MyECheck, Inc. (fka MYEC)

[byrdiesoccer]

My Patent Valuation estimate...

Eds Patent is a Utility Patent

"It states that a patent's value is the present value of the incremental cash flows or cost savings it will help provide."

Source- http://www.investopedia.com/articles/fundamental-analysis/09/valuing-patent.asp

So If we were to focus on the "cost savings" value, shouldn we then compare how much "the leader" in the merchants service market would save if they decided to use the patent in replace of what they currently use?

I.E. Paypal?

"Merchant Services net Total Payment Volume was $37.2 billion in Q1 2014"

"Merchant Services net Total Payment Volume was $40.4 billion in Q2 2014, up 35% year over year."

Source- https://www.paypal-media.com/about

How much Paypal charges merchants

"the fee for each transaction is 2.9% plus $0.30 USD of the amount you receive. "

Based on this, I averaged the first 2 quarters of 2014 together and then multiplied them by .029 to get average income from services in a quarter.

38.8*(.029)=1.12 billion dollars in revenues

"MYEC charges a 1% fee per transaction (maximum $5) to clear checks in any amount."

Because I can't track each value of each transaction, I will just use the 1% fee instead and multiply it by the PayPal quarterly average revenues used in the previous equation above.

38.8billion*(.01)= 388 million dollars in revenues

To make things simple, I will assume that Paypal charges a higher transaction fee than MYEC only because it cost more to use ACH. Therefor if Paypal used MYECs patent then they would have the same transaction fee % as MyEcheck because there cost would be lower. This assumption will let me calculate the "opportunity cost" of using ACH versus MYEC Patent.

HOWEVER, If Paypal used MYECs patent BUT still charged the same 2.9% fee, they would increase profits by 732 million.

I calculated that number by subtracting Paypals transaction fee by MYECs transaction fee(2.9%-1% ) and then multiplied that difference by the averaged quarterly revenues(38.8*1.9%).

Equation
(.029-.01)*(38.8 billion)= 732 million income "opportunity cost" each quarter for using MYECs patent vs ACH

IMO this is how much more in revenue Paypal could have each quarter if using the patent and keeping the same fee of 2.9% because cost would reduce.

So Finally, multiplying 732 million by 4 quarters will equate to $2.9 billion in revenues Paypal is theoretically missing out on.

Based on the income approach, the patent could be valued at $2.9 billion.

Ed has stated he's going to make a conservative valuation so it obviously won't be this much .

Would 1% of this valuation be more along the lines of what Ed is inferring (29 million)? Or is .01% of this valuation more accurate?

Source- http://www.investopedia.com/articles/fundamental-analysis/09/valuing-patent.asp