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Who made the real profits on Steorn?

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Sun Jul 08, 2007 2:42 pm PostPost subject: Who made the real profits on Steorn?
Ping1400
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Some time ago I tried to make some budget estimation of Steorn, to check their ‘burn-rate’ and determine when they would need more investment to continue. The budget calculation was based on the situation where Steorn is a sincere company, building up brand-name and intellectual property. It showed the figures of Steorn to be accurate.

By now the true nature of the company is getting clear, and the budget estimation should be adjusted. In this new budget the total numbers don’t change (the burn-rate keeps up between 3 and 4 million per year), but now the money is milked from the company to the profit of some individuals.

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New budget (total 3.5 million per year):

Management and marketing costs go up from 750k to 1000k per year. The management fee of the two directors is kept the same at 200k per year per person. The increase of budget is from increase in marketing spending. This additional 250k goes to the ‘marketing partners’ and some additional employees.

Admin costs go up from 750k to 1000k per year. The legal costs which are spend on the ‘legal partners’ increase from 50k to 200k per year and the expenses (travel, wine & dine) go from 200k to 300k. The declarations are in favour of the management, but other employees profit too.

The R&D and technology budget goes down from 1700k to 1500k. The number of employees that are working on technology internally is decreased from 10 to 5 (600k budget, including materials). The number people being external technology consultants, outsourced research and development workers and patent specialists goes from 5 to 7 (900k budget). In reality there are only a few contractors with a workshop, with a cost of 200k per year max. The remaining 700k is spend on the ‘technology partner’.

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In total around 14,5 million Euro was raized from the investors. Until December 2006 they spend about 5,8 million Euro. By the end of 2007 some 9,3 million will be gone and an estimated 5 million in cash will still be left. It is clear who are losing: that are the investors. But who made the real profits until now?

(disclaimer: these estimations are educated guesses, they are certainly wrong)

1 Tom Byrne
Thomas is a venture capital and financial consultant. He has been involved with Steorn from 2001 and was also a leading investor in Orbo Technology Ltd before it bankrupted. Tom has been director for numerous companies like TravelFAT, Yard Media, Alatto Technologies, EVP Management, EVP (GP), Oglesby & Butler Group, Ledorat, Irish Takeover Planet, Abaris Corporate Advisors, Tourism Accomodation Approvals, Micro Focus International Holdings, Gresham Hotel Group, Telekinesys Research, Davy Corportae Finance, BES Fund Management, Premiere Holdings Ireland, Video Library of England, Kart Security Systems and Airotat. In august 2004, just after the new OU technology strategy was started, he cashed half of his Steorn shares for a modest price (estimated profit around 300k), which makes him probably the most successful shareholder of Steorn ever. Besides that it can be assumed he was involved in most of the financial investment transaction hereafter (including all the possible bonuses from that). The estimated consult and bonus fees exceed 500k.

2 Legal & Marketing partners
The total expenses on legal and marketing exceed 1500k. Partners could include:
- Unison Consultants (financial, market and strategic consultants), closely associated with Steorn through Roger Hatfield
- Brown Rudnick Solicitors
- dr. Bari, Technology strategy consultant
- O’Donnell Sweeney Solicitors (Francis Hackett, distinguished lawyer and 10% shareholder in Steorn)
- Marketing advisors and partners

3 Technology outsourcing partner
Unknown partner that supplies with engineering, scientific, patent and machine construction power. At least some workshop has been contracted to build the toys, like the kinetica toy (by the Dutch engineer ) and the plastic ‘thing’ that was shown at the museum. The amount of money that was spend exceeds 2000k, of which 1500k seems to be lost somewhere.

4 Steorn directors
Sean McCarthy (Chief Executive Officer) and Micheal Daly (Chief Operations Officer) had their management fees for three years (since 2005), estimated at 200k per person per year. The other managers Roger Hatfield (Chief Financial Officer), Michael Moriarty (Corporate Finance and Strategy) and Richard Walshe (Marketing Manager) arrived later and seem not to be into the technology, they are just hired professionals. As the Steorn directors Sean and Micheal together own 60% of the shares of Steorn they can decide which companies are selected as partner. The kick-back fees that could be paid directly or indirectly from these external partner companies could be up to 2000k by now. A milking strategy could have brought them (added to their management fees) something like 3000k.

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But I don’t believe that the Steorn directors were trying to milk the company for personal profit. They were too much self deluded. In the end they were milked by all the financial and marketing consultants and partner companies surrounding them. There was going to be so much value in the technology of Steorn, nobody would care after all. It really was a dot-com 2.0 thing.

Conclusion:
- Investors lost
- Consultants won
- Money gone

[9-aug-07] Minor edit to remove 'exact' numbers (to address Crank's legal fear)


Last edited by Ping1400 on Wed Aug 08, 2007 10:05 pm; edited 3 times in total
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Sun Jul 08, 2007 7:07 pm PostPost subject:
Thicket
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Nice digging, especially on Tom Byrne. I was unable to track down information on him.

I've got a lot of information on individual shareholders who have lost piles of money but I've deliberately avoided posting it. There are upstanding and successful professionals in the group, although none that I've found are in technical fields (note: I don't consider a medical or legal background as being 'technical' in the sense of knowing about energy matters) By now they should be acutely aware of the Steorn fraud. I think that many, if not all, will try to avoid public humiliation and won't pursue legal action against Steorn.
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Sat Aug 04, 2007 9:55 pm PostPost subject:
Frank
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I'm totally ignorant of such financial matters, but I must admit, post Independence Day what you chaps are saying does sound terribly plausible, especially since it seems clear to me that they knew the demo was going to fail in advance.

As for legal action against Steorn, it could be throwing good money after bad.
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Sun Aug 05, 2007 1:24 pm PostPost subject:
crank
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Ping - I'm not trying to muzzle or censor anyone, but can I just remind you that I'm the owner of this site, and some of the people you're talking about are very powerful lawyers. I live in the same country as they do, I don't fancy being taken to court and having punitive damages awarded against me.

You can't just say anything you like about people like Francis Hackett. He's one of the top Irish lawyers, he'd object to being accused of wrong-doing.

I don't interfere in the running of this forum, and very rarely visit it except to make sure it's not being spammed by porn. That situation suits all concerned. Just please bear the legalities, and the possible legal implications for me, in mind.
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Sun Aug 05, 2007 4:50 pm PostPost subject:
Quanten
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I doubt you would be sued as forum owner. You might be asked to deliver email address and IP of a poster, but as long as you don't review any post, and you take down post deemed offensive if somebody ask you, you would be covered by safe harbor.
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Sun Aug 05, 2007 6:14 pm PostPost subject:
crank
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I thought Yahoo was sued because of a post that they hosted???
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