By 2012, the confident executives of ReconRobotics had positioned the company, surging thanks to government contracts, as the poster child of a new Upper Midwest trade group, "Robotics Alley," and the emerging industry of all things drones and robotics.
The future remains bright for the industry. However, ReconRobotics is broke.
Sales fell from $21 million in 2012 to $3 million last year amid huge losses. Several of Recon's top brass and board members resigned or were forced out. Employment has shriveled from 60 to six. A veteran turnaround manager was hired this year while a new investor tries to raise additional capital, negotiate terms with creditors and tries to restructure debt outside bankruptcy.
"There were a series of managerial mistakes," said CEO Mack Traynor, who was brought on board to try to refloat Recon. "We're insolvent. We owe between $5 million and $12 million to creditors, depending upon how many of their contingent liabilities are valid. We're trying to restructure the company" with assistance from creditors.
Alan Bignall, the veteran technology executive who ran ReconRobotics since 2006, when it was first commercializing robotic technology developed at the University of Minnesota, was forced out last year. Bignall, now running a small IT company, declined to comment.
RiverBend Electronics, a Winona-based contract manufacturer that makes Recon's lightweight "throwbot" video-eye robot used by the military and police agencies, and a couple other creditors last year filed a petition to force Recon into bankruptcy. They withdrew their bankruptcy petition and the case was dismissed after Bignall's departure.
"I lost faith in the [former] management, specifically Bignall," said RiverBend President Stephen Craney. "They have a viable product and very capable management and technical team now in place. I'm supporting them. I think it can be viable going forward."
In a brief interview in early 2014, Bignall said he had to lay off people after the failure of the U.S. Army to buy, as expected, 1,000 Recon Scout self-propelled robots for $13 million in 2013. The Army was out of Iraq, scaling back in Afghanistan and also coping with federal budget cuts after Congress and the White House couldn't reach a deal.
"We were on a roaring success for six years, and then it came to a halt, and I'm reacting to the market," Bignall said early in 2014. "Our biggest customer was the U.S. government.''
Two high-level executives also quietly left at the time, including Andrew Borene, a lawyer and former Marine officer in Iraq. He was Recon's director of business development. Borene, who now works in Washington D.C., also was a force behind Robotics Alley, which continues as a trade group.
"I loved the technology and the mission and the people," Borene said last week. "We thought it also would be a vehicle for financial success, and it didn't work out."
Traynor didn't dispute Bignall's assertion that the business crashed because of the U.S. military cutback.
However, he and others questioned Bignall's spending, including on a long-term lease for a 30,000-square foot office in Edina, on which Recon defaulted before moving to a smaller space in 2014; a sales office in Europe, and spending $2 million on technology for landing gear for drones that Recon never commercialized and which has been written off as a loss. In all, Traynor said, selling, general and administrative costs doubled in 2012, just before the bottom started to fall out.
In addition to Bignall, several other executives and board members left, including two retired generals. They were replaced this year by Kyle Nelson and Don Krantz, two Twin Cities technology executives committed to Traynor's plan.
Meanwhile, Tony Christianson, a founder of financial services firm Cherry Tree Associates, raised several hundred thousand dollars from new investors this year to take out a loan from Bremer Bank. Bremer was threatening to claim Recon's cash, according to Traynor, which would have forced it into bankruptcy. That bought some breathing room.
As Traynor, who expects about $3 million in sales again this year, works to stabilize the operation, Christianson is working on a debt restructuring with dozens of creditors, including Riverbend.
"There's been a flurry of activity," Christianson said recently. "We hope to see the rebirth of the company within a few weeks."
Nobody has disputed the effectiveness of the technology for military and police clients.
Recon, which had received local and national technology awards, boasted that it was "the world leader in tactical micro-robot and personal sensor systems'' and a seller by 2014 of 4,300 Recon Scout and Throwbot devices for troops and police agencies that used them to look ahead or around corners in hostile territory. Accolades are on the wall from grateful military and police units.
The company was formed to commercialize robotics technology developed at the University of Minnesota's distributed robotics laboratory under funding from the U.S. Defense Advanced Research Projects Agency (DARPA) and the National Science Foundation, among others.
Andrew Drenner, a former U computer scientist who is considered the key inventor of the Recon technology, remains director of research at Recon.
The question is whether Traynor & Co. can win the cooperation of creditors who are owed several million bucks, and 180 original shareholders, and start to grow again. He'll also need additional capital. If not, the company could go bankrupt, the shareholders lose their investment, and somebody else could buy the technology out of bankruptcy.
"I want [Christianson] to make the best deals with creditors so we've got operating flexibility going forward," Traynor said. "We want the company to return to the performance of 2011-12 without the [overhead] costs of the past."
Neal St. Anthony • 612-673-7144
