Resonex assets bought by creditor after MRI vendor defaults on loan

Reorganized firm will continue distribution effort in Asia

Theassets of MRI firm Resonex were acquired by its major creditorlast month after the Fremont, CA, company defaulted on loan payments.Resonex has been reorganized as Resonex Holding Corp. and willcontinue to manufacture MRI scanners for distribution in Asia,according to the firm's new president, John Kingery.

Resonex had been hit hard by the slump in the domestic MRIindustry. The company announced in January that it was shuttingdown its marketing effort in the U.S. to focus on sales in Chinaand other Asia-Pacific markets (SCAN 2/2/94). Resonex won an orderfor 10 systems in China last year.

Those sales were apparently not enough to keep it out of thehands of creditors, however. Resonex fell behind on secured loanpayments to a major creditor, Technology Funding Inc. of San Mateo,CA. Under the terms of the loan agreement, Technology Fundingforeclosed on the loan in February and announced an auction tosell off Resonex assets, Kingery said. Technology Funding purchasedthe assets at the auction, which was held on Feb. 25.

Instead of liquidating Resonex, Technology Funding decidedto keep the assets and reorganize the company. Nearly all of thefirm's senior management was hired back by the reorganized Resonex,with the exception of former president and CEO Gerald D. Knudson,Kingery said.

The reorganized Resonex will continue to provide service andupgrades to the company's installed base of scanners in the U.S.More importantly, Resonex will pursue sales in the developingAsian market.

"The most attractive market in the world for MRI is inthe Pacific Rim and in particular, China," Kingery told SCAN."We think our product and the position we have there makeus well-suited to pursuing that opportunity."

Resonex manufactures resistive-magnet scanners, which are attractivein developing nations where cryogen supplies are scarce.

Kingery declined to state whether Resonex will license U.S.rights to its technology to another vendor, but did say the companywould be interested in discussing the concept.

Technology Funding picked Kingery to head the reorganized Resonex.Kingery ran his own management consulting firm and had been workingwith Resonex for several years prior to the foreclosure. He alsowas president of Raytheon's medical imaging division until 1987.

In the end, a single-modality firm like Resonex simply couldn'tcompete in the U.S. against companies like GE and Siemens, whichhave other businesses to absorb the shock when sales in one modalityslump.

"The market in the U.S. is very competitive and is markedby companies with large-scale operations and vast resources,"Kingery said. "To our mind, the product differentiation hasbecome quite narrow in the U.S."