Shareholders of struggling ReconRobotics have approved a reorganization the CEO said was necessary to avert liquidation in bankruptcy court.
A group of Twin Cities financiers, led by investment banker Tony Christianson of Cherry Tree Associates, previously bought a $300,000 Recon bank loan and will invest another $300,000 in exchange for 60 percent of the common stock.
Creditors who are owed up to $11 million will get 30 percent of the common stock, plus a preferred class of stock that is supposed to be worth $2 million in five years. About 180 individual shareholders will get the remaining 10 percent of the company. They stood to get wiped out in bankruptcy court, where creditors get paid first.
Recon CEO Mack Traynor, a turnaround specialist retained this year as interim CEO, will remain if the deal closes next week, as expected.
Recon, a celebrated winner of technology awards, boasted that it was “the world leader in tactical micro-robot and personal sensor systems” and a seller by 2012 of thousands of look-ahead Recon Scout and Throwbot devices for troops and police who deploy them in hostile territory. The company’s revenue peaked at $20 million.
The former CEO and board left during 2014, as sales slumped amid government-spending cuts in 2013-14, a failed diversification strategy and charges of mismanagement.
Revenue has fallen to about $2 million and employment to six from 60 three years ago, Traynor said. Winona-based contract manufacturer, Riverbend Electronics, Recon’s largest creditor, opposed Recon’s previous management. It is on board with the restructuring and a large shareholder under the restructuring.
“Our investor group was optimistic and excited about this competitive space for small unmanned robots,” said Christianson, who plans to join Recon’s board. “It was unfortunate that the company ended up with more debt than it could pay. We think it was well worth the time we spent to restructure it and we are optimistic about the possibilities rebuilding the business. We have our eyes wide open. There are never any guarantees.”
The company was formed to commercialize robotics technology developed at the University of Minnesota with funding from the U.S. government.
Andrew Drenner, a former U computer scientist, a key inventor of the Recon technology, will remain with the reconstituted company.
Traynor said he and a new board will develop a go-forward business plan early next year.