Conference call?? part 1
Carma1: Ok, Roger ya there?
Mr. Dudley: I am.
Carma1: Ok, welcome to the call everybody. We of course have on the line with us, Roger Dudley. We've introduced him many times on the other calls, so you all know his extensive background and incredible work that he's done to help build this fine company. What we're gonna do is go ahead and jump right into the questions, cause we've got alot of territory to cover. Roger, if you don't mind, we'll just go ahead and get moving. Will that be ok with you?
Mr. Dudley: Mark, if I could, I'd just like to make maybe a one or two minute comment to all.
Carma1: Please do.
Mr. Dudley: Often, what we have seen after our prior conference calls are questions about some terms that I have used, and I apologize to all the listeners, because I think I'm speaking from a point of view, and a knowledge point, in assuming that everybodys on the same page as I am, and as I read questions or questions are turned back to us, that's not the case, and so I apologize, and under this format there's no two way, but please feel free to continue to send in questions, even with our staff going on medical leave, people on their way now to law school, we do have staff. We are current to the best of my knowledge, all but maybe two answers in our IR box. We get 20-25 a day, from very simple questions to very detailed kinds of questions, and we appreciate your communication, but I would like to Mark, maybe just give a very high level overview of Fonix, and at least the words, we will all be talking the same words, and then as we make reference through the conversation, there might be some basis of acceptance.
Carma1: Ok. Why don't we do this real quick folks, if ya got a pen and paper, you might want to jot down some of these terms and and the definitions voiced on it. Go ahead Roger.
Mr. Dudley: The Fonix Mission is to make the Human User Interface easier and more convenient. That's a very straight forward statement, and Human User Interface often times is referred to as the HUI. Now we can all be cute and ya know we're the DUI's, the HUI's, the whatever, but it's Human User Interface, is what Fonix` mission is, not just to provide technology as a vendor. By providing the Human User Interface, it is our goal as a company to move up the food chain in the revenue cycle, and the revenue that companies pay to adopt technology. We want to position the company so that as an interface and providing a framework to some key markets that we will discuss, is solid, that we have an ability to lock in a customer base as you will. If we were just a technology provider, technologies come and go, and we are trying to move up. By using the intuitive human communication techniques to interact with electronic devices and systems is what is meant by the HUI, or the Human User Interface, and that is again using human communication techniques to interact with electronic devices and systems. The value proposition, where we think Fonix is set apart in this emerging and rapidly growing area is to provide customers, and we'll define customers in a minute, with single source, integrated solutions for Human User Interface requirements utilizing proprietary patented neural network technology. Our HUI technologies are automatic speech recognition or sometimes referred to as ASR. Text-to-Speech, the acronym is TTS. Handwriting recognition or HWR are the core technologies underlying the interface that we are after. The market, and this is a big question that is asked often, the markets that Fonix focuses on, Internet and Telephony systems, vehicle telematics, wireless, mobile, and intelligent devices. The business model that Fonix operates on is to work with strategic alliances, OEM's, VAR's, and major accounts that produce multiple, recurring high margin revenue from unit royalties, run-time licences, enterprise technology access fees, even consultation fees, upgrades and enhancements, and last but not least, service and maintenance agreements. Mark, that being said as kind of a high level overview, I'm sure we will refer to many of these definations, but I hope it will keep the audience somewhat focused in what Fonix is trying to accomplish.
Carma1: Wonderful. Let me go ahead and say this before we get started folks. Since we have everybody on the line that signed up for the call, if anybody wants to post this phone number on any other boards, besides the Fonix board, about a call that is taking place right now, please feel free to do that, and that will fill the call out, and their might be some other people that are interested as well. Roger? We ready to go?
Mr. Dudley: Sure. Carma1: Ok, the first call, is a bit of a, the first question is a bit of a humorous question from mucmara and it is: Is Fonix or any of its officers or directors under investigation by the SEC?
Mr: Dudley: We don't find that humorous. I thought that was a serious a very serious call, and a very good call. To the best of our knowledge, Fonix or it's Officers or Director's are not under any investigation.
Carma1: Very good, and by jamsav we have: Of the two, four, or more companies that are listed as "no contact" before 9/1/00, are these major companies?
Mr. Dudley: Yes they are, and let me tell you who they are. There products within companies and so that will help give you some direction. Lucent's Lucy Product, Mailcall, Motorola MyaSphere, Planetary Motion, Registry Magic, Bell Systems, and Wildfire Communications are the companies, and or products that Fonix was not allowed to directly market or sell to through the General Magic contract which is the question properly states will expire 8/31 of this year, or tomorrow.
Carma1: Right, absolutely. Did the delay in time cause business set backs that will effect income revenue?
Mr. Dudley: No.
Carma1: And from mrsDotCom: Would Fonix consider posting a monthly newsletter on their homepage to let their investors know of any new developments, that most likely would not need to have a press release?
Mr. Dudley: I think that's a very good question, and we would like to improve our communication. I think all will agree that since our last phone call our web page is improved, and is more current. There's still work to do. In terms of a press release, or a newsletter, let me just, this is a good time to introduce, according to our council, the SEC has just recently proposed new disclosure requirements, that in some ways makes it more difficult to have even these kinds of calls. If we do analysts calls, investors calls of any nature starting October 1st of this year the SEC says then we must, the company must follow it up with a press release and quite possibly an AK disclosure. So if you will, if we do news announcements about things that are not in the public arena that we've not publicly disclosed, it's almost a wasted effort because there's no reason to do these kinds of things because we have to follow them up with a press release, and or quite possibly an AK report. That being said, we're not gonna slow down on what we say publicly, but we are going to continue to be very careful about only discussing what is publicly disclosed.
Carma1: Very good. Last year it was stated that the female voice for Fonix TTS (Victoria) would be released soon. Is this still a plan of the company, and is her release getting any closer?
Mr. Dudley: That, the Victoria voice is what you refer to, our female TTS large vocabulary has been released in beta, the beta customer sites. We are getting tremendous feedback, and positive feedback to that, and the commercial release of that should occur before the end of the year.
Carma1: Very good. Since competition
Mr. Dudley: In fact,
Carma1: Yea.
Mr. Dudley: I want to make that point out. We have already released to commercial sites and there's a few that are actually testing it in the market right now, and we're getting very good results.
Carma1: Wonderful. Since competition seems to be closing in on ASR, has Fonix tried to "shrink" their ASR in relationship to the amount of MEG'S it will take to embed their product, to maintain the smallest footprint possible and keep an edge on competition?
Mr. Dudley: I think that's again a very good question, and we are always looking to improve and increase our scalibility. In the ASR arena, we are so scalible that we're head and shoulders above any other type of ASR, except for one situation, and I'll come back to that in a minute, but where we are most focused on is our TTS to continue to shrink that down, compress it, so we also reside a full large unlimited vocabulary, resides on a, in the embedded device on a RISC processor in an embedded area, and still maintain a very high human quality text-to-speech and that clearly we continue to focus on. The one exception on ASR, there's two or three companies, and I think there's some questions about this later on, so lets hit em now, about a company called Sensory Systems I believe, Conversa, and ISD. Those companies as our understanding, and again I want the listnership to know I'm not a spokesman for those companies but what we know based on research, is those three companies are focused on very small vocabularies requirements for toys and games. Sensory has their own product, they make their own chip, they put their own ASR on it, but its for very very limited word interaction for a doll, a toy, and some games. Conversa is basically the same. They use the ISD chip, which is a selected small chip. What we understand about Conversa is that they not only need a RISC processor, but they also need a DSP solution as well. So, but again, those are for very very small word application toys and games, but quite frankly Fonix is not focused on, we're not in that market space.
Carma1: Ok. We've got a bunch of questions here by Fairways9. Let's jump into those. Who will ultimately pay revenues to Fonix? The OS companies (e.g., MSFT ), the hardware companies (e.g., CPQ, HP ), the chip companies (e.g., INTC, HIT) or the end user?
Mr. Dudley: A very good question, and I hope in my introductory remarks I answered that question, but to be very specific we look to collect revenues from the OS developer, from the chip manufacturer, and also the OEM distributor, as well as the IVR solution provider. That is, the example there would be the contract we have with Nortel, Concierge, and a couple of the companies in Korea that we now have established.
Carma1: Great. How much would it cost for a vendor to add ASR to say a VCR or Microwave oven? How much do the chips cost, the microphone, and the software?
Mr. Dudley: Great question, but for competitive reasons, I'm not touching that one with a ten foot pole.
Carma1: Gotcha. What percentage of the available resources in the IPAQ does Fonx consume?
Mr. Dudley: The iPAQ for all to understand that is the new Compaq iPaq. Again, for our competative reasons, we will not disclose that publicly.
Carma1: Why don't we get a multimedia demonstration on the web page that shows Fonix ASR in action?
Mr. Dudley: Great question. Hold on to your hats. I hope we'll have something in the near term on that.
Carma1: Good news. What is the high and low range of how many shares outstanding there will be when Fonix becomes profitable?
Mr. Dudley: Any number that I would throw out would be totally a guesstimate. As we have disclosed and I think there are other questions regarding this subject, Fonix currently has just under 165, 170 million shares outstanding. We have completed a 20 million dollar equity line. If all the buyers in the world wanted to buy, and no sellers wanted to sell, the stock price would go extremely high, and if we had to draw down on that equity line, we'd be giving shares out at the higher price versus the lower price. Everything is a function of what the market is, and also what our need for cash is. The equity line that will determine how many shares are given, is clearly based on our need for cash to offset the deficit between cash receipts, and operating expenses, and maybe just a plug here for the listeners. We try, many listeners would like us to do a lot of things all at once, for example, voice activate the web page. That requires resources, and that's just one example, but there's a lot of things that you all would like, we would like to do, but we're also going to manage the company fairly tight fisted. We want to put the dollars in resources where there going to generate revenue dollars. That's our focus so that we can offset and lower the amount of dilution out of the equity line.
Carma1: How many employees does Fonix have now, and what types of positions are you currently hiring?
Mr. Dudley: Very good question. We currently, we still maintain about an 80-85% employee base. We're growing. Where we're focused right now is in sales, sales, sales, and sales.
Carma1: Are you hiring any sales people?
Mr. Dudley: And specifically, sales engineers to help support customer implementation. The marketing and sales group, and I certainly don't want to sound facetious, but we have a good core of engineers. We're not adding to that side of the house. We're adding to the revenue side.
Carma1: That's good news. Does Fonix has any plans for webcasting their shareholders' meeting?
Mr. Dudley: Hadn't even thought of it until this question was posed. We've got a month to look at that. We'll comment on that later, and if it doesn't cost us any money, we'll consider it. If it costs us the money, we'll probably won't do it.
Carma1: How often does the board meet and how active are all the board members?
Mr. Dudley: The board has scheduled quarterly meetings, and then often times we will have telephonic board meetings, but at least once a quarter we are meeting. As you all currently know, we, all board members except one are in house. The one outside board member is Mark Tanner. Tom Murdock and I meet with Mark Tanner on a monthly basis. We have lunch, probably a two hour discussion where we give him kind of the Readers Digest version, the high level overview of what's going on in the company, and with Bill Maasberg, all board members are extemely active and we try to keep Mark Tanner informed on a very regular basis.
Carma1: Ok. How the new SEC disclosure law effect Fonx? We're not sure exactly what SEC disclosure rules he means specifically.
Mr. Dudley: Well, I think I've addressed that in terms of something that we know is coming down, in terms of specific SEC disclosure the question refers to, I don't know and we probably ought to move on.
Carma1: The people that are providing the 20 mil equity line, are they currently under investigation by the SEC?
Mr. Dudley: I'm not aware that they are. They've made no representation or disclosure otherwise.
Carma1: Ok. Tell us in what ways the posts on these message boards help the company and in what ways do they hurt the company?
Mr. Dudley: I don't think people that are listening to this want to know my opinion about the message boards. We should maybe move on. I, quite frankly, from time to time I hear what is reported on the message boards wonder if their even coming close to talking about the same company that I work for, and that we're trying to put forward so, I really don't have an opinion on that, and if it's a great communicatons means to keep people informed, I would we could stay on track and stay on focus, and if there's any question that doesn't seem right, again, I invite any and all to contact us. We'll give you the answers, we'll give you the facts, and if the facts are then being debated, and they get turned in upside down kinds of shapes, so be it. We have no control over that.
Carma1: Has any potential customer of Fonix made any comments regarding stuff being posted on these boards?
Mr. Dudley: Yes.
Carma1: Ok. Now we have some questions by Vocalize. Actually one question. If the shareholders meeting....
Mr. Dudley: That is taken care of. That is on the web page right now.
Carma1: It is posted.
Mr. Dudley: Top right hand corner, under events, it has full information on the shareholder meeting.
Carma1: Thank you.
Mr. Dudley: And just a point there.
Carma1: Yea...
Mr. Dudley: Yesterday we filed with the SEC the 14-A document which is the proxy statement. The ADP group is doing the mailing on the proxy information and the annual report. Shareholders should expect to see that in mailboxes end of this week, into early next week, either direct or from your broker.
Carma: Ok. Jomar had a couple of questions. Is Fonix still on track to reach profitability within 12-18 months time frame, as was previously stated by you in the previous CC?
Mr. Dudley: We believe that we are.
Carma1: Does Fonix rule out a reverse split?
Mr. Dudley: We have no interest at all in doing a reverse split.
Carma1: Ok. By midastouch: What are the details of the technical capabilities of ASR (not TTS) up to and including anything not covered by NDA or prudent proprietary secrecy.
Mr. Dudley: That's a tough question because technical capability to the true sense would mean we would have to disclose trade secrets, proprietary pacid (sp) information, and we do not normally do that, but at the high level, what the Fonix ASR is strong at, is noise robustness meaning that it can operate in very noisy environments. We do not need to have a microphone tethered to the mouth or some kind of a headset where you have to speak into a microphone that is two inches from your mouth. Noise robustness seems to be a very very strong and compelling reason for the technology. We are very scalible, meaning we can scale the ASR engine and our our text-to-speech to a certain degree down to small RISC processors and here we're at the level of the StrongARM family, the new StrongARM 2 that was just announced last week, the Hitachi chip, the TI 6600 chip, there's a series of hardware chip manufacturers, maybe I'll just read those off. The whole X86 family, the Intel StrongARM group, Epson, EOC33, the Hitachi sh3 and 4, the TI 6201, the Motorola PowerPC, the MIPS core, the ARMS core, the Infineon TriCore and multiple chips coming out of Infineon. We scale to those. We can command and control a speech activation on that, as we are currently demonstrating on the Compaq iPAQ handheld device. A very powerful demonstration and we hope to have more to say about that in the future, as we referenced in our October 10th press release.
Carma1: Go ahead.
Mr. Dudley: Another feature of the technology is clearly user independant, meaning that the user does not have to train the voice speech recognition engine to the individual user. That's one of the competive advantages over for example, Conversa, or the speech engine that Samsung is using in their voice dialer. That is specific to the voice, meaning that if I handed Mark my telephone to read off a number to be dialed it would not read his voice. It's limited to just my voice because I've trained it. That's kind of a high level overview of features, but those coming back to us as to why people are interested in our ASR.
< Carma1: Absolutely. That's a real advantage. Let's move on to the next question. Do the "speech technologies" in the Panasonic deal in any way include ASR?
Mr. Dudley: Yes
Carma1: Ok. Is it exploratory, or a done deal?
Mr. Dudley: That deal is done. It is signed. They, meaning Panasonic, the KME people, are in Manufacturing of this. I would just like to comment. There's a lot of questions that come out, Why can't we say more about it? Again, I want to emphasize, it is a consumer electronic device. It has multiple stages, multiple offerings or versions that will be released over the next several months. They have told us they are still on track to come out of manufacturing this fall, and have this product available on the retail shelves before Christmas.
Carma1: Ok. Is it a license agreement with royalties or is it a collaboration agreement as the SEC filings indicate?
Mr. Dudley: It's a combination of all. There is a licence fee. We do receive per royalty fee and we also received an initial collaboration fee.
Carma1: Ok
Mr. Dudley: And fourth, to add one more, there, We have also built into the contract a service and maintenance fee on an ongoing basis.
Carma1: Ok. Please elaborate on the following statement from the S-2 filing which describes the Matsushita (Panasonic) deal: "There can be no assurance that these collaboration or manufacturing agreements will produce license or other agreements which will generate material revenues for Fonix." |
