MedHab's Major Update

MedHab CEO Johnny Ross spoke the following words at a recent City of San Angelo Development Corporation Board meeting.

"A little bit more on our Progress Report.  We moved our manufacturing from Athens, Texas. for right now our interim manufacturer, to Watertown, South Dakota.  The reason being is we've gone through a few manufacturing runs and this is what has put us behind a little bit, you know we expect time delays with technology.  We're creating a trail.  we're not walking a trail, so there's going to be these type of delays, longer than I would like but we've overcome alot of this and ready to start rolling now.  Regardless, a company in Athens, Texas that was tasked to build our devices repeatedly failed in smaller runs, couldn't get it right and that has to be right, because whether it's the retail market or the health care market, that product is built by FDA regulated quality systems.  That's our requirement, they couldn't do it.  So, we terminated the contract and moved it to Spartan for right now.  Some of that business will come back to San Angelo, Texas when we're ready.

We're in a silent launch mode right now with RPMSquared, the idea, we we have a major announcement we'll talk about in the very, very near future and we will move that from a silent to a global marketing campaign.  Our FDA filing, we expect that to be in 45 days to 60 days.  It depends on when we get our electrical test back.  As I said we expect to have three products on the market by February.  One being RPMSquared, two being the StepRite product, pursuant FDA approval which takes three or four months, five months in some cases, and then this third product that I mentioned that we're working with UTA to develop.  

We've hired six employees, actually our sixth employee here last week.  As you know we put a lot of stock in Angelo State University and every time you see me I talk about that because what Angelo State University, the students have done, Nike failed to do, MIT failed to do and these students over here did it.  It's absolutely amazing to think about the software that they have developed. We have contracted with five students, thirty plus hours for the last two years and we have hired four Angelo State University students.  As you know, it's our goal to retain those students and that talent here in San Angelo. Texas because we are tired of seeing it leave.

For those of you that don't know me I grew up here in San Angelo.  I've watched it for years.  We need to keep those people here.  We hope to do our best to do that. 

To date we have not requested any financial support from the COSADC.  As you know we have a five year contract.  With six employees I don't feel it necessary to do that at this point in time.  It's a waste of your time and energy probably looking at such a small number so there's no liability or risk on your part at this point in time. I, ya, when the numbers are right, I'm thinking 25-30 employees than I'll talk with Mr. Pena and Mr. Schneeman as to when the best time might be to do that.

Last but not least and I'll open it up for questions, we have a very big surprise announcement to make, actually two weeks from now.  There's one person in the room, Dave Erickson who knows what we're going to present.  I'm not going to tell you today what that is, but it's enormous potential for our company and I'm going to invite each of you to MedHab and show you some of the things that we're doing again and make that announcement at that point in time.  I believe that announcement will be the catalyst that spars the growth and revenue generation that MedHab needs, not only to sustain our business but to create the jobs we intend and have contracted to do. With that I want to thank each of you for your time and open it up for any questions you might have.

Questions arose about the agreement and contract, which COSADC staff did not have in front of them.  Ex-Mayor Alvin New remains on MedHab's Board of Directors.  Board member Tommy Hiebert asked Ross what do you have in San Angelo now?

Can you be a little bit more clear on what you mean? 

Hiebert clarified it with what operations, administrative functions, manufacturing are here?  What's happening at the incubator?

Right now all of our software development, IT is here.

Except for the software UTA students are employed to develop MedHab's third product which will focus on healthcare prevention.  

IT will remain here.  All of our distribution is here and yhat department will grow as revenue dictates.  As stated our contract manufacturing is done at Spartan South Dakota, but Medicare requires redundancy sites.  So we will always continue to have presence in South Dakota to do manufacturing, but we will bring some of that manufacturing here as well.  We will do that with all products that we manufacture.  

But what happens is the product is actually, the harness if you will, all the components are put together now in South Dakota, sent to Rhode Island and put into the inserts, the polymer, and then it comes back here for distribution.  So we have, like I said, the six employees here.  The vast majority of their functions today is IT development and they are now building the services and website necessary to support the call center which will be here and the technical support, which we anticipate hiring a few of those right after the new year.  

We may need to do it sooner than that because we're actually doing a phase 1 clinical trial with Steve Martin over at West Texas Rehab right now.  Once that clinical trial is done, it's about a 45 day trial capturing data and then from there it moves to a phase 2 trial that our medical director Dr. John Early is doing at UT Southwestern.  September 1 is the kickoff date for the University of Southern California to do their study and now this new one with Colorado is coming up.  As you can see we're going to have to start making sure those systems are in place so we can create the jobs to support that.  But distribution and IT is what we're doing right now today.

Hiebert asked what dictates moving a portion of production from South Dakota to San Angelo?

I don't think workforce is a problem.  It's a matter of, the first step that we need to do is make sure that the consistency that we can have a manufacturing process that allows for a 1% failure rate or less.  We're moving to that very quickly in the short runs.  Once that process is cast in stone.  The FDA is going to go to South Dakota.  They're going to check that to make sure that it is what it is.  Once that's done and revenue dictates, because we can't do this in the incubator.  There's not enough space.  We've developed machines, they're not big machines but they're tabletop machines and we have to continue to bring more and more of those in to test and manufacture the product.  Once all those are done and in place, all the systems they are in place, we'll move that here.  I don't anticipate that happening until we have our own building because we don't have the space here.  That building, if you've been in there lately, is all chopped up.

Hiebert noted getting manufacturing jobs here is a huge, huge thing and asked COSADC staff to help MedHab secure a location.

We've talked about it and I can't tell you if it will be three months from now or a year from now.  I don't know because it's all revenue dependent.  I can tell you there's a number in my mind, which is 20,000 units.  That is when we have to start looking because we know we have to ramp up at that point in time.  I believe the announcement that we're going to make next week and what we're doing with that will have a big part in getting that unit.

If we think what's going to happen with this announcement we start generating the revenue that we believe we'll generate, then we'll need to start looking at a building.

Hiebert encouraged Ross to do that as quickly as humanly possible to get the jobs here.  Hear, hear!

I hope to see everyone in about ten days at MedHab.

It's been eleven business days, so that announcement should come soon.

Update 9-14-14:  MedHab announced a white paper of their product review by Dr. Kelly Brooks from February 2013.  Presently, she serves as the Editor-in-Chief for the Journal of Sport and Human Performance.