We consider the problem of distributed multi-robot team formation including the dynamic reconfiguration of robot teams after encountering obstacles. We describe a distributed robot team reconfiguration algorithm, DYN-REFORM, that uses a game-theoretic technique of team formation called weighted voting games(WVGs) along with a flocking-based formation control mechanism. DYNREFORM works without explicit knowledge of global features such as the presence of obstacles in the environment or the number and location of all other robots in the system. It uses the locally computed metrics of each robot in the team to determine whether a team needs to split or two teams need to merge during reconfiguration. We have tested team reconfiguration using the DYN-REFORM algorithm experimentally within the Webots simulator using teams of e-puck robots of different sizes and with different obstacle geometries. We have also shown that using robots coordinated with the DYN-REFORM algorithm for a distributed area-coverage application improves the coverage performance.