Module 8 Discussion
1. Read "From the Headlines - Necton:" in the assigned chapter, and describe the business model turnaround Necton undertook. Comment on what you think would have been the challenges and your perceptions of how the new business model succeeded.
FROM THE HEADLINES Salt of the Earth, Portuguese Style: Necton Joao Navalho, a marine biologist work- salt and Flor de Sal, completely unpro- online retailing. While local in character, ing in the coastal wetlands of southern cessed salt crystals formed on the brine Necton is international in reach, export- Portugal's Algarve region, is proving surface." ing to over thirty countries, and truly has that not all sea salts are the same. With The markets for gourmet salt are truly become a salt of, and for, the earth, Por- his partners, Navalho's original intent in international, with a vast array of varieties. tuguese style.* the early 1990s was to harvest microal- With a clear purpose of fostering sustain- Far more than known for its salt, Nec- gae from salt marshes in order to market ability in its habitat, Necton operates in the ton has emerged as a leading member of its beta-carotene as a natural organic Parque Natural Ria Formosa, a protected the microalgae production industry that dye for use in the organic food market. area where it has also begun cultivating is predicted to weigh in at $3.7 billion by This original plan didn't work out, in other products and tourism that leverage 2023." part due to locals' less organic use of the location and environment. Necton the algae farm as a resting place for old believes that "the salt economy contrib 1 http://www.nytimes.com/2009/01/27 appliances." utes to a sustainable development in /world/europe/27salt.html?_r=0, accessed on Around 1997, the venture's business which men live and produce natural prod- 5/14/2016. plan diverted to one of the other obvi- ucts inside a wildlife habitat. ... Rebuilding 2 Nutritional and flavor differences between Fleur-de-Sel, traditional hand-harvested sea ous products of salt marshes: salt. Main- traditional salinas (salt marshes) can bring salt, and machinery-processed sea salt can be taining their focus on providing products new, 'healthy' jobs and allow a better nat- significant due to the contents other than just in the less price-sensitive organic food ural resources management."' Necton is sodium chloride, see http:/www.necton.pt space, the team sought advice from a considering restoring Portuguese-built /sal-do-mundo for more details. retired salt worker, Maximo Antonio salt fields on the other side of the Medi- 3 http://www.necton.pt/a-historia and http://www.necton.pt/projecto-ecosalt, Guerreiro, who started a career in salt terranean- the east coast of Africa, which accessed on 5/14/2016. harvesting 40 years earlier at the age of is at least a little bit closer to Navalho's ori- 4 http://www.nytimes.com/2009/01/27 14 as a continuation of a family tradition. gins in Mozambique.* "world/europe/27salt.html?_r=0, accessed on They determined to clean up the existing Financing for the salt venture was a 5/14/2016. salt beds that had lapsed into a state of hard sale, in part because of the indus- 5 http://saldopositivo.ogd.pt/empresas serious disrepair. With the salt cultiva- try's previous cessation in the region. (nectonda ria Formosa para o mundo/, tion and harvesting expertise on board, Nonetheless, bank financing was accessed on 5/14/2016. and with the help of imported labor, the arranged, and within two years, Necton 6 http://phytobloom.com/aboutus_whoarewe /and https://www.marketwatch.com/press enhanced entrepreneurial team re-engi- had salt for sale. Flor de Sal products release/microalgae-market-worth-3680 neered the water flow system and began from the Algarve region are available million-us-by-2023-2019-02-14, both hand-harvesting world-class organic in the United States, including through accessed on 9/1/19.MINICASE Endco, Inc. Endco is a wireless solutions provider that facilitates wireless Internet access through small remote devices that connect to portable computers. During the past several years, Endco was lavished with an abundance of equity financial capital from a variety of venture investors. Although initial adoption rates for this new service were far below expectations, Endco was confident that expanding the service area, and thus increasing the service's availability to new and existing users, would result in rapid increases in the volume of new subscribers. Helping to fund this massive expansion, Endco arranged tremendous amounts of debt financing, much of which was secured by the expansion assets themselves (i.e., wireless towers and transmission facilities). However, recently it became clear that Endco would not be profitable and would merely continue to burn large amounts of cash if it continued to operate. Using the financial data provided, answer the following questions regarding Endco's Chapter 7 bankruptcy liquidation. Administrative and legal fees are $370,000, and the bank underwriting the notes payable has the right of offset on cash deposits, the amount indicated in the cash account on the balance sheet for Endco, Inc. A. Who are considered to be the priority claimants in this liquidation? B. Who are considered to be general creditors? C. Create a table indicating the cash distribution to each creditor and the percentage of the original liability that is satisfied. (continued on next page)BALANCE SHEET ($ MILLIONS) ASSETS LIQUIDATION RECEIPTS Cash $ 24 $ 24 Inventory 16.0 5.0 Accounts receivable 5.6 3.0 Not plant 200 0 165.0 Net equipment 100.0 57.0 Total assets $ 324.0 $232.4 LIABILITIES AND EQUITY Accounts payable $ 35 Notes payable (12% bank loan) 29.0 Accrued liabilities (wages and taxes) 1.5 Long-term mortgage loans (12%%, 10 years) 140.0 Long-term subordinated loans (14%, 15 years) 80.0 Debentures (subordinated to notes payable) 20 0 Preferred stock 300.0 Common stock 100.0 Retained earnings -350.0 Total liabilities and Equity $324.0
