Wednesday, January 11, 2012

MedHab: City Council Made New Compliant

Had San Angelo's City Council not changed local regulations, Mayor Alvin New faced a major conflict of interest.  New would've had to resign or sell his stakes for MedHab to get an incentive package. 

During the ethics debate, Council members argued that San Angelo needed 227 jobs, as if those positions were guaranteed.  Hardly,  MedHab projected 85 jobs for its knee-and-below rehabilitation product.  It's other three product lines remain in the conceptual stage.

Jim Turner at ConchoInfo researched MedHab's high tech product for knee rehab.  He found MIT worked on shoe sensors in 2006 and a year later tested wireless pressure sensors in a shoe.  Nike and Apple have patents dealing with shoe sensors that measure pressure, motion and temperature.  Their patents mention training and rehabilitation. 

MedHab submitted their idea in 2008.  Jim believes MedHab's one patent is shaky, given strong prior art in the space. To produce the product, Jim believes MedHab will need to license other firms' patented technology, especially in the wireless arena.

The $2.95 million cash incentive is based on jobs provided and capital investment made.  Add in-kind incentives and the total grows to $3.6 million.  Council can say "no jobs, no investment, no incentives."

While that's true, the multimillion dollar package makes it more likely, Medhab will be able to borrow money and recruit new investors.  Many small firms want to grow enough for a bigger company in the same space to buy them out.

It's possible MedHab's venue shopping for incentives will markedly increase the company's value.  Nearly $3 million in cash is one heck of a nonequity, nondebt capital injection.  

Jim couldn't shake the feeling of snake oil around City Council's two moves.  He reminisced about past firms with big employment promises, Apex-Maxima, SafeCar and CCI, Bill Robinson's faith based prison.  AgriLight sent jobs to San Antonio and R.G. Barry closed after City Council funded their RFID machine.

Economic development guru Shawn Lewis promised MedHab would come to San Angelo if Council approved the package.  Mayor New's $25,000 MedHab investment isn't considered a conflict of interest.  MedHab will provide 227 jobs.  And Jim Turner knows where you can buy snake oil

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