Hartford Business Journal

8 Hartford Business Journal • January 21, 2019 • www.HartfordBusiness.com Reporter's Notebook Matt Pilon | mpilon@HartfordBusiness.com Health Care/Bioscience, Startups & Entrepreneurs, Government/Law and Energy LEGAL & COURTS Would-be Hartford med-tech investor loses assets in court W ith a fed- eral judge's approval, a lender has seized core assets from CliniFlow Technologies, a company that burned through $400,000 of tax- payer money in a failed campaign to build a $45 million med-tech hub in Hartford's South End. Court records show that Ohio- based Wesley Holdings officially took ownership of the assets from CliniFlow subsid- iary 3si Systems on Dec. 26, after being the sole bidder in a court-ordered auction the month prior. The assets include soft- ware, computers, distribu- tion rights, patents and other intellectual property, much of it related to a hospital operat- ing room voice command system 3si was developing, according to court records. Wesley originally filed suit in May 2017 against 3si, its principal David Wagner and a number of other entities he controlled, alleging they had violated the terms of a $1.3 million loan agreement. The total owed has since grown to more than $3 million, due to interest and other costs. CliniFlow is a little-known company, but state officials hailed its decision in 2017 to move from New York to a distressed Hartford corridor, where it planned to house three startups in a newly built office build- ing and create 195 jobs in exchange for $3.6 million in taxpayer money. While the $3.6 million in state bonding was au- thorized for the project, the state Department of Economic and Community Development never released those funds, because Clini- Flow failed to meet certain project milestones. However, DECD did pro- vide Wagner $400,000 from its Small Business Express program. In Nov. 2017, the Hartford Business Journal reported on a slew of lawsuits that accused Wagner and his associates of defrauding inves- tors in several businesses out of millions of dollars. Some accused Wagner of operat- ing a "Ponzi-like" scheme that used money from new employee- investors to pay back-wages of ex- isting workers, federal court records show. DECD officials said they were unaware of Wagner's legal troubles when they granted him state aid, even though several lawsuits against him and his com- panies were filed in federal courts. HBJ's story high- lighted potential weaknesses in DECD's vetting process of state aid recipients. Shortly after HBJ's story published, a DECD official said CliniFlow defaulted on its deal and that the agency was working with the At- torney General's Office to "aggressively" pursue repay- ment of the state funding. However, their efforts were unsuccessful. Today, the operating-room technology that Wagner pledged to develop in Hart- ford remains in its infancy, and will likely require "mil- lions of dollars to develop and commercialize," according to Development Specialists, the court-appointed receiver in the Wesley Holdings case. Wesley isn't the only one after Wagner's and his com- panies' assets, but it's unclear what assets remain. Oth- ers are suing or seeking to collect on court judgements. Meantime, Wagner filed for personally bankruptcy in Rhode Island in 2018. STARTUPS & ENTREPRENEURS UConn, DECD seed CT pain-cream venture W ith the help of their alma mater and the Department of Economic and Community Development, three UConn alums are looking to take their fledgling company, maker of an over-the-counter topical pain-relief cream, to the next level. The Feel Good Lab plans to hire several people this year at its Newing- ton Ave. warehouse in New Britain and New Haven office, with the help of $150,000 from DECD's Small Busi- ness Express program and $100,000 from the UConn Innovation Fund. If the company hits $1 million in sales revenue by year's end, DECD has pledged an additional $200,000 loan. Hiring one or two warehouse workers in New Britain will free up the co-founders — C.J. Forse, Ryan Gresh and Kyle Fitzpatrick — to focus on grow- ing the business. The Feel Good Lab is already selling its inaugural product, Natural Pain Cream, through its website and on Amazon, as well as in nearly 100 brick-and-mortar Select Physical Therapy locations in the Northeast. The cream, marketed as an all-natural remedy with ingredients like menthol, turmeric, arnica and devil's claw, can't be found in major pharma- cies yet, but that is a long-term goal. In the meantime, the company just launched its second product offering, a different formu- lation called Sport Recovery Lotion, which the company is marketing to athletes. News of UConn's equity investment came, coincidentally, almost 10 years to the day when the co-founders graduated from the school with degrees in engineering. Working with the UConn Innovation Fund will help The Feel Good Lab test its product on athletes, said Gresh, whose pharmacist father, Gene Gresh, developed the original formula for the cream on which the company has based its products. "UConn is going to open the door for a ton of opportunities for us when it comes to partnering with some of the sports teams," Gresh said. The company hopes to complete a scientific trial to test the effects of its cream against pla- cebos. Over-the-coun- ter remedies must be careful with the claims they make in marketing and advertising, or risk running afoul of Food & Drug Administration rules. Like many, The Feel Good Lab relies in large part on customer testimonials in its marketing. A trial, if the results are positive, could allow the company to make additional claims about its efficacy in treating muscle soreness. In addition to the UConn and DECD fund- ing, the company has also raised $175,000 from friends and family and says it is negotiating a $300,000 investment with angel investors. "By the end of 2019, we hope and expect to be a household name," Forse said. STATE GOVERNMENT CT far from alone in weighing sports betting this year One of the earliest bills filed in Connecticut's recently begun legislative session calls for legalizing and regulating online and brick-and-mortar sports betting. A recent report from market tracker GamblingCompliance puts Connecticut in a group of a half-dozen states with the highest odds of passing sports-betting bills this year, or at least adopt- ing regulations. Eight states had legalized sports betting as of November, according to ESPN. Here's some other intel and projections from GamblingCompli- ance about the U.S. sports-betting market: • The most likely states to adopt sports betting this year are: Connecticut, New York, Michigan, Indiana, Arkansas, Kentucky and Washington, D.C. • Estimated U.S. sports-betting revenue in 2018: $400 million • Projected U.S. sports-betting revenue in 2020: $1 billion-plus The Feel Good Lab co-founders C.J. Forse (left) and Ryan Gresh (right). PHOTO | CONTRIBUTED David Wagner, Principal, CliniFlow Technologies

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