Danny E. Stroud

Veraz Ventures, Inc.
Developing Telecommunications Opportunities

HISTORY:

Veraz is a Spanish word. It translates to English as “veracious” which is defined as follows:
· Honest; truthful; observant of truth; "an honest man"; habitually speaking truth.
· Accurate; precise; as in a "a veracious witness".

Veraz Ventures, Inc. was formed in 1998 to take advantage of significant growth opportunities that exist in the telecommunications industry in the Central America/Caribbean Region. We were involved in the planning of ESMR (Enhanced Specialized Mobile Radio) networks throughout the Region utilizing the proven "iDEN" digital technology developed by Motorola, Inc. Motorola iDEN technology

In some cases, as a member of a joint venture, we would act as the operator of the network. In other situations, where there is a strong incumbent wireless operator, we assisted in the operation to a lesser extent. In both situations we also facilitated obtaining external equity and debt investments.

Veraz Ventures also formulated strategies and executed on business plans to start ISPs (Internet Service Provider) in several Central American countries. The objective was to build on existing business strengths of indigenous technology companies (paging, or 2-way radio service providers, for example). These companies had the business structures but not the Internet know-how or business connections to effectively implement these businesses.

Veraz Ventures eventually provided an investment banking advisory role in selling some of these companies. Sinfonet, of Panama, is an example of one such company. (now called Inter.net of Panama) Sinfonet

CURRENT:

Veraz Ventures helps companies that are distressed from Balance Sheet issues (over-leveraged, hostile lenders, etc.) work out re-capitalization plans. It seems to be a growth industry, unfortunately. Not just for tech companies, but also "content" and "support" companies (media and software companies, for example) that hung their hat on the broadband streaming media environment that has not quite yet materialized.
 Since 2005, Veraz has been working (not exclusively) in the national defense sector by assisting secret and top-secret qualified security services companies manage and finance the rapid growth precipitated by the increasing need for these services.  Mr. Stroud served, in an emergency capacity as the CFO of Frontier Systems Integrators, a defense contractor headquartered in Northern Virginia.   In August 2007, Entrepreneur Magazine recognized Frontier as the 17th fastest growing company in America in 2007.  Mr. Stroud was the CFO during this rapid growth phase and was responsible for developing back-office systems to support that growth, manage working capital and develop processes to optimize profitability.   As CFO, Mr. Stroud was responsible for financial and accounting operations in the company.

Many of them have excellent companies from many perspectives such as having good products, motivated management and employees, and loyal customers. According to CIO Insight, 42% of CIOs reported in 2002 that they had outsourced to a company that went out of business. The dotcom purge is way behind us, these current business failures are balance sheet related.

Currently there is an abundant supply of individual companies or lines of businesses that are for sale as the result of exits or divestitures by large companies. Essentially these circumstances are driven by the inability of smaller companies or LOBs to finance a no growth or slow growth business model. This is especially true when they are over-leveraged or have excess capacity that cannot be serviced.

Valuations are attractive to buyers and investors (it's a buyer's market!) as the result of little demand by possible strategic buyers and less demand by financial buyers. This creates a seriously negative set of circumstances for the distressed companies. Many are throwing up their hands in defeat. Others have chosen to fight it out. What these fighters need is to adopt a transaction-oriented strategy. Very few of them have the time or scale to "manage their way out of trouble".

Although many of the management teams are capable of cutting costs and becoming more focused on cash flow (versus nominal growth), this is generally not enough to save them in the long run. The debt is looming and sometimes has covenants and/or conversion rights that essentially subsumes a compete change of control! The management teams need help via a merger, being acquired, recapitalization or some other "quantum event". In all cases it requires renegotiation of the debt. And, as we all know, senior secured creditors are a tough bunch and have learned to fight the cramdown. It need not be a win-lose situation if the business is worth saving. The proverbial "do over" is a viable alternative for everyone that has the patience and will to do so.

Veraz Ventures has extensive experience in this environment. At Verio I was the lead executive for doing "workout acquisitions" of Internet Service Providers (ISPs). At AppliedTheory, I was given the ultimate challenge of "saving the asset" in a declining market. It was an exceptionally good outcome for AppliedTheory In Latin America, it was less urgent but the principles were the same--- old money needs to make room for new money. Finding the right partner, structuring the deal and coping with the emotional/political issues is an intense task. Most management either cannot do it (emotional barriers of the founders and VCs is the usual impediment), or they do not know how to do it.

That is what I know how to do. In the small cap/mid cap arena I am one of the most experienced and successful work out guys.

MORE HISTORY ABOUT LATIN AMERICA

LATIN AMERICA REGIONAL WIRELESS STRATEGY
Veraz Ventures identified auction, application, acquisition and joint venture opportunities in several countries in the Central American/Caribbean Region and negotiated plans to deploy the iDEN technology in these countries. From Veraz's perspective, it is quite important that each of these carriers effectively plans and implements the iDEN technology in it's respective country. Their success will contribute to the overall success of the Regional plan whether or not they directly participates in the operational phase in our Regional plan (although we very much encourage their participation). That Regional Plan includes providing joint utilization of capabilities and facilitates for the operation phase and coordinating standards and operations across the region.

REGIONAL SYNERGIES

The major role of the Regional Services Company would be to coordinate strategic activities as it relates to technology, services and back-office systems across the broader region. The Regional Services Company would either enter into an agreement with entities that are already moving forward with iDEN deployments or would form new operating companies in countries (LOC) where and the following conditions could be met:
1. Interested local partner to form LOC (licensed operating company)
2. Frequency availability adequate for iDEN
3. Market conditions are favorable
4. Adequate funding
The Regional Services Company would be the driving entity for the overall regional strategy and operations. The LOC would be the operator for the in-country operation. The Regional Services Company would support broad areas to take optimum advantage of experience and maximize the impact of industry relationships.
SUPPORT SERVICES

Although the LOC would be the driving entity for the local operation and strategy, the Regional Services Company would also be the vehicle to leverage economies of scale in areas such as billing systems, network engineering, and customer support operations. The LOC would provide local network operations and the sales channels.

The following functions and services would be provided to the Regional Services Company and to the individual LOCs as required under the auspices of Veraz Ventures, Inc.:


1. Develop Strategic Plan

·  Frequency requirements
·  Positioning/Pricing/Packaging
·  Application (regulatory) preparation and review
·  Timing

2. Build the Organization

·  Develop operations plans
·  Define roles and hire key people
·  Develop and define the organizational structure
·  Develop procedures and review methods to increase likelihood of success

3. Back Office System Procurement and Implementation Planning

·  Billing System
·  Customer Care System
·  Network Management System

4. Network Planning and Deployment

·  Motorola contract terms and infrastructure definition
·  Network design and deployment

5. Vendor Management Planning

·  Identify and negotiate 3d party relationships for build-out and operational support (engineering support, billing, network management, telecom, customer operations, etc.)

6. System Launch Planning

·  Product definition and position
·  International roaming agreements
·  Marketing Planning

·  PR and Communications Plan