Saturday, January 28, 2012

MedHab to Choose by Valentine's Day

On January 5th MedHab's President Johnny Ross said he would decide within 35 to 40 days between San Angelo and Abilene for his company's manufacturing site.  That puts the decision at Valentine's Day at the latest.

San Angelo's economic development package appears to be a sweetheart deal for a fledgling company.  How often has City Council offered an employer roughly $3 million in cash incentives?

Add the investment romance between Mayor Alvin New and MedHab and things get more interesting.  City leaders purposefully misled area reporters and the public on Mayor New's stake in MedHab, as well as his board of director position.

Take the City's piece on Council approved MedHab incentives, which stated:

The company has raised $1.8M from less than 10 investors (3 in Austin, 3 in San Angelo, 1 in Lubbock, 2 in Dallas).
The piece stopped at "3 in San Angelo," failing to specify local investors Mayor Alvin New and Randy Brooks, a member of San Angelo's Development Corporation

Nine investors ponied up $1.8 million, an average of $200,000 apiece.  The Standard Times indicated New and Brooks held less than 1% of the firm, a $30,000 equity stake.  As MedHab sold equity in $25,000 increments, the other seven investors had to put up an average of $250,000.

Red flags suggest corporate ownership of MedHab stakes.  MedHab's Texas filing had two corporations as board members, NNNN and Deaton Engineering.  Mayor Alvin New has three NNNN corporations on file with the state of Texas.  Deaton Engineering offers medical device design, however its website does not show MedHab as a case/customer.

Deaton helped Neil Bush profit from his Presidential brother's No Child Left Behind.  Neil's Ignite Learning used Deaton to design its COW, curriculum on wheels.  Deaton described the case:

Ignite! came to Deaton Engineering with an urgent need to design and prototype their product concept and begin shipments in just six weeks. The device would be a self-contained unit featuring a built-in computer, LCD projector and speakers. The overriding requirement was that elementary and middle school teachers would be able to simply plug in the device and begin a lesson.
MedHab's timeline isn't quite as urgent, given their Australian product launch will occur in June 2012.  Deaton's news feed is surprisingly light the last eighteen months, especially for a firm with deep capabilities and interesting partnerships

The COSA Development Corp piece showed an additional incentive, not included in City Council slides. 

- an economic development incentive in the form of a reimbursement of up to 25% of costs incurred by the company for building
I would look at the motion made by City Council regarding MedHab for clarification, however this crew has a notorious record in documenting decisions.

San Angelo's economic development package is a sweet non-debt, non-equity capital injection for MedHab.  It should help the company land $3 million in mezzanine financing.  That should boost Mayor New's and Randy Brooks' investment.

(Click on the image to make it larger)

Update 2-16-12:  Deaton Engineering's YouTube site has MedHab videos.

Update 4-17-12:  Valentine's flowers wilted long ago.  MedHab is yet to announce a production site.

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