Transcript Dr. Koop I

Dr. KOOP
Professor Joshua Livnat, Ph.D., CPA
311 Tisch Hall
New York University
40 W. 4th St.
NY NY 10012
Tel. (212) 998-0022 Fax (212) 995-4230
[email protected]
Web page: www.stern.nyu.edu/~jlivnat
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Overview
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Dr. KOOP Site
Classification and business model
Facts from public sources
Purchased traffic
Revenue sources
Expenses
Recent developments
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Dr. Koop (KOOP)
• Business to consumers
• Entertainment/Content site
– Some E-Commerce potential
• Revenue sources
– Advertising - short-term arrangements
– Advertising - health-care products and services
– Partnerships - referral services - recurring
revenues
– Content sale and licensing
– Others (clinical trials, etc.)
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Business Model
• Provide free content in the health-care area.
• Attract enough users.
• Earn advertising and referral fees from:
– Drug firms
– Health-care providers
– Identification of patients for clinical
trials/particular drugs.
• Sell content to others
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Advantages
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Health is a primary concern of individuals.
A large number of potential users.
A growing market
Public demands to know more about healthrelated issues.
• Strong competition among drug companies
and health-care providers.
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Disadvantages
• How to attract visitors to the site. Large
marketing costs.
• How to attract advertisers.
• How to attract affiliates - long term
partners.
• Updating contents.
• Deterring competitors.
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Dr. Koop - Material Facts
• Site effective July 1998.
• IPO in June 1999, raised $88.5 million.
• Over 1.3 million registered members at the
end of March 2000.
• Monthly traffic during Q2 of 2000 was
around 1.85 million unique visitors.
• Entered agreements with Infoseek and AOL
to supply content and to purchase traffic.
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Series1
Jul-00
Jun-00
May-00
Apr-00
Mar-00
Feb-00
Jan-00
Dec-99
Nov-99
Oct-99
Sep-99
Aug-99
Infoseek
Infoseek
Jul-99
2500000
Jun-99
3000000
May-99
Apr-99
Mar-99
Feb-99
Jan-99
Dec-98
2000000
Oct-98
Sep-98
Visitors
Traffic Data (Media Metrix)
4000000
3500000
AOL
AOL
1500000
1000000
500000
0
Month
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Price of Traffic
• Promised Infoseek and Buena Vista $57.9
million in cash and 775,000 warrants ($8.60
exercise price) over three years.
• 30.5 million shares outstanding on
12/31/99.
• Recognized expenses of $7.2 million in
1999, and $2.7 million in Q1/00.
• In Q2/00 terminated the agreement as of
July 2000. Obligated to pay $5.3 million in
cash, and additional 820,000 warrants
($1.25 exercise price).
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Price of Traffic
• The AOL four-year agreement required Dr.
Koop to pay AOL net cash of $81 million,
1.5 million warrants ($15.94 exercise price),
and 4.3million more warrants based on
performance.
• Koop paid net of $12.25 million until the
end of Q1/00, and recognized expenses of
$12.25 million in 1999 and $6 million in
Q1/00.
• In Q2/00, Koop issues 3.5 million shares to
AOL in lieu of further cash payments and
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warrants.
Revenues
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Income Statement Data
Q1/98
Q2/98
Q3/98
Q4/98
Q1/99
Q2/99
Q3/99
Q4/99
Q1/00
Q2/00
Revenues
0.000
0.000
0.000
0.043
0.404
1.019
2.910
5.098
4.743
2.523
Content Sell&Mar
0.284
0.166
0.672
0.181
1.847
0.646
1.645
1.015
1.035
2.048
2.110
8.010
2.390
18.585
3.826
16.920
5.786
19.365
5.361
24.916
G&A
0.259
0.562
0.870
0.906
1.104
1.740
2.247
4.409
4.002
4.828
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Income Statement Ratios
Q4/98
Q1/99
Q2/99
Q3/99
Q4/99
Q1/00
Q2/00
Content Sell&Mar
3826%
2360%
256%
507%
207%
786%
82%
639%
75%
332%
122%
408%
212%
988%
G&A
2107%
273%
171%
77%
86%
84%
191%
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Liquidity
Cash
A/R
A/P
Acc. Exp.
6/30/00 3/31/00 12/31/99
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23.9
35.7
3
4.7
10.5
5.6
10.1
8.2
6.3
8.3
9.2
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Cash Burn Rate
• Net Operating Cash Outflow in Q2/00 was
$(34.1) million.
• Capital expenditures $1.8 million in Q2/00.
• Will run out of cash within 0.7 month, if it
can postpone suppliers and employees,
earlier if not.
• Can it borrow money? See PPE on 10-K.
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Revenue Analysis
• Total revenue in Q2/00 $2.5 million.
• Content subscription and software license
$.85 million (33%).
• Advertising and sponsorship revenues $1.7
million (66%).
• E-commerce $.01 million (1%).
• 33 Partners on 6/30/00, compared to 32 on
3/31/00 and 33 on 12/31/99.
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Expense Analysis
• High content expenses
• Extremely high marketing expenses.
Attempted to purchase traffic in a hurry.
• High G&A expenses as compared to its
revenues.
• High PP&E and investments in other firms.
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Restructured Agreements
• Traffic agreements restructured. May affect
future traffic and future revenues.
• Terminated agreement with HealthMagic,
writing off an investment of $5 million.
• Fired 35% of its labor force.
• Retained Bear Sterns to advise on its future
options.
• Can it survive?
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New Investors
• Private placement on 08/22/00 from group
of VC’s led by ComVest Venture Partners.
• Total investment can reach $27.5 million.
• A new management team was appointed.
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Qualified
audit
opinion
New
Financing
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