing payments of the principal amount of $133,333 together with any accrued and unpaid amounts (the "Monthly Amount") which are owed to the Creditor Parties, commencing on June 1, 2008 and on the first business day of each succeeding month thereafter through the maturity date. The Creditor Parties may convert a portion of the Monthly Amount into shares of the Company's common stock provided: (A) the average closing price of the Company's common stock exceeds 115% of the Fixed Conversion Price of $.20; (B) the amount of such conversion does not exceed 25% of the average dollar trading volume of the Company's common stock for the 22 trading date immediately preceding the due date of the Monthly Payment. If the criteria set forth above in (A) is met but the criteria set forth in (B) is not met as to the entire Monthly Amount, the Creditor Parties shall convert only such part of the Monthly Amount that meets the criteria set forth in (B). Any portion of the Monthly Amount that has not been converted into shares shall be payable at the rate of 100% of the Monthly Amount in cash. In addition, the Company is not permitted to make any payments in shares of its common stock if there is no effective registration statement covering the resale of the shares or an event of default exists and is continuing.

The Company granted a security interest to Valens in each of the Company's real or personal, tangible or intangible, property and assets. The Company also pledged the stock of its subsidiaries and other equity interests owned by the Company.

The Company also issued five year warrants to purchase 3,825,840 shares of common stock of the Company to Valens Offshore and warrants to purchase 8,347,287 shares of common stock of the Company to Valens US which are exercisable at a price of $0.22 per share.

Since inception, the Company has financed operations primarily through equity security sales. The Company may need to raise cash through additional equity sales at some point in the future in order to sustain operations. Accordingly, if revenues are insufficient to meet needs, we will attempt to secure additional financing through traditional bank financing or a debt or equity offering; however, because the start-up nature of the Company and the potential of a future poor financial condition, we may be unsuccessful in obtaining such financing or the amount of the financing may be minimal and therefore inadequate to implement our continuing plan of operations. There can be no assurance that we will be able to obtain financing on satisfactory terms or at all, or raise funds through a debt or equity offering. In addition, if we only have nominal funds by which to conduct our operations, it will negatively impact our potential revenues.

Off-Balance Sheet Arrangements

The Company does not currently have any off-balance sheet arrangements as defined in Item 303(c)(2) of Regulation S-K.