Roger D. Dudley and Thomas A. Murdock of Fonix

Q Please provide some background on Fonix.

A Fonix technologies empower people with conversational speech solutions for systems and devices. We are an industry leader in delivering real solutions for day-to-day use, making the everyday application of speech easy, convenient and comfortable. Founded in 1993, Fonix has been transitioning from an R&D company to a provider of complete speech solutions since 2000. With facilities in Draper, Utah; Boston, Massachusetts; Munich, Germany; Seoul, South Korea; and Fukuoka, Japan; Fonix has begun an international sales and marketing push to become the leader in the speech solutions industry for devices and systems. Fonix delivers our speech solutions by leveraging and re-using our standard platforms and modules with application development in the following five markets:

  • Computer Telephony Integration (CTI)
  • Mobile / Wireless Devices
  • Automobiles
  • Assistive
  • Everyday Speech for Consumer Devices

    Q Discuss the recent stock split and what it means to your shareholders.
    A In March 2003, shareholders approved a 40-to-1 reverse split of Fonix common stock. While it has no immediate effect on the market valuation, the reverse split increases individual share prices while reducing the total number of outstanding shares. While Fonix anticipates that revenues will increase over the coming months, the company requires additional equity financing to be able to satisfy its operating requirements. The board of directors believed that the reverse stock split would enhance the company's flexibility in the future for its specific financing and capitalization needs. Reverse stock splits have increased among publicly traded companies, up from 76 in 2000 to over 200 in 2003. Although certain risks are always associated with reverse stock splits, the reverse split will enable the company to have continued access to the private capital markets until such time as existing and additional third party licensing, collaboration or co-marketing arrangements generate substantially greater revenues such that the company will be able to finance ongoing operations from license royalty and other revenue generating processes.

    Q The Fonix stock price has varied greatly over the past few years. Why should someone invest in Fonix today?

    A Certainly, the entire stock market has experienced extreme volatility during the last few years as a result of declining corporate revenue and earnings, global economic and political unrest and uncertainty due to international war, conflict and terrorist attacks. Fonix stock performance during this period has been in line with other stocks in the high-tech industry. Many fundamental and technical factors determine stock price, however the market is fairly efficient, and investors should base their personal risk decisions on multiple factors including the company's performance in a very competitive speech market. Fonix management feels it is focused on exploiting its competitive advantage in the mobile / wireless, CTI, assistive and automotive markets with the objective of growing profitable revenue by delivering award-winning natural, intuitive speech enabling solutions. Fonix revenue increased 410 percent from 2001 to 2002. Revenues for first quarter 2003 reflected a 97 percent increase over first quarter 2002, and revenue forecasts continue to predict significant increases in the future. Based upon the company's historical strength and market leading position of delivering re-usable and modular speech interface solutions to companies like Microsoft, HP, Panasonic, Hitachi, Intel, Mitsubishi, Epson, Motorola and Lear, Fonix is strategically positioned to lead and dominate the worldwide embedded speech interface market as speech products become increasingly accepted and demanded by customers.

    Please describe your automotive product offerings and what types of solutions they voice-enable.

    A Fonix delivers speech solutions that can be quickly deployed and adopted by the automotive electronics marketplace. Fonix AutoSuite is designed to work as a natural voice interface inside a car for conveniently controlling and managing systems like navigation, climate control, Internet and cell phone access. Fonix provides a user-friendly interface that is more intuitive, safer and increases passenger/driver satisfaction. Automotive solutions include: Fonix hands-free phone kit addresses safety concerns by providing a fully voice-accessible phone interface for the automobile. Avoid tedious and dangerous manual entry of destinations and other navigation information. Fonix provides speech solutions with standard in-car navigation functions for automotive tier 1 suppliers and OEMs. Fonix provides the following navigation solution features: the ability to store thousands of street name destinations, interface with leading navigation systems (i.e. Navtech), spell destinations or speak them, and the solution provides N-best recognition results. Fonix radio-based multimedia products build on our stand-alone solutions to provide market-ready speech solutions for the automotive market. Fonix midrange multi-media solutions provide all the functions of the radio-based solution with the addition of full navigation system support, multimedia system speech command and control for CDs and DVDs, auto HVAC, highly customizable to create a unique look and feel, fully qualified on automotive quality hardware and software platforms, easily customizable speech menus and vocabularies depending upon the type of application. High-end multi-media applications will be accessible after purchase to provide the buyer the highest degree of flexibility and convenience. Creating a long-term partnership with Fonix automotive will allow auto suppliers and manufacturers to field diagnose vehicle performance via speech interface, access any combination of speech solution either at or after the purchase, continually offer customers the latest in telematics speech solutions, flexibly move from one computing architecture to another without major revision overhead.

    Can you compare the benefits of embedded, server-based and distributed speech technologies in relation to mobile phones?

    A Embedded and server-based solutions each have their own advantages and disadvantages. Servers have the benefit of more power and more space than mobile devices, and they will work with any equipment that is able to place a voice call. Embedded speech technology saves airtime, allows for tighter integration with mobile systems, gives customers more control over features, and has access to a cleaner voice signal, free from channel distortion, noise and bandwidth limits. Distributed solutions have the potential to combine the advantages of both embedded and server-based, though they will require increased coordination between mobile equipment manufacturers and network operators. Some comparisons include: Embedded

  • Works when no network connection is available
  • Saves airtime, since it is not necessary to open a wireless channel during voice interaction
  • Reduced CPU and memory requirements and consumption
  • Better voice quality: avoids channel noise, distortion and bandlimiting
  • Customers have a wider range of options by selecting mobile equipment
  • Short product cycles: new technology is available quickly
  • Simple interaction with multimodal device features (display, stylus, keypad, radio, etc.) Server-based
  • More available electrical power, weight and space allows for more powerful processing
  • Lower hardware cost per user because equipment is shared across subscribers
  • Ready access to databases, Internet sites, etc.
  • Can operate with a wide range of mobile equipment - anything that can place a phone call
  • Customer options are restricted to services offered by carriers in a given region Distributed
  • Combines the above advantages of both embedded and server-based
  • High voice quality, combined with powerful servers, gives maximum ASR accuracy
  • Minimizes connection costs by using wireless bandwidth efficiently
  • Supports multimodal features such as visual prompting, stylus input, etc.
  • Provides ready access to network data - news, customer information, Internet, databases, etc.
  • Requires technical compatibility between mobile devices and network equipment

    Where are you seeing the most uptake of small footprint speech technologies?

    A Small footprint speech technologies clearly are making their way into smartphones and other portable multimedia devices. Speech solutions require sufficient computing power and memory to allow the speech software to be small and efficient. With a computing power of more than 350 MIPs and some megabytes of free memory, automotive multimedia and portable communication devices are now fulfilling all the preconditions to support high-quality speech solutions. They also will allow for adaptation of dialog oriented solutions, which are based on a combination of automatic speech recognition (ASR) and text-to-speech (TTS) implementations that include application specific dialog software in many languages.

    When did you introduce the Speak@Me suite and to what market is it targeted?

    A Introduced in December 2002, Speak@Me is Fonix's innovative package of solutions for Computer Telephony Integration (CTI). The suite's flagship solution, ConnectMe, is a voice-automated telephone operator that provides an efficient, professional means of routing incoming, outgoing and internal calls. ConnectMe is not only affordable for small- and medium-sized companies, but it also provides considerable ROI for organizations by decreasing the number of calls handled by a live operator and reducing other telephone-system-related costs. ConnectMe easily integrates existing business phone systems and allows the importing of phone directories.

    What is the SpeakThis product and how easy is it to incorporate into a company's Web site?

    A Fonix SpeakThis streams text-to-speech audio over the web. Site visitors may listen to content or receive verbal instruction without needing any special software or downloading any plugins. SpeakThis also allows users to download MP3 files to listen to later. SpeakThis can be dropped into a Web site by simply copying and pasting a bit of HTML supplied by Fonix. Since SpeakThis is a web service, Fonix runs all the software and maintains the servers; so a company can start to use SpeakThis on their site in just a few minutes, with no impact to a company's bandwidth or server capacity.

    Why would a company want to "speech enable" their Web site, and what does this mean?

    A To "speech enable" a Web site means to add text-to-speech (TTS) capabilities to a site. For example, some Fonix customers provide SpeakThis as a service for older readers who dislike reading a lot of text on the computer screen. Listening to an article, a product description or instruction is an alternative to printing a document and reading it from paper or reading it on the screen. Fonix uses SpeakThis on our Web site's online store to read brief descriptions of our products. It's a very simple way for a company to offer a more engaging, user friendly experience for visitors to their Web site.

    Where do you see speech technology five years from now? Ten years?

    A An important growth area for speech technology applications (recognition and synthesis) is in mobile devices. In the five-year time period, there will be a significant increase in the use of interactive speech in automobiles for hands-free telephony and the control of non-critical systems. This same hands-free speech technology will become universal for mobile phones and PDA / wireless communicators. The speaker-independent, remote-microphone and noise-robust technologies that Fonix provides today are the market drivers. In the 10-year time period, adding these technologies to the expected increased computing power available for natural language understanding will allow for language translation. Hand-held devices will provide close to real-time conversations with two-language speech recognition and speech synthesis. Fonix looks forward to being there with applications using our speech technology that will provide customers with easier, safer, more convenient modes and methods of using and interacting with devices.

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