City Council January 3, 2012 Med hab overview

MedHab, LLCProposed Incentive Offer Donna OsborneEconomic Development Coordinator

Introduction to MedHab Johnny Ross (San Angelo native) and Tim Sanghera High-tech, medical device company  Multiple patents filed; some already awarded  Provisional patents for second product line  Third product in preliminary stages Low natural resource requirements Advisory Board – leaders in high tech & medical fields  Steve Martin with West Texas Rehab Will launch product in Australia by June 2012 and US as soon as FDA approval received

Introduction to MedHab Received incentive offers from:  Midland, Odessa, Temple, Lubbock, Abilene Only Abilene still under consideration with San Angelo  $17,500 per job incentive from Abilene Received $1.8M from private investors  3 San Angelo  3 Austin  1 Lubbock  2 Dallas Identified source for mezzanine financing ($3M)

Project Eligibility• COSADC incentive guidelines allows individuals and companies to apply for incentives• Under the law, Corporations and Limited Liability Companies has an independent legal existence separate and apart from their members and/or owners• The criteria for individual applicants do not apply to business organization applicants• COSADC operates under the Texas Non-Profit Corporation laws, and its board members are not subject to state conflict of interest statutes• These statutes and COSADC bylaws require abstention from discussion, deliberation, and voting on a matter in which a board member has a financial interest in an applicant company

Conflict of Interest• State conflict of interest laws are not legally relevant to a discussion about applicant qualification standards• Conflict of interest laws are relevant at the stage of discussion, deliberation and voting on a matter when it involves consideration of the application for assistance, the award to, and approval of the contract with an entity in which a member of the City Council has a “substantial” financial interest• If applicable, requires Council member to file an affidavit and abstain from “further participation in the matter”

Product Overview• StepRite® - a wearable medical device (insole)• Capability to measure: body weight, pressure, gait and flexibility• 4-component technology: accelerometer, thermal sensors, weight/pressure/gait sensors, and wireless user interface technology • Developing cell phone application • Remote medical technology is emerging sector• Customizable physical rehabilitation protocol• Winner – Rice Alliance Elevator Pitch

Product Overview• Initial product designed for lower extremity injury rehab • Knee, ankle, foot • Measure weight, gait, pressure, and range of motion• Next, will enhance for diabetic neuropathy segment • Will add thermal sensors• Additional applications • Detection and prevention • Professional athletes• Third product will be for back injuries • Working on provision patent documents

Project Overview Initial product line: 85 FTEs  2 additional lines – project more than 200 FTEs Staffing: Management, Manufacturing, Distribution, Technical Support, Quality Assurance, and Patient & Healthcare Provider Support Jobs will have full benefits; company will offer state-of- art wellness program Will generate $5 – 6M annual payroll at capacity Jobs multiplier for industry is 2.5 Will provide career paths for call center and IT professionals (weakness ID in strategic plan process)

Company Overview Plant Operations to begin in Incubator  Will allow company to expand operations while purchasing and renovating permanent location Proposed permanent location in existing building  Multiple buildings meet company requirements Plan to invest more than $500,000 in building upgrades  Three phases of renovations, based on product expansions Plan to invest $2,000,000 in property and equipment Plan to secure EB2 financing to purchase building by year three of operations

Partnership With Community Requesting incentives, based on performance and/or investment first by Company All incentive payments to be paid in arrears, or on a reimbursement schedule Will complement available workforce provided by:  Howard College, Goodfellow and ASU Company has already invested in San Angelo:  $90K contract with ASU to design software to collect data  Exploring $30-50K contract opportunity for 2nd program  Discussing pilot project for industrial intelligence application

Recommended Incentives• Job creation incentive for first five years • Up to 227 FTEs • Average $7,929 per job• Other investment-based incentives • Lease assistance for up to 36 months (25%) • Not needed, if stay in Business Incubator • Renovation of existing building (52%) • 3-Phase renovations, up to $500,000 investment • Code compliance costs for renovations (25%) • Tax rebates on additional capital investment (100%)• Average total incentive per new job: $12,994

Estimated Return on Investment AnnualProjected Annual Return on Performance Additional CommunityInvestment At Year 6 Impact Impact NotesAnnual Payroll (1.5 multiplier) $6,500,000 $9,750,000Estimated FTEs (2.5 multiplier) 150 - 200 375 - 500Improved Property Value $3,000,000 $23,700 property tax (City only)Personal Property Value $2,000,000 $15,800 property tax (City only)Additional Indirect Investment $250,000 $1,975 additional prop. tax revenueDemand for New Housing 42 unitsValue Added to Tax Rolls $3.269MAdditional Property Tax Revenue $80,521 annual increaseAdditional Annual Sales Tax $44,825 additional sales tax revenue Non-salary Subtotal $166,821 Total Annual Impact $9,916,821

Summary of OfferRecommendations:Job Incentives: $1,800,000 maximum up to 227 jobs; average of $7,929 per jobBuilding Renovations: $575,000 maximum 52% of total investedLease Assistance: $108,000 maximum 25% of total costsNew Capital Equipment: $300,000 maximum 15% of total investedCode Compliance Costs: $12,500 maximum 25% of total costsTax Rebates on Incr. Values: $154,285 personal &real property; City & CountySubtotal: $2,949,785 Maximum Cash incentives $1.00 per year lease in Incubator for up toForegone rent: $648,000 three yearsTotal assistance to MedHab: $3,597,785

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City Council January 3, 2012 Med hab overview

by City of San Angelo Texas on Jan 03, 2012

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City Council January 3, 2012 Med hab overview — Presentation Transcript