Amit Kapur Professor Steven Rogers Entrepreneurial Finance FIN 446 Sports In Your Pocket Assumptions 1) Quantities of Guides=

4000 2) Reference to Management Team and Board of Advisors in Executive Summary (Exhibit 3) is towards Crites and Sanabria 3) Trademark of the words In Your Pocket is available and is able to be trademarked. 4) Idea can be patented. 5) Both Crites and Sanabria added value to SIYP for the Marketing Case Competition.

Income Statement (per guide) Revenue= Research & Writings= Design & Layout= Production= Warehousing= COGS= Gross Profit= Distribution= Operating Profit= $6.95 $0.08 $0.20 $0.80 $0.02 $1.10 $5.86 $3.13 $2.73 %= 39.24% High Operating Margin %= 84.24% Very High Gross Margin

Case Questions 1) Which option should Dame pursue (Part Time Crites and Full Time Sanabria, Find a buyer for the concept, or Sell partially to Morrow & Daniel while retaining partnership share)? ANSWER: Dame should pursue the option of developing this business with Crites, who can contribute on a Part Time basis, and Sanabria who can contribute on a Full Time basis.

Amit Kapur Professor Steven Rogers Entrepreneurial Finance FIN 446 JUSTIFICATION: The Income Statement above (per guide) is impressive, specifically with a high Gross Margin potential and a high Operating Margin potential. Furthermore, this business is entirely scalable because sports are a craze, not only in the United States, but in all other countries as well (Cricket with Asia and Football in Europe). Its conceivable that Dame could make this work in all 4 major sports in about 30 cities in America, and then scale this idea to other countries. With the patent, Dame could license not only the idea worldwide, but can also license the words In Your Pocket to other producers of guides of other types as well. Dame has an entrepreneurial spirit in him, most supported by his creation and actualization of the idea FIYP, his ability to steer his team to victory in the Marketing Case Competition (which also shows camaraderie amongst the trio) and his decision to focus on Entrepreneurship at Kellogg. According to Exhibit 2, Crites and Sanabria seem to add value to the team. Crites has extensive advertising background with Nestle, which could be converted into monetary gain for SIYP, particularly if advertising is a revenue stream for the company. He also has the ability to analyze marketing expenditures and is very good at multi-tasking (since he was able to work at Pepsico and complete his degree at Kellogg simultaneously). He also has training capabilities from his days at Northern Trust. Among other things, Sanabria has a knack for leadership, supported by his GEM Engineering Fellowship Scholarship. The group already has an oral commitment for at least 100-500 guides for all major sports venue, which is a very lucrative contract for a startup, particularly because of the exposure it brings to the company. Replicating these contracts in the future should be easier, and at much greater magnitude. It is also conceivable that, as this idea generates momentum, Crites would consider leaving his job to continue to expand the company on a full time basis. He also had the ability to bring in his friend Pete Schoenke (extensive synergies with SIYP). Outsourcing most of the tasks would allow for a smoother operation initially, which would take the pressure off the time commitment of the three principles of the company. 2) If the deal was struck with Morrow & Daniel, what should be owed to Crites & Sanabria? Was the course credit and fair share of $10,000 prize compensation enough? ANSWER: Fair share of prize money and course credit compensation is not enough. If a deal is struck with Morrow & Daniel, Crites and Sanabria should each get 10% equity. JUSTIFICATION: Technically there is no agreement that makes Dame liable to share any of the proceeds earned from the sale of SIYP, however, that does not Crites and Sanabria do not deserve a share. Both of them had discussed adding $10,000 each to the business should Dame be willing to take on the idea of pursuing SIYP on a full time basis. Though capital had not yet been exchanged, they would have added approximately 31% capital to the business if Dame had given them the green light. Even though Dame had conceived the idea, Crites and Sanabria made it clear that they wanted to actualize this idea into an existing business, which shows intention, and if Dames is concerned about ethics, then he must consider that. Sanabria recalled that dividing equity was just not a priority for the team because the focus should remain on developing the marketing plan, given the time limitations. His faith in his

Amit Kapur Professor Steven Rogers Entrepreneurial Finance FIN 446 friendship with the other two allowed him to keep that conversation pending, and if Dame was considering compensating the two for the time invested, then that means he truly felt they were deserving of equity (otherwise he would have just considered their time commitment as part of the class course). That said, the two had not yet made a monetary investment, so everything they brought to the table thus far was mere sweat equity. I would normally value sweat equity at 5-10% but since they had the intention of investing, 10% each seems equitable both from a business and ethical standpoint. Dame deserved an 80% ownership since he had invested all of the capital ($12,000), conceptualized the idea of FIYP, developed the current business, and secured the copyright. 3) Would accepting another deal mean he was reneging on them? ANSWER: No. JUSTiFICATION: Reneging is when one fails to carry out an agreement, however the trio (Dame, Crites and Sanabria) have not yet come to an agreement. In fact Sanagria and Crites have given Dame the option of continuing on with his career path, just as they would continue on with theirs, should he decide not to pursue SIYP. They may be disappointed, but accepting another deal would not mean reneging, since no deal was currently in place.

Amit Kapur Professor Steven Rogers Entrepreneurial Finance FIN 446