TWST: Could we begin with a brief historical sketch of the company and then an overview as it is now?

Mr. Kovacs: We began approximately eight years ago. The company has taken on various forms. About five and a half years ago, through an acquisition, we acquired what has been and is today our core technology, which at the time, five and a half years ago, was to solve one daunting task, which was to facilitate native input into machines of various natures by the Chinese population. Our core technology, eZiText_, as we've branded it today, was built with that value proposition in mind. Five and a half years ago, we worked very hard on the technology and began to see some results through our sales efforts in China. And approximately four years ago, we struck a significant milestone in the company's development with the signing of Ericsson, whereby eZiText_ would be embedded onto Ericsson's mobile products to allow native input by Chinese into their mobile phone for applications and functions such as short messaging, Web browsing and things of that nature. From that point, we have been able been able to build a brand that is recognized globally. We have taken it from one customer and one device in the market to where we are today with eZiText_ at 54 customers and just over 70 devices in the market with eZiText_ embedded onto them. At the end of 2001 eZiText_ was embedded on approximately 20-22 million devices, just in last year alone. We expect that number to be about 40-50 million in the 2002 calendar year. Today we are a company that has had great success from one core technology. We are then building that technology to redefine the value proposition to say it is not only a challenge to input in our native language into the device, but it is also a challenge to make whatever is coming at us through this device, whether that's content, whether that's applications, whether that's simply Web browsing, it is a challenge to make those applications usable by us as human beings. That has positioned us today, through the introduction of our next generation technologies, to address that particular market opportunity. So where Zi is today is we are on the verge of being introduced onto many different devices through our new technologies, which will have a host of multi-modal input capabilities, as well as capabilities that facilitate a much more intuitive, personal and usable interaction with machines that dominate our life.

TWST: Could you explain this in layman's terms ' the particular problems in China and how you jumped from China to other uses?

Mr. Kovacs: The particular problem in China was the Chinese character set being tremendously voluminous and we would facilitate the simplicity of the character set to be input on a mobile phone, which is really dictated by nine keys. And frankly, until this technology came out, that was not a possibility. So what we did at the time was very simply map the entire Chinese character set onto nine keys represented by strokes. And, upon entering one stroke, we would then predict the particular character that the user was trying to input. Once the character was identified, we would then predict, in fact, the entire phrase that that character would be a part of. So, in layman's terms, we were taking not only input at a most basic level, but we were using that to predict what the user was in fact trying to say by learning their usage patterns over time. All of this has now represented what eZiText_, our core product, is today. With the success in the Chinese marketplace, and many manufacturers that were selling into Chinese, it was a very natural product extension for us to go through the rest of the world. In fact, we have now taken that technology and we've gone to 33 languages around the world. We have gone to most of the Latin languages of any specific size. We've gone to Korean, Taiwanese, and we have a Japanese product about to be launched. And that is really how we've used our core strength in China to leverage the rest of the world.

TWST: It sounds like you've got a smart machine.

Mr. Kovacs: That's, in fact, exactly what we are doing.

TWST: Where do you go from here? What is your plan for the next couple of years?

Mr. Kovacs: Along the paradigm of the machine is just the machine. In our lives, I liken always to that we don't want to buy a glass; we want something to hold the water we want to drink. The machine is simply a window to the world that we as human beings and individuals want to connect with. Along those lines, we have identified and solved the first challenge, native input into the machine. The next challenge is how do you create the opportunity for all of the applications, services and capabilities that are coming to us through that machine to be totally personal. So on the same device, for you and for me, the way we use it would be much different, depending on the application we want to subscribe to and depending on the community that we are involved in. Although that sounds like a rather complex value proposition, the technologies that we're going to be introducing in the next quarter do indeed address that specific market need.

TWST: Can you tell us about those upcoming technologies?

Mr. Kovacs: First of all, we can talk in generic terms about natural language processing, things like how do you interpret the commands you enter into a device in a way that is specific to the user? So I press the 3-key, not only do I want to dial, but I might want to initiate three-way calling. I might want to have a stock quote. I might want to pull up a name in the phone book. And all of those, depending on your usage patterns, can be completely predicted, thus, shortening the time that it takes to input with the machine at a very basic level, but also connecting us to the applications that only we as individuals want. So we get rid of all of the junk, all of the other time-wasting and valueless propositions that we face and we make it completely specific to our unique needs. We talk about natural language processing, but I think the more exciting part is that once you have the connection between the device and the server and you have the connection valuable ' so you have technologies from Zi at the server level, so at the operator that understands us ' so every time we turn on our device, no matter where we are in the world, it will understand the community we subscribe to, the type of language we speak, not only whether it's English or Spanish, but the unique colloquialisms and the way we speak English, and it will be able to facilitate that. It will know the applications we want to subscribe to. It will know, if we have a stock quote, what stocks we have. It will advise us of the market reaction to the specific stocks. It will intuitively ask us do we want to sell, do we want to buy or do we want to quote? It will tell us the weather back home. It will tell us the weather of where we're traveling to. And this is just the beginning of what this intuitive interface technology can really do. And when I speak about the futures, and I'm giving several examples, those futures are not a year away. These are being rolled out as we speak through our customers in prototype format.

TWST: How do you intend to grow the company? Will there be partnerships?

Mr. Kovacs: Partnerships have been a very key part of what we have done. The key ones that have been very public with our company is we are defining the front end of Open Wave's browser system that is on the vast majority of worldwide mobile phones today. We also have significant partnerships with many other companies that do and provide a lot of the value throughout the mobile phone value chain, if you will. Those will continue to be a very important part of how we go forward. An even more important part is our own research and development effort, which we have now solidified and, as I've said, much of this is prototype phase. The third leg of our gross strategy is through acquisitions. And indeed, we are right in the middle of looking at some key acquisitions to further our position within the next one to two quarters, so that we can become a world dominant player in this space instantly.

TWST: I believe China has the most mobile phones in the world.

Mr. Kovacs: Absolutely. China is the largest rollout of mobile phones in the world, in terms of regions. And in terms of our potential, that is growing. The number in China is about 125 million mobile subscribers today, and just in China alone, that represents about a five-fold increase in revenue from where we are today.

TWST: Could you give us some of the possible milestones that the company will be passing in the next few years that investors can take note of?

Mr. Kovacs: There are three core areas that we've kind of led our growth toward. And I think that these are noteworthy in specifics. First of all, of our 54 customers today, only about 22 have implemented eZiText_ on their devices. That means 32 still are remaining to do implementations. So at our very basic level, that will be about 2 to 2.5 times current revenue from doing nothing more than satisfying customers we've already won. I think a more important measurement is not only the number of customers that we have left in our customer base to penetrate, but that the number of devices those customers have implemented in the market represents only about 20% of the total number of devices we can and will be on. The challenge now for us is just to satisfy, from an engineering point of view, their project timelines for implementations, which we are doing very rapidly now. That is a six-fold opportunity for us in just pure revenue growth, without ever having sold another customer or making another sales call. Those are two that we've already earned, and we are just rolling out over time. We will see that occur over the next one, two to three quarters. Beyond that, the third aspect is through our research and development and our acquisition strategy. And what we expect, and we've set a target, is to triple the revenue from our base case through strategic acquisitions, just by purchasing private companies that have a core technology that we can immediately drop into the channel we've already built and have spent eight years building. With that, we have two opportunities in front of us today and many others that are potential, to be able to grow our revenue substantially. So in 2002 I would expect that we are now at the knee of the curve, in terms of our revenue growth, and 2002 is certainly going to be a breakout year, and at the very minimum, will be cash flow positive on an entire year basis.

TWST: What difficulties or problems could be waiting for you? What would you be worrying about, if anything?

Mr. Kovacs: There are always worries, and the market certainly throws you some curve balls. I would say, rather pleasantly, that after 2001, I cannot anticipate how the market is going to be any more difficult. What I'm really encouraged about is that in 2001 we had tremendous growth. We're about to announce our fourth quarter results in another month and a half and I know they will be very pleasing for all of our investors. The biggest thing for us is to make sure we've got the milestones in place, we've got the research and development and we've got our customers. Now it's just execution, focused execution in getting it done. And in our current structure, I'm 100% confident we're going to get that done.

TWST: Could you tell us about the current structure and tell us about some of the people you have on board who will accomplish what you're talking about?

Mr. Kovacs: That's a great question because I look at a core part of my job as developing and bringing in the right people and putting it all together. Of the people we've brought on board, we've certainly got a very capable gentleman now in out Chief Technology Officer position. His name is Todd Simpson and he has had a great track record of taking technologies public and building upon that to great success. He is now responsible for all of our research and development, as well as our customer initiatives, as they relate to the futures of our products. We are seeing great results from his efforts, just since he has been on board, which has been approximately one year. In our Vice President of Engineering role we have a gentleman named Peter Ackermans, who come from the industry and has deep skills and deep industry contacts. His role is important because, at our core, we're an engineering company that's based on technology. So he keeps our companies happy by making sure that the deliveries are on time and that they are exactly what the customers have expected. We are doing that today. We've added great sales strength. We've added a new Vice President of Sales and Marketing worldwide in Gary Mindell. He comes from a background in the wireless industry, and he is bringing great control and diligence to our sales and marketing process. We have great capabilities at our operations level, certainly at our CFO level, and with our Chairman and CEO, Michael Lobsinger. We put all those together and our executive team is the right team, finally, to take this thing to the level that we know it can get to.

TWST: What in your own background led you to this?

Mr. Kovacs: I've spent my entire career in technology, both in telephony, as well as with IBM, where I was an executive in New York responsible for a core aspect of their software division. I've seen the growth of, certainly, the land-based Internet, and now into wireless Internet, and that what has led me to the excitement for this marketplace. It has also helped me develop some skills to try to bring this together, and skills that I believe are assisting the company today. More than anything, it has helped me really understand the future of the market and how to get our technology into the Fortune 50 companies worldwide. And that is indeed a strength of Zi today is that we are really able to connect with our customers. I look at all of our backgrounds as continuing that important initiative.

TWST: What political, public policy, economic and demographic or cultural factors might affect you in the near future?

Mr. Kovacs: I think number one at the top of my mind and the top of our mind as a company is China's, first of all, ascension in the World Trade Organization. I think they are becoming, and dare I say it in this fashion, increasingly Westernized, where the regimented business models and the regimented rule of law are starting to make much more sense for entry into China. Those are some of the political factors, but I think from a psychological factor many, many more companies today have a tremendous interest in tapping the one and a half billion sets of eyeballs in China. It is a position we've been in for six years. We understand it and we know it. So the most important political item is going to be that China continues to develop as they are and as everybody believes they will throughout 2002 and beyond. And everything we see today indeed suggests it will. Secondarily to that, technology has to continue, and I think we are seeing now a breath of fresh air through the market. I certainly see that with all the CEOs of the companies we partner with and talk with. People are now believing again that technology is going to continue to be an important driver, certainly in the markets and in us as human beings. And if that continues then we're going to be in a great position throughout this year.

TWST: Can you describe the picture that will emerge from all this, let us say, in five years, six years, in terms of how people communicate and how they do business?

Mr. Kovacs: In terms of a market vision, I think we are going to, as human beings, rather than have to adapt to technology, technology will adapt to us. It will understand us, and not only that, it will fit within our specific lifestyle. The reason wireless, and specifically mobile phones, have been so popular ' and in fact, the forecast for 2002 is that another 400-440 million will be sold worldwide ' is because it's personal, it's intuitive, it's always on, it's at my side, and now I'll be able to use it for applications, content and services. I think, certainly through the next five years, all aspects of our world will be connected, everything from our refrigerator to our microwave to our car alarm systems, it will all be connected and we will have that at our fingertips in a way that is personal to only us. So it will completely adapt to our life. And to the degree that the technologies will facilitate that adaptation, is the degree to which the technologies will be successful. That at Zi is what we are driving for every single day.

TWST: People talk about being away from home and able to control the different things inside the home remotely. Is that very far away from us?

Mr. Kovacs: Actually, that's here today.

TWST: Yes, but on a broad scale?

Mr. Kovacs: That's not far away from us. In fact, if you look at combining not only location-based services, but with how we connect our home and connect our personal infrastructure around us, our PDAs, our land-based telephones, etc., the technology for all of that exists today. The challenge that has to be overcome is bringing those together. This popular concept called convergence, just bringing the technologies together in a way that they're all usable, is really what's going to drive that. I expect that in 2002 and 2003 we're going to see great advances. Consumers are demanding it. Companies now realize that they're going to receive maximum value by focusing on it, and already, we're starting to see a lot of effort being put into there. So I think this is going to be a very important year for convergence, as is 2003.

TWST: Do you think that eventually this will change the way people set up their business, in the sense that there might be less emphasis on bricks and mortar and more on getting things done wherever you have to be?

Mr. Kovacs: That's a great question, and I think the whole bricks and mortar concept came into great question during the dot-com era. And what has emerged out of that, and some of the failures, is that bricks and mortar will be very important, face-to-face, having a specific terrestrial-based presence, if you will. But where it's going to go, and I don't think there's any debate now, is there will be a significant augmentation of the physical, if you will, with the virtual. And whether that virtual is through some technology or another, it will all be through, certainly, wireless, enabling us to be on the move and connect with our physical world.

TWST: Does the investment community understand what you're doing as well as you would like it to?

Mr. Kovacs: I don't think they do, and as a company, it's our responsibility to make sure that they do. So we are very busy these days to continually try to drive our message, as it evolves, into the marketplace. We are doing a much better job of it now as it unfolds, and we will continue to do that. But that's a huge opportunity for us because, frankly, this is a very powerful message, and they don't understand it to the degree that we would like them to, and that's our responsibility.

TWST: Could you give us the three or four best reasons why long-term investors should be looking very closely at Zi Corporation?

Mr. Kovacs: I think the first is that we've got a track record of success. We've been able to take a very simple technology and deliver it to 54 Fortune 500 companies. That alone is going to springboard us into a significant market presence, which we are already well on our way toward. Of course, once you start being embedded on 40-100 million phones throughout the world, you have significant consumer presence. We are working very hard to leverage that consumer presence back up the value chain and are having great success in doing that. And as the second core reason, when you have that consumer presence and you are embedded into that many devices, that is brand awareness that is very, very valuable. The third aspect is that that brand awareness we are focused 100% this year on turning that into return for our shareholders. And by doing that, we expect significant revenue growth, and everything we do is about bringing ideas to products and products to revenue. And that you will begin to see this year. However, I think the most exciting thing is that, because of our market position, we are now partnering with several other industry leaders, and it is going to be those partnerships, as we pull them all together, that are going to create the $1 billion company that we have as our objective.

TWST: Is there anything we've left out or is there a further statement that you would like to make?

Mr. Kovacs: I would just say that we've worked real hard to get to this point, and 2002 is going to be a year to watch, so hang on and stayed tuned.

TWST: Thank you. (MC)

GARY KOVACS President Zi Corporation 500 Fourth Avenue SW Suite 300 Calgary, Alberta T2P 2V6 Canada (403) 233-8875 (403) 233-8878 - FAX e-mail:

Each Executive who is the featured subject of a TWST Interview is offered the opportunity to include a Corporate Profile or other highlight material to be provided and sponsored by and for the company.

Copyright 2001 The Wall Street Transcript Corporation All Rights Reserved