Dr. KOOP Valuation

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Dr. KOOP Valuation

• Professor Joshua Livnat, Ph.D., CPA
• 311 Tisch Hall
• New York University
• 40 W. 4th St.
• NY NY 10012
• Tel. [phone] Fax [phone]
• jlivnat_at_stern.nyu.edu
• Web page www.stern.nyu.edu/jlivnat

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Valuation Approaches

• E-Tailers
• Project the entire market potential
• Use current market size
• Assess growth of the market due to online
  purchasing
• Estimate market share
• Using predicted profitability, forecast future
  cash flows
• Discount to present

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Valuation Approaches

• Reverse auction and market making
• Typically, transaction-based fees
• Assess market size
• Use historical growth rates
• Conform to overall market potential
• Predict fees based upon market size
• Using estimated profitability, assess future cash
  flows
• Discount to present

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Valuation Approaches

• Entertainment/Content
• Determine revenue sources
• Advertising
• Referral fees
• Pay per use
• Predict growth in visitors/members
• Predict growth in revenues
• Predict future expenses and cash flows
• Discount cash flows

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Regression of Revenues on Visitors
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Regression of Content on Visitors
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Regression of GA on Reach
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Regression SellMarktg on Reach
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Steady - State Operational Model

• Revenues
• We use the regression result 1.6 MM (quarterly)
  per 1 million visitors.
• Content expenses
• Regression results make sense. We use fixed
  (1MM) and variable (1.4MM per 1MM visitors)
  components.
• General Administrative expenses
• Regression results make sense. We use fixed
  (0.54 MM) and variable (1.39MM per 1MM
  visitors) components.
• Selling Marketing
• We use variable costs of 2.2 MM (quarterly) per
  1MM visitors plus fixed costs of 1.1 MM.

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Operational Model
3MM/quarter. Revenues are determinedas
Square(Reach)1.58MM
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Prediction Model
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Value !!!

• Assumptions
• Financing can be obtained in 2000-2003.
• Number of shares remain the same.

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Qualified Audit Opinion
New Financing
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Summary

• Advertising revenue model will not be long-term
  viable unless the company can sign up partnership
  unlikely given the lower traffic.
• Probability for significant E-Commerce is low.
• Expenses are too high.
• Volume analysis at current levels indicates
  failure.
• Cash flow shortages in the next 4 years.
• Low price per share even if company survives and
  generates positive cash flows.