View PDF Version

PHILIP VERGES - IPVOICE COMMUNICATIONS INC (IPVO)
CEO Interview - published 04/12/2004

DOCUMENT # WAY613

PHILIP VERGES is the Chief Executive Officer and Chairman of IPVoice
Communications, Inc. In 1997 he founded a high-tech systems integration
firm that specialized in launching the latest technology products and
services. His 1997 startup launched offerings for Cisco Systems, CompUSA
and The Laser Center, among other notable brand name firms. Since 1997,
the company Mr. Verges founded launched dozens of new high-tech
solutions with successes that included products that built revenue in
excess of $100 million. In 2002, Mr. Verges lead the effort to redirect
IPVoice Communications, Inc., toward an initiative that included
bringing the core assets from his 1997 startup into the IPVoice
corporate entity. Mr. Verges' prior experience ranges from hands on, low
level programming to program management of commercial software
development projects. He began his programming career at EDS after
serving as a U.S. Army officer for five years. He gained his first sales
and marketing experience at EDS as a lead executive in a startup
division selling to the credit card and mortgage industry. Following his
tenure at EDS, Mr. Verges initiated a project management business for a
Midwestern high-tech firm. Mr. Verges has worked in data and telephony
integration for over 10 years. 

Sector: telecommunications

TWST: In your own words, what is IPVoice?

Mr. Verges: IPVoice is a company concentrated on continuously launching
emerging communication technologies. As the name, IPVoice, implies,
we're focusing on IP communication technologies. The name of the company
will change in the June timeframe to 'New Market Technology,' and
IPVoice will be just one of our offerings in the voice over IP area
(VoIP). We currently have IP communication offerings in the homeland
security market as well as the healthcare market. Over the last few
months, we've acquired base market share through a small merger and
acquisition strategy in both homeland security and health care, in
addition to our established base market share in the VoIP market. There
are three components in delivering on emerging communication
technologies. One is being able to source capital. The second is that
challenging first sales opportunity or establishing the first several
sales of a new technology. And the third is having a long-term plan,
because once you've established new sales for an emerging technology,
then the larger players, the brand name incumbents and the other
interested investors, will rush in. You have to have a plan in place to
capitalize on your own success before someone else does. Those are the
three things we're doing at IPVoice today.

TWST: What is the agenda? What should we expect as far as results or as
far as products or relationships to be announced over the next six to 12
months? How do those targets relate to the operations of the company?

Mr. Verges: There are a number of exciting things, and it can be
overwhelming. I'll try and talk about some of the categories and give a
few examples of some of the specific types of announcements. Again,
we're about two years into this plan at IPVoice. IPVoice is a five-year-
old company, but the business strategy that's currently in place is only
about two years old. We've been concentrating on the VoIP market and, in
the middle of last year, we brought Pete Geddis, the former Chief
Operating Officer from Quest Communications, on board to lead our VoIP
strategy. Based on his success and some other successful components of
the business model, as I mentioned before, we've broken into health care
and homeland security in the last quarter. As I mentioned, we have to
have a long-term strategy. Once we successfully establish a voice over
IP offering or a communication offering in health care and homeland
security, we'll be faced with lots of competition. Our plan is to spin
off our success to a brand-name incumbent. Or if you capitalize the
company on a large scale, we will take it public independent of our
current public structure. At that time, we plan to not only enjoy the
equity income to the company that that creates, but also win a long-term
revenue stream by continuing to supply installation, integration, and
support services. If we were, for instance, to sell a VoIP offering to
BellSouth or Southwestern Bell or some other incumbent service provider
' companies that use third party vendors for installation and support '
who better to provide installation and support for a new offering than
the company that created that offering? I would certainly anticipate
that our revenues would grow even more dramatically once we spun that
company off to a major brand provider.  To accelerate our capacity for
being able to provide such services and scale such services in the
eventual event of a spinoff of one of these offerings, either in VoIP,
Homeland Security or health care, we have acquired small systems
integrations companies not only in North America but also in developing
economies where we'll be able to tap into the labor source. We're all
reading about the IP labor market moving offshore and we're preparing
for that inevitability. We have an integration office in Singapore so
that we can tap into the Asian market, and we also have one in
Venezuela. We plan to try to open a systems integration office later
this year in Eastern Europe. We'll look at India eventually; however,
there are such a large number of outsourcing-capable companies in India,
we're trying to look at some of the other markets to remain competitive.
So I think you'll see announcements of spinoffs in the next 12-24
months. I anticipate substantial revenue growth organically, as well as
some continued revenue growth through ongoing mergers and acquisitions.
We plan to expand our current IP communication offering outside of our
three current markets in the telecommunications sector with our VoIP
offering and outside of homeland security and the health care industry
as well.

TWST: Could you talk about your just announced acquisition in Venezuela?

Mr. Verges: Yes, we are really excited about our entry into the Latin
American marketplace with our recent acquisition of RKM IT Solutions.
RKM is a 16-year old systems integration and IT outsourcing services
firm recognized in Venezuela and throughout northern South America as a
leading provider of voice, data and video network solutions, as well as
systems and help desk support. Their clients include the top 50
international corporations in the country, as well as a strong presence
in the oil and gas, banking and manufacturing industry. RKM is also a
regionally certified partner for Cisco System, Novell, Sun Microsystems,
Computer Associates  and Microsoft. RKM will accelerate IPVoice revenue
growth by assisting us in penetrating the Latin America market for
IPVoice products. For example, we have already identified a number of
cross-selling opportunities for our VoIP products to RKM's current
customer base. RKM also helps us to reduce operational costs with a
lower cost Latin American information technology labor force. This
market expansion and lower labor costs are an integral part of our
strategy in Asia, Latin America, and Eastern Europe. We acquired Infotel
of Singapore in the fall of 2003, closed on RKM recently, we are
exploring opportunities in China, and are currently slated to conduct a
business development trip this may to Eastern Europe.

TWST: Your latest financials show strong revenue growth. Could you
elaborate on your results for 2003?

Mr. Verges: We were happy to report our sixth consecutive profitable
quarter and a 145% year-to-year revenue growth. Our annual revenue
totaled $2,346,945 which did not include any sales from Infotel
Technologies PTE Ltd. in Singapore Because Infotel was acquired in
October 2003 and has a September 30th fiscal year end, Infotel's first
quarter revenue from October 2003 through December 2003 will be recorded
with IPVoice's first quarter sales from January 2004 through March 2004.
If we had been able to include Infotel's sales, the trailing 12 month
sales for IPVoice would have exceeded $3 million ' more than 300% year-
to-year growth.

TWST: How strong is the balance sheet to support acquisitions and
growth?

Mr. Verges: The balance sheet is in good shape. Considering current
management came into this dot-com company with this new strategy two
years ago, we have done a lot of repair work. But we entered this year
with nearly $1.6 million in cash on the balance sheet. We have been able
to raise $3 million for the company and we have creatively established a
fund dedicated to supporting our merger and acquisition strategy. The
name of that fund is the Innoprise Fund. We currently have $11 million
subscribed, with an eventual goal of $20 million. So not only do we have
access to capital to support our ongoing merger and acquisition and
expansion strategy to the parent company at IPVoice, but we also have
the ability to provide financing direct to our subsidiaries, which are
staged for eventual spinoffs. So we're positioned to being able to fund
this growth and maintain the aggressive growth that we've had so far
over the last 24 months.

TWST: How does that financing strategy impact the shareholder base and
the actual shareholders in dilution over the next two to three years?

Mr. Verges: We're doing something that we think is relatively unique and
very interesting and designed to specifically benefit the shareholders
most fortuitously. We are acquiring companies with preferred shares, as
opposed to increasing the issued and outstanding immediately. All of our
acquisitions of companies have been with the use of IPVoice preferred
shares. Those shares are all held for two years and none of our
preferred shares used for acquisition have any discount conversion
rights, so they convert at the rate of whatever the common stock is
trading at, at the time of conversion ' two years out.. We only have one
acquisition that will be eligible for conversion into common stock in
this calendar year. That's our Singapore acquisition of a company called
Infotel. Late this fall that stock will become eligible. We acquired the
company for a value of $3 million when our stock was trading at $0.17.
Again, there's no conversion discount and we're trading solidly at the
$1 level today.  By this fall we anticipate an even more improved share
price. So we think that this will be a good model to demonstrate this
relatively neat merger and acquisition strategy with preferred shares.

TWST: What changes should we anticipate as you grow in the top-level
management team? Is the core group going to be basically a holding
company and a management level there with these operating units?

Mr. Verges: The core company, again, is not really a traditional holding
company. Certainly there are aspects of that, in that we have several
subsidiaries, but remember, the core company is also generating revenue
independent of the subsidiaries. In fact, the core company generates
more revenue than any of the subsidiaries. The core company is what will
deliver that ongoing installation, integration and support business once
the emerging technology companies staged for spinoff actually spin off.
So you will see ongoing expansion through organic (internal) sales as
well as some continued expansion as we beef up that core systems
integration capacity on an accelerated basis on merger and acquisition.
I think as we grow, you will see more growth coming from organic sales
than you will see from merger and acquisition. I anticipate we'll push
the $50 million mark through merger and acquisition and then beyond $50
million you'll see more of the growth come from organic sales.

TWST: Introduce to us and assess the top-level management team at that
core company.

Mr. Verges: The management team I think is well suited for our growth
strategy. Just before the end of the year, we brought into the company
an experienced executive, Dan Scofield. Dan had previously been the
president of Uniden America, as well as having led a major division of
CompUSA ' specifically the division of CompUSA that concentrates on
direct sales outside of their stores. They do a large number of sales of
high-revenue amounts, in excess of $1 billion annually, direct to small
businesses.  Dan has come on board to run that core systems integration
business for us, so I think we're in good shape. We have excellent
management that has come with our mergers and acquisitions at each of
our acquired technology companies. So we'll look for Dan to continue to
build his core team now, in the systems integration company central to
where our ongoing revenue growth will come from in the installation,
integration and support business after the spinoff of the staged
companies.

TWST: What does the shareholder base consist of today?

Mr. Verges: There are some institutions that have come into the stock
with the trading volume that we have ' in excess of 25 million shares
trading per month. It's difficult to think that we have that level of
trading without institutions in there. However, I think the strongest
aspect of our shareholder base is the number of individual investors who
are in there. Institutional investors don't come in unless they see the
volume and liquidity. And there's never any volume unless there's a lot
of individual investor interest. We've been fortunate, being a small
company without a great deal of financial resources in our early stages
two years ago, to have grown through a grass-roots strategy. We spent a
lot of time traveling around the US, hosting luncheons and dinners,
inviting our shareholders, calling them up individually, inviting them
to bring their friends and meeting with them one on one. I think this
initial personal investor relations plan accounts for the volume of
trading that we have today, the strength of the share price at each new
level that we achieve in price and the attraction of the institutional
investors that are starting to come into the stock.

TWST: Have any analysts focused in on IPVoice Communications?

Mr. Verges: We've had some analysts who have taken interest and called.
We've had one analyst who has come in and completed a report on the
company. I anticipate that report being published within the next week
or two.

TWST: How did you raise the funds for that equity support channel that
you've created?

Mr. Verges: In keeping with our grass roots approach, another benefit to
shareholders has been the grass roots approach that we've taken to
fundraising. All of the dollars that have been raised in the Innoprise
Fund and into the company have come directly from the investors
themselves, either small institutions or high net worth individuals. So
there have really been no broker fees that have been paid for any of the
capital that we've raised. As you're out on the road meeting with
shareholders, you are inevitably running into those parties who are
potentially interested in investing in the company. So we've been able
to bypass the brokerage fees and go direct to the investors themselves
and gain even more benefit for shareholders of IPVoice.

TWST: What compels investors to include IPVO in their long-term
investment strategies?

Mr. Verges: I think there are a couple of things to focus on when
considering IPVO in an investor's portfolio. I think one of the things
that we must mention is the interest the market is taking in the VoIP
industry. Many investors are looking at 'pure play' VoIP companies,
meaning the company does nothing but VoIP. IPVO, however, goes beyond
just VoIP.  So how are we differentiated and why do we think being more
than just VoIP is better than the 'pure plays'? Well, Internet protocol
is the delivery of information via data or voice packets, it's a way of
sending information over the Internet. Voice is just one of the types of
information that can be broken into packets and delivered over the
Internet. We believe that it's no different from sending homeland
security information or sending healthcare information or any other
number of information.  We believe we capitalize on and multiply the
technology potential of Internet protocol by delivering more than just
voice. We think that from an investment perspective, IPVO is a
diversified, much greater opportunity for return, much more risk-
mitigated opportunity for return, than a pure play VoIP. I also think
that with the public markets starting to show some interest again in
emerging technologies, coupled with IPVoice regularly being one of the
top 20 most actively traded OTC stocks, that IPVO is positioned to
continue to be a profitable investment. Provided that we continue to
execute the way the way that we have and stay one step ahead, we're
certainly a company that investors interested in the technology market
should be taking a look at.  Two years ago, when no investors were
interested in looking at the technology market, we decided not to wait
for someone else in the community to invent what the formula would be
for bringing dollars back to the technology market. We decided to take a
leadership position and develop what that formula is. We think the
formula is a public company that targets smaller investments and various
equities derived through spinoffs. We keep the investment dollars
relatively low so that we improve the opportunity to actually return on
that investment, and then we concentrate on sales. Early technologies
can't just build a first-to-market, feet on the street, build-a-brand
strategy. They have to have a real life strategy that utilizes knocking
on doors, articulating a proposed value proposition, learning what
customers really want and refining that value proposition in order to
get the first sales. So now you have the capital, you have the first
sales, you get the equity appreciation and how do you grow from there?
Again, our strategy is to go with the flow of the market and to spin our
emerging technology out, to benefit from the equity income immediately,
and then grow our sales by providing the ongoing support services in the
spinoff. I think that our leadership position, our differentiated VoIP
offering and our step ahead in the marketplace are the three reasons
investors should take a look at us.

TWST: Thank you. (DWA)

PHILIP VERGES
 Chairman & Interim CEO
 IPVoice Communications Inc.
 14860 Monfort Drive
 Suite 210
 Dallas, TX 75240
 (972) 386-3372
 (972) 386-8165 - FAX
 www.ipvoice.com
 e-mail: ir@ipvoice.com

Copyright 2004 The Wall Street Transcript Corporation
All Rights Reserved


The Wall Street Transcript (TWST) interviews are published verbatim, and TWST does not in any way endorse or guarantee the accuracy of any information or opinions expressed herein and all opinions are subject to change without notice. Nothing herein constitutes a solicitation to buy or sell any securities. TWST interviews with CEOs or other senior executives may include "forward-looking statements", which are based on factors that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. TWST shall have no liability whatsoever for any trading losses arising out of use of this information. Copyright 2003 Wall Street Transcript Corporation. All Rights Reserved.