KETTLE RIVER GROUP INC. (aka Koala International Wireless Inc.)
(Name of small business issuer in its charter)
Nevada
(State or other jurisdiction of Employer incorporation or organization)
Suite 676, 141-757 West Hastings St., Vancouver B. C. Canada
(Address of principle executive offices)
V6C 1A1
(Zip Code)
Issuer's telephone number: (604) 681-7806
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
Securities to be registered under Section 12(b) of the Act:
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Kettle River Group Inc. was incorporated under the laws of the State of Nevada on August 18, 1999, and is in its early developmental and promotional stages. To date, Kettle River Group Inc.'s only activities have been organizational, directed at acquiring its principal asset, raising its initial capital and developing its business plan. Kettle River Group Inc. has not commenced commercial operations. Kettle River Group Inc. has no full time employees and owns no real estate. Kettle River Group Inc.'s business plan is to determine the feasibility of selling Vitamineralherb.com products to specific markets. Should Kettle River Group Inc. determine that the plan is feasible, it intends to market high-quality, low-cost vitamins, minerals, nutritional supplements, and other health and fitness products to medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers via the Internet for sale to their clients.
ACQUISITION OF THE LICENSE
On February 14, 2000, Kettle River Group Inc. acquired a sub-license agreement with David R. Mortenson & Associates (the "license"). The license grants an exclusive right to distribute Vitamineralherb.com products to health and fitness professionals in Great Britain via the Internet. Kettle River Group Inc. acquired the license under the terms of a settlement agreement by and between Kettle River Group Inc. and Mortenson & Associates, an affiliate of Vitamineralherb.com. Mortenson & Associates had granted Kettle River Group Inc. a license to distribute and produce an oxygen enriched water product, called "Biocatalyst," for remediation of sewage and waste water in septic tanks and waste water treatment facilities. Mortenson & Associates acquired its right to sublicense Biocatalyst to Kettle River Group Inc. from NW Technologies Inc. As a result of a legal dispute between Mortenson & Associates' principal and NW Technologies, Mortenson & Associates was unable to fulfill its obligations to Kettle River Group Inc. under the license. Under the terms of the settlement agreement, Vitamineralherb.com, an affiliate of Mortenson & Associates, granted to Kettle River Group Inc. the license to distribute Vitamineralherb.com products in part for its agreement not to pursue its claims against Mortenson & Associates.
THE LICENSE
Kettle River Group Inc. has a three-year license to market and sell vitamins, minerals, nutritional supplements, and other health and fitness products to medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers via the Internet for sale to their clients. Kettle River Group Inc.'s territory is the state of East Texas. The license will be automatically renewed unless Kettle River Group Inc. or Vitamineralherb.com gives the other notice of its intent not to renew.
Vitamineralherb.com has agreed to provide certain business administrative services to Kettle River Group Inc., including product development, store inventory, website creation and maintenance, establishment of banking liaisons, and development and maintenance of an order fulfillment system, thereby enabling
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Kettle River Group Inc. to focus strictly on marketing and sales. Some services, such as development of the website and the order fulfillment system will be provided by Vitamineralherb.com, while others, such as product development and store inventory, will be provided by the product supplier. Vitamineralherb.com sets the price for products based on the manufacturer's price, plus a mark up, which Vitamineralherb.com and Kettle River Group Inc. share equally.
Kettle River Group Inc. and its customers will also be able to request quotes for and order custom-formulated and custom-labeled products via the website. Three different labeling options are available to customers. First, products may be ordered with the manufacturer's standard label with no customization. Second, the fitness or health professional may customize the labels by adding its name, address, and phone number to the standard label. In most cases, these labels would be a standardized label with product information and a place on the label for the wording "Distributed by." This gives these health and fitness professionals a competitive edge. Third, labels may be completely customized for the health or fitness professional.
When a fitness or health professional becomes a client, Kettle River Group Inc.'s salesperson will show the client how to access the Vitamineralherb website. The client is assigned an identification number that identifies it by territory, salesperson, and business name, address, and other pertinent information. The health or fitness professional may then order the products it desires directly through the Vitamineralherb.com website. It is anticipated that the customer will pay for the purchase with a credit card, electronic check ("e-check"), or debit card. All products will be shipped by the manufacturer directly to the professional or its clients.
The website is maintained by Vitamineralherb.com, and each licensee pays an annual website maintenance fee of $500. All financial transactions are handled by Vitamineralherb.com's Internet clearing bank. The Vitamineralherb webmaster downloads e-mail orders several times a day, checks with clearing bank for payment and then submits the product order and electronic payment to International Formulation and Manufacturing. Vitamineralherb.com then forwards the money due Kettle River Group Inc. via electronic funds transfer, Vitamineralherb's software tracks all sales through the customer's identification number, and at month end, e-mails to Kettle River Group Inc. and customer a detailed report including sales commissions. Vitamineralherb has indicated that it will use e-commerce advertising such as banner ads on major servers and websites, as well as trying to insure that all major search engines pick Vitamineralherb.com first. Sales originating from the website to customers located in East Texas will automatically be assigned to Kettle River Group Inc.
BACKGROUND ON THE MANUFACTURER AND DISTRIBUTOR
On June 9, 1999, Vitamineralherb.com entered into a manufacturing agreement with International Formulation and Manufacturing, Inc., a nutraceuticals manufacturing firm, located in San Diego, California, USA. International Formulation and Manufacturing is a contract manufacturer of vitamin, mineral, nutritional supplement, and alternative health products for various marketing organizations; International Formulation and Manufacturing does no retail marketing. In addition to a line of standard products, International Formulation and Manufacturing is able to manufacture custom blended products for customers. International Formulation and Manufacturing also has the capability to supply privately labeled products for Kettle River Group Inc.'s customers at a minimal added cost.
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IMPLEMENTATION OF BUSINESS PLAN: MILESTONES
Kettle River Group Inc.'s current business plan involves first determining the feasibility of selling Vitamineralherb.com products to targeted markets. Should Kettle River Group Inc. determine that it is feasible, it intends to employ salespeople to call on medical professionals, alternative health professionals, martial arts studios and instructors, sports and fitness trainers, other health and fitness professionals, school and other fund raising programs and other similar types of customers to interest these professionals in selling to their clients what Kettle River Group, Inc believes are high-quality, low-cost vitamins, minerals, nutritional supplements and other health and fitness products. These professionals would sell the products to their clients via the Internet. Kettle River Group Inc. will achieve implementation of its business plan by meeting the following milestones:
Milestone 1: Market Survey. In order to determine the feasibility of its business plan, Kettle River Group Inc. must conduct research into the various potential target markets. The market analysis research will likely consist of a telephone survey to 100-200 potential clients, focusing on three or four of the core target markets, such as chiropractors, health clubs, and alternative medicine practitioners. The survey would likely contain questions that would determine the marketing approach and acceptability of specific products. The survey would take approximately four to six weeks. The cost of the survey is estimated to range from $10,000-$13,500.
Milestone 2: Hire Salespeople. Should Kettle River Group Inc. determine that the exploitation of the license is feasible, it will then have to engage salespeople to market the products. Kettle River Group Inc. expects that it may hire two salespeople during its first year of operation. The hiring process would include running advertisements in the local newspaper and conducting interviews. Kettle River Group Inc. anticipates that hiring the salespeople may take four to eight weeks and estimates that the cost of the salespeople, not including compensation, will be $20,000.
Milestone 3: Establish an Office. Kettle River Group Inc. would then have to establish an office or offices for the sales force in the appropriate market or markets. This would include an office, equipment such as computers and telephones, and sample inventory for the salespeople. Kettle River Group Inc. anticipates that it may take eight to twelve weeks to locate acceptable office space and select and purchase equipment. The expense of office rental, equipment and inventory samples is estimated to be $45,000 per year.
Milestone 4: Development of Advertising Campaign. The next step would be to develop an advertising campaign, including establishing a list of prospects based on potential clients identified in the market survey, and designing and printing sales materials. Kettle River Group Inc. anticipates that it would take approximately six to ten weeks to develop the advertising campaign, although, depending on the availability of resources, Kettle River Group Inc. will attempt to develop its advertising campaign concurrently with establishing an office. The cost of developing the campaign is estimated at approximately $12,000 per year.
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Milestone 5. Implementation of Advertising Campaign/Sales Calls. Implementation of the advertising campaign would begin with mailing the sales materials to the identified list of prospects. Approximately two to four weeks thereafter, the salespeople would begin telephone follow ups and scheduling of sales calls. Although it will be necessary to make sales calls throughout the life of the company, it is estimated that the first round of sales calls will take approximately eight to twelve weeks to complete. The cost of salary and expenses for two salespeople is estimated at $248,000 per year.
Milestone 6: Achieve Revenues. It is difficult to quantify how long it will take to convert a sales call into actual sales and revenues. Kettle River Group Inc. will not begin receiving orders until its sales force is able to convince potential clients to begin offering such products to their customers, or to convert from an existing supplier. Kettle River Group Inc. hopes that clients would begin placing orders within weeks of a sales call, but it may take several months before people begin to purchase products. Moreover, customers may not be willing to pay for products at the time they order, and may insist on buying on account, which would delay receipt of revenues another month or two.
No commitments to provide additional funds have been made by management or shareholders. Accordingly, there can be no assurance that any additional funds will be available on terms acceptable to Kettle River Group Inc. or at all.
INDUSTRY BACKGROUND
The Internet has become an increasingly significant medium for communication, information and commerce. According to NUA Internet Surveys, as of February 2000, there were approximately 275.5 million Internet users worldwide. At the IDC Internet Executive Forum held on September 28-29, 1999, IDC stated that in 1999 US $109 billion in purchases involved the Internet. IDC's vice president, Sean Kaldor, indicated that figure is expected to increase more than ten-fold over the next five years to US $1.3 trillion in 2003, with $842 million completed directly over the world-wide web. Kettle River Group Inc. believes that this dramatic growth presents significant opportunities for online retailers.
In recent years, a growing awareness of vitamins, herbs, and other dietary supplements by the general public has created a whole new segment in the field of medicine and health care products. According to Jupiter Communications, online sales of such products are expected to be US $434 million in the year 2003, up from $1 million in 1998. Kettle River Group Inc. believes that several factors are driving this growth, including a rapidly growing segment of the population that is concerned with aging and disease, a growing interest in preventative health care, favorable consumer attitudes toward alternative health products and a favorable regulatory statute, the Dietary Supplement Health and Education Act of 1994.
COMPETITION
The electronic commerce industry is new, rapidly evolving and intensely competitive, and Kettle River Group Inc. expects competition to intensify in the future. Barriers to entry are minimal and current and new competitors can launch sites at a relatively low cost. In addition, the vitamin, supplement, mineral and alternative health product market is very competitive and highly fragmented, with no clear dominant leader and increasing public and commercial attention.
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Kettle River Group Inc.'s competitors can be divided into several groups including:
- traditional vitamins, supplements, minerals and alternative health products retailers;
- the online retail initiatives of several traditional vitamins, supplements, minerals and alternative health products retailers;
- online retailers of pharmaceutical and other health-related products that also carry vitamins, supplements, minerals and alternative health products;
- independent online retailers specializing in vitamins, supplements, minerals and alternative health products;
- mail-order and catalog retailers of vitamins, supplements, minerals and alternative health products, some of which have already developed online retail outlets; and
- direct sales organizations, retail drugstore chains, health food store merchants, mass market retail chains and various manufacturers of alternative health products.
Many of Kettle River Group Inc.'s potential competitors have longer operating histories, larger customer or user bases, greater brand recognition and significantly greater financial, marketing and other resources than Kettle River Group Inc. has. In addition, an online retailer may be acquired by, receive investments from, or enter into other commercial relationships with, larger, well-established and well-financed companies as use of the Internet and other electronic services increases. Competitors have and may continue to adopt aggressive pricing or inventory availability policies and devote substantially more resources to website and systems development than Kettle River Group Inc. does. Increased competition may result in reduced operating margins and loss of market share.
Kettle River Group Inc. believes that the principal competitive factors in its market are:
- ability to attract and retain customers;
- breadth of product selection;
- product pricing;
- ability to customize products and labeling;
- quality and responsiveness of customer service.
Kettle River Group Inc. believes that it can compete favorably on these factors. However, Kettle River Group Inc. will have no control over how successful its competitors are in addressing these factors. In addition, with little difficulty, Kettle River Group Inc.'s online competitors can duplicate many of the products or services offered on the Vitamineralherb.com site.
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Kettle River Group Inc. believes that traditional retailers of vitamins, supplements, minerals and other alternative health products face several challenges in succeeding:
- Lack of convenience and personalized service. Traditional retailers have limited store hours and locations. Traditional retailers are also unable to provide consumers with product advice tailored to their particular situation.
- Limited product assortment. The capital and real estate intensive nature of store-based retailers limit the product selection that can be economically offered in each store location.
- Lack of Customer Loyalty. Although the larger traditional retailers often attract customers, many of these customers are only one-time users. People are often attractive to the name brands, but find the products too expensive. It is understood that these are quality products and have value, but the multilevel structure of marketing often employed by large retailers mandate high prices.
As a result of the foregoing limitations, Kettle River Group Inc. believes there is significant unmet demand for an alternative shopping channel that can provide consumers of vitamins, supplements, minerals and other alternative health products with a broad array of products and a convenient and private shopping experience.
Kettle River Group Inc. hopes to attract and retain consumers through the following key attributes of its business:
- Broad Expandable Product Assortment. Kettle River Group Inc.'s product selection is substantially larger than that offered by store-based retailers.
- Low Product Prices. Product prices can be kept low due to volume purchases through Kettle River Group Inc.'s affiliation with Vitamineralherb.com and other licensees. Product prices will also be lower due to Kettle River Group Inc.'s lack of need of inventory and warehouse space. All products are shipped from International Formulation and Manufacturing's inventory.
- Accessibility to Customized Products. At minimal cost, health and fitness practitioners may offer their customers customized products.
- Access to Personalized Programs. Health or fitness professional can tailor vitamin and dietary supplement regimes to their clients. |
