*** Knowledge Transfer Systems, Inc. (OTCBB: KTSI) ***

Editors Note:

At Stockupticks, we like companies that are innovative, focused on growth and have existing relationships with the biggest names in their industry. That's why KTSI caught our eye. 

At the beginning of last year, Knowledge Transfer Systems, Inc. was a company with a small, 40-course software library that covered desktop applications like Microsoft Office.  The courses only ran in a computer-based training (CBT) format from CD-ROMs and were not Internet ready.  In addition, the courses were sold principally through only one reseller.

Today, KTSI has hundreds of titles that are deliverable through numerous mediums and are made available through an impressive list of big-name partners.  Sound interesting?  Please read on ...

*KTSI takes educational material from leading publishers, and through its proprietary tools and development process, transforms them into multimedia courses that can be deployed over the Internet, corporate intranets, or via CD-ROM. 

*KTSI can brand these courses with a company's or distribution partner's individual look and feel.  It also blends its eLearning courses with all forms of training materials or content, affording its partners unique solutions to meet the  respective needs of each customer. 

*KTSI also develops custom solutions for Fortune 100 companies or can "re-purpose" existing material for the Web or for CBT delivery. 

*KTSI has developed a comprehensive course catalog covering over 250 titles for Information Technology Specialists.

*Professional training organizations and major corporations can meet the exact needs of their employees and students with tailor-made courses that integrate with any Web delivery platform or Learning Management System.
 
 

*** ABOUT KTSI ***

Knowledge Transfer Systems, Inc. designs, publishes and markets eLearning courses and solutions. The company markets products through its resellers and distribution partners in over 50 countries around the world.  In addition, KTSI develops custom multimedia marketing and training solutions for Fortune 100 companies. 

Knowledge Transfer Systems partners with some of the leading publishing and instructor-led training companies to source content.  KTSI takes source materials (books, instructor guides or CDs), and creates derivative works in the form of rich multimedia training courses. 

By starting with materials that are already organized in an instructional format and mapped to the respective industry certifications, KTSI is able to deliver finished product in a shorter period of time and at substantially lower cost than the competition. 

To date, KTSI’s focus, through its wholly owned subsidiary, KT Solutions, Inc., (www.ktsolutions.com) has been in the IT industry and has developed over 250 courses covering all of the popular desktop applications and IT certifications. 

Because of its content-sourcing relationships with multiple publishers as well as an extremely efficient development process, which includes a variety of proprietary development tools, KTSI products are private labeled for publishers and marketed through its distribution channels as well as through dozens of other resellers, integrators and eLearning companies that market these products in over 50 countries around the world. 
 
 

*** A SNAPSHOT OF THE INDUSTRY ***

   For years organizations and individuals have fulfilled their requirements for education and training almost exclusively through instructor-led training. Due to the high cost, scheduling difficulties and the growth of technologies like the Internet, an increasing proportion of training today is done online, which is also known as eLearning. 

In the corporate marketplace $31 billion is spent each year training corporate and government workers.  1600 businesses operate their own internal universities of one kind or another.  Even in a downturn, goes the reasoning, these firms will find online training a great way to save money – cheaper by far than week-long junkets for the latest software courses or sales meeting. Bloomberg. Online Education. Personal Finance magazine, October 2001

Training Magazine estimates about 1/3 of information technology (IT) training today takes place online, but that is expected to double in two years, and non-IT corporate training is moving on-line at a similar pace.

Already a $2 billion industry, the post-secondary online market alone will more than quadruple by 2005, estimates Gerald Odening, education equity analyst at J.P. Morgan Securities, as more and more adults, seeking the higher earning power that education brings, hit the virtual books.

Training and Education are a $2 trillion market, second only to health care.  eLearning is growing at an 83% annual compounded rate. It is also projected that in difficult economic times these companies/individuals look to more cost-efficient alternatives than classroom training.

International Data Corporation (IDC), states that the most evident characteristic defining the IT education and training market is that the market is in transformation, with the primary constant being growth.  IDC states the drivers of this growth as: The shortage of IT skills as the worldwide demand for IT professionals outstrips the existing supply, a significant shift in the market towards technology-based training due to time and money constraints and a proliferation of computers with multimedia capabilities and the universal acceptance of the Web throughout organizations.
 

*** THE KTSI BUSINESS STRATEGY ***

The content sourcing arrangements also reduce development costs by over 40%  and provide access to the sales channels and sales forces of these publishers for KTSI products.  The combination of KTSI’ channel sales strategy and content sourcing relationships make for a highly leverageble business model.

RAPID AND EFFICIENT DEVELOPMENT

Over the years, KTSI has developed a suite of production tools that create high-quality multimedia courses much more efficiently than conventional tools.  This, coupled with the fact that the source materials are already “halfway there,” means faster time to market at a lower cost.  Size does matter, and KTSI’s large library allows partners to sole-source for all their IT needs.  The KTSI course library covers over 90% of the subject matter where dollars are spent on education in the IT industry.

CHANNEL PARTNERS

Knowledge Transfer Systems utilizes a partner marketing strategy concept.  This provides for broad coverage across multiple sales channels without the expenses of a direct sales force.  This also eliminates channel conflict, which can create problems with other content companies.  Another key element is that KTSI has total flexibility in crafting business terms that fit the business model of the channel partner.
 

*** MARKETING ***

KTSI’s strategy is to be the content partner for the leading training providers across four major channels: traditional corporate, academic, on-line providers and retail.  Also, almost all of KTSI’s content sources become sales channels for the derivative works.  This results in thousands of indirect sales people selling KTSI courses into all the channels.

The profile of a KTSI partner is one who already has a large customer base and in most cases is already selling substantial quantities of training products.

KTSI differentiates itself from the competition by branding the courses for the partner and creating hybrid or blended solutions that complement the partners’ existing product offerings.  Further differentiation comes from KTSI's revenue sharing model and flexible contract terms. 

The market for IT training content is fragmented with no one company holding a dominant position.  There are two types of companies; full service hosted portal companies and content only companies. 

The KTSI library of 250 IT courses covers current technologies and easily can stand up to the competition.  Because competitors rely on a high cost, direct sales model to corporations, it makes it difficult for them to be competitive in the reseller channel without impacting their core sales model.  They are inflexible in modifying their content for resellers and they are inflexible in their contract terms. 
 

*** DISTRIBUTION ***

CORPORATE SALES CHANNEL

KTSI is working to expand its reach in the corporate sector. 

ACADEMIC

KTSI is working to establish new partners in the academic channel.  KTSI is targeting companies that already have an established customer base.  KTSI is currently establishing relationships with several partners in this sector.

Connected Learning - provides the distance education infrastructure for several hundred colleges nationally. 

Education2Go - provides distance education courses to 1,100 institutions worldwide. 

Fundever, Inc. - product catalogs reach 10,000,000 students, faculty and parents in the secondary school market. 

RETAIL

KTSI is in conversations with several publishers that currently market products through retail outlets.  Through KTSI's relationship with its Investment Banking partner, it is also in a position to forge direct relationships with several Retail, Discount and Book Stores on a national basis. 

INTERNATIONAL

To date, KTSI revenues have been derived almost exclusively within North America.  Recently, new distribution agreements have been signed for Sweden, Canada, India and SE Asia.  KTSI is in discussions with several large IT training companies in Europe for distribution of KTSI courses.

“We estimate that expenditures by organizations on education in the United States alone will exceed $750 billion and worldwide will reach $2 trillion.  Swelling demand for educational products (particularly U.S. products) a shortage of teachers, and other learning resources, and the centrality of education in the knowledge economy should drive growth in the education and training industry.  Revenue growth for eLearning should considerably outstrip revenue growth in all sectors of the education industry as eLearning companies capture an increasing share of the industry total.  In the corporate space alone, IDC is projecting eLearning revenues to grow from $1 billion in 1999 to $11.4 billion in 2003.  We expect growth in the academic and consumer markets to be significant as well.” 

KTSI CLIENT  REFERENCE

Lucent Technologies uses KTSI’s multimedia solutions to train a worldwide customer base in multiple languages on the installation, administration and use of their telephone systems.

Xerox Corporation found KTSI extremely innovative in training their sales organization on their overall sales philosophy and in pricing, configuration, and ordering of Xerox office automation equipment.

UPS selected KTSI to provide a training solution for their new Document Exchange Program, a Web-based document transport system.

@Road used KTSI to develop a multimedia training solution for their web- and wireless-enabled tracking technology.  The result was both a CD-ROM and a full-page Internet streaming training solution that enabled @Road’s clients to make full use of Fleet ASAP and further benefit by better managing their mobile assets, growing revenues and increasing profitability.

Baan selected KTSI to produce a training solution for their InfowaveConsultant and Manager Exchange program. The resultant program trains Baan consultants and Managers in their proprietary connectivity systems.

Academic Systems produces multimedia instruction that enhances learning and student achievement in mathematics and English. Working in concert with educators, Academic Systems has created its Interactive English and Interactive Mathematics software programs to support a rich, interactive learning environment. These titles comprise an extensive range of courses and tutorial lessons for use in classrooms, learning centers, and at home. 

*** SELECTED FINANCIAL HIGHLIGHTS ***

Fiscal Year End: 12-31
Industry: Diversified Services
Transfer Agent: Interwest Transfer Company, Inc.

Share Data - 08/14/2002
Authorized 100,000,000
Outstanding 50,643,208
Float 4,000,000 (approx)
 

*** LINKS ***

To Get A Current Stock Quote On KTSI, Click Here 
To Visit An Archive Of  News Releases On KTSI, Click Here
To Review SEC Filings From KTSI, Click Here
 

*** CONTACT ***

Knowledge Transfer Systems Inc.
110 Broadway
Oakland, CA 94607 
800-395-9991

Corporate Web Sites:
www.knowledgetransfersystems.com
www.ktsolutions.com
info@knowledgetransfersystems.com

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