424B1 1 a2219908z424b1.htm 424B1

Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
INDEX TO STATEMENTS OF CASH RECEIPTS FROM INCLUDED CONTRACTS
TABLE OF CONTENTS 4
TABLE OF CONTENTS 5

Table of Contents

Filed Pursuant to Rule 424(b)(1)
Registration No. 333-192476

PROSPECTUS

421,100 Shares

LOGO

Fantex Series Vernon Davis Convertible Tracking Stock

and

Shares of Platform Common Stock issuable upon conversion of

the Fantex Series Vernon Davis Convertible Tracking Stock

$10.00 per share

             This is the initial public offering of Fantex Series Vernon Davis Convertible Tracking Stock, which we refer to as Fantex Series Vernon Davis. This is also an offering of shares of our platform common stock into which the shares of Fantex Series Vernon Davis are convertible, and references in this prospectus to an offering of shares of Fantex Series Vernon Davis shall be deemed also to mean a reference to the shares of platform common stock into which the shares of Fantex Series Vernon Davis are convertible.

             We are offering hereby 421,100 shares of Fantex Series Vernon Davis at $10.00 per share on a best efforts, all or none basis. To the extent that there is insufficient interest in shares of our Fantex Series Vernon Davis, this offering will be cancelled and no shares of our Fantex Series Vernon Davis would be sold to the public. Funds received from the offering will be deposited into an interest bearing escrow account pending the closing of the offering in accordance with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

             Our tracking stock brands are not separate legal entities and cannot issue securities. Instead, our Fantex Series Vernon Davis is a tracking stock. Each of our tracking stocks, including our Fantex Series Vernon Davis and any tracking stock that we may create in the future, is intended to track and reflect the separate economic performance of a specific brand contract we have signed with an athlete, entertainer or other high profile individual, each of which we refer to as a tracking stock brand. However, holders of shares of any of our tracking stocks will have no direct investment in the associated tracking stock brand, brand contract or individual. Rather, investors in any of our tracking stocks, including our Fantex Series Vernon Davis, will be our common stockholders and an investment in a tracking stock will represent an ownership interest in our company as a whole, which will expose holders to additional risks associated with any individual tracking stock that exists at the time of any investment or that we may establish and issue in the future. Vernon Davis and his affiliated persons are, and we expect they will continue to be, individuals and legal entities that are separate and independent from us, with separate ownership, management and operations. The issuance of Fantex Series Vernon Davis will not result in an actual transfer of our assets or the creation of a separate legal entity.

             The platform common stock is intended to track and reflect the economic performance of all of our tracking stock brands that we may issue in the future. Upon consummation of this offering, the Vernon Davis Brand, tracked by the Fantex Series Vernon Davis, may be our only tracking stock brand depending upon the status of the offering of our Fantex Series Arian Foster Convertible Tracking Stock and our Fantex Series EJ Manuel Convertible Tracking Stock, which we refer to respectively as Fantex Series Arian Foster and Fantex Series EJ Manuel. We would attribute to the Vernon Davis Brand, any other outstanding tracking stock brands, and the platform common stock certain assets and expenses, including in certain cases expenses related to other series of common stock of Fantex that may be issued from time to time in the future. Our board of directors at its sole discretion may convert the shares of Fantex Series Vernon Davis into platform common stock at any time following the two-year anniversary of the filing of a certificate of designation creating the Fantex Series Vernon Davis. See "Management and Attribution Policies" beginning on page 113 and "Description of Capital Stock" beginning on page 170.

             Holders of shares of our platform common stock and any of our tracking stocks, including shares of our Fantex Series Vernon Davis are each entitled to one vote per share of such stock. Following the consummation of this offering, Fantex Holdings, our parent company, will hold all 100,000,000 outstanding shares of our platform common stock, and thus will hold substantially all of the voting power of our outstanding common stock.

             We are an "emerging growth company," as that term is used in the Jumpstart Our Business Startups Act of 2012, and, as such, are subject to reduced public company reporting requirements. See "Prospectus Summary—Implications of Being an Emerging Growth Company."

             Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

       
 
 
  Per Share of
Fantex Series Vernon Davis(1)

  Total
 

Initial public offering price

  $  10.00   $  4,211,000
 

Underwriting discount(2)

  $    0.50   $     210,550
 

Proceeds to Fantex, before expenses

  $    9.50   $  4,000,450

 

(1)
The platform common stock will be issued for no separate consideration, but will be issued only upon the conversion of the Fantex Series Vernon Davis.
(2)
See "Underwriting (Conflicts of Interest)."

             Shares of our Fantex Series Vernon Davis are new securities; there are currently none issued and there is currently no established market. We do not intend to apply for a listing of our Fantex Series Vernon Davis on any securities exchange or for their inclusion in any established automated dealer quotation system. Our Fantex Series Vernon Davis will be offered only through the website of our affiliated broker-dealer, Fantex Brokerage Services, LLC, or FBS. Accordingly, we cannot assure you as to the development or liquidity of any market for our Fantex Series Vernon Davis. However, shares of our Fantex Series Vernon Davis will be issued in electronic form and will be listed exclusively on the FBS alternative trading system under the symbol "Fantex Vernon Davis."

             Investors will be required to satisfy the suitability requirements described in the prospectus in order to invest in the offering. The method for submitting reservations and a more detailed description of this offering process are included in "Underwriting (Conflicts of Interest)—Offering Process" beginning on page 178.

             Under the terms of the underwriting agreement, we expect that Fantex Holdings will agree to purchase from FBS, at the initial public offering price, up to 200,000 shares of Fantex Series Vernon Davis in this offering. Sales of shares to Fantex Holdings pursuant to the underwriting agreement will only be made if FBS represents in writing that it is unable to locate other qualified purchasers to purchase the shares at the initial public offering price. Under the terms of the underwriting agreement, Fantex Holdings will not transfer, sell or otherwise dispose of any shares purchased by it for a period of 180 days after the effective date of this offering. For further information regarding these standby shares, please see the section entitled "Underwriting (Conflicts of Interest)."

             This offering is highly speculative and the securities involve a high degree of risk. Investing in our Fantex Series Vernon Davis should be considered only by persons who can afford the loss of their entire investment. See "Risk Factors" beginning on page 37.

             Although Vernon Davis is under contract with the San Francisco Forty Niners, or 49ers, through the 2015 season, none of his contract payments are guaranteed through the remainder of the contract. According to the NFL Players Association, the average career of a National Football League, or NFL, player lasts about 3 years and according to the NFL Management Council the average career length for (i) an NFL rookie that makes an opening day NFL roster is 6 years, (ii) an NFL player that is a 1st round draft pick is 9.3 years and (iii) an NFL player that is selected for or plays in at least one Pro Bowl is 11.7 years. We assume that Vernon Davis's career will be 14 years. We have conducted a valuation analysis and determined that the present value of the brand income that Vernon Davis may earn is approximately $40 million, of which we are entitled to 10% under our brand contract with Vernon Davis. We will attribute 95% of the income to which we are entitled under our brand contract with Vernon Davis to the Vernon Davis Brand, while the remaining 5% will be attributed to the platform common stock. We made a number of assumptions to determine the value of the brand income. If any of our assumptions are materially incorrect, including our assumptions regarding the projected future earnings of Vernon Davis in football, football related activities and other brand income, the actual value of the brand income could be significantly less than $40 million, 76.9% of which is estimated to be derived from anticipated future contracts that do not exist as of the date of this prospectus. In such case, the return on investment or rate of return on an investment in Fantex Series Vernon Davis could be significantly below an investor's expectation. A more detailed description of the estimation of Vernon Davis's career length is included in the section entitled "—Vernon Davis Brand Contract, at Estimated Fair Value—Vernon Davis Career Length" beginning on page 98.

             This offering will terminate upon the earlier to occur of (i) 30 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all shares offered hereby have been sold.

FANTEX BROKERAGE SERVICES, LLC

STIFEL

The date of this prospectus is April 25, 2014.


Table of Contents

TABLE OF CONTENTS

 
  Page  

Prospectus Summary

    1  

Glossary of Certain Terms

    30  

Risk Factors

    37  

Special Note Regarding Forward-Looking Statements and Industry Data

    81  

Use of Proceeds

    82  

Dividend Policy

    83  

Capitalization

    85  

Dilution

    86  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    88  

Management and Attribution Policies

    113  

Business

    121  

Management

    151  

Executive Compensation

    158  

Transactions with Related Persons

    166  

Principal Stockholders

    168  

Description of Capital Stock

    170  

Underwriting (Conflicts of Interest)

    177  

Shares Eligible for Future Sale

    184  

Material U.S. Federal Income Tax Considerations

    185  

Legal Matters

    190  

Experts

    190  

Where You Can Find More Information

    190  

Index to Financial Statements

    F-1  

Index to Statements of Cash Receipts from Included Contracts for Vernon Davis

    SR-VD-1  

Index to Statements of Cash Receipts from Included Contracts for EJ Manuel

    SR-EM-1  

Index to Statements of Cash Receipts from Included Contracts for Arian Foster

    SR-AF-1  



        We have not, and the underwriters have not, authorized anyone to provide you with any information other than that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus may only be used where it is legal to offer and sell shares of our Fantex Series Vernon Davis. The information in this prospectus is complete and accurate only as of April 21, 2014, regardless of the time of delivery of this prospectus or any sale of shares of our Fantex Series Vernon Davis. Our business, financial condition, results of operations and prospects may have changed since that date. We are not, and the underwriters are not, making an offer of these securities in any jurisdiction where the offer is not permitted.

        This prospectus has been prepared by Fantex and may be used by FBS in connection with offers and sales of these securities in secondary market transactions in these securities, including market-making transactions as may be effected from time to time. However, FBS is not obligated to make a market in the Fantex Series Vernon Davis and if it does so, it may discontinue any market-making at any time without notice, in its sole discretion. FBS has no current intention of acting as a market-maker in the secondary market for the Fantex Series Vernon Davis, but may do so in the future. If FBS decides to make a market in a tracking stock, it will first amend its Form ATS filed with the Securities and Exchange Commission, or SEC, to reflect such change. To the extent FBS chooses to act as a market-maker, it may act as principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties, when it acts as agent for both. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. Fantex will not receive any proceeds from such secondary market offers and sales. All such transactions with respect to these securities that are made pursuant to a prospectus after the effectiveness of the registration statement of which this prospectus is a part are being made solely pursuant to this prospectus, as it may be supplemented from time to time. This delivery requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        Neither we nor the underwriters have undertaken any efforts to qualify this offering for offers to investors in any jurisdiction outside the United States. Investors must have a U.S. mailing address (other than a P.O. Box) and a U.S. social security number and/or a U.S. tax identification number to be eligible to participate in this offering.

i


Table of Contents


PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you. You should read and carefully consider the following summary together with the entire prospectus, including our financial statements and the related notes thereto appearing elsewhere in this prospectus, before deciding to invest in our Fantex Series Vernon Davis. Some of the statements in this prospectus constitute forward-looking statements that involve risks and uncertainties. See "Special Note Regarding Forward-Looking Statements and Industry Data." Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those discussed in the "Risk Factors" and other sections of this prospectus.

        We are a development-stage brand acquisition, marketing and brand development company whose focus is on acquiring minority interests in the income associated with the brands of professional athletes, entertainers and other high-profile individuals and assisting such individuals in enhancing the reach and value of their respective brands. We intend to focus our business on three core areas:

    evaluating, targeting and accessing individuals and brands with the potential to generate significant income associated with these brands, or brand income;

    acquiring minority interests in such brand income; and

    assisting our acquired brands in increasing their value via technology and through leveraging our marketing, advertising and strategic partnering expertise.

        On October 30, 2013, we entered into a brand contract with Vernon Davis, a professional athlete in the National Football League, or NFL, pursuant to which we will acquire an interest equal to 10% of the gross monies or other consideration (including rights to make investments) that Vernon Davis receives from and after October 30, 2013, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes), as a result of his activities in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching. As consideration for this interest under the brand contract, we will pay Vernon Davis a one-time cash amount of $4.0 million contingent upon our ability to obtain financing, which we intend to do through this offering.

        We have also entered into brand contracts with Arian Foster, effective February 28, 2013, as amended, and Erik "EJ" Manuel, Jr., whom we refer to as EJ Manuel, effective February 14, 2014. We intend to enter into additional brand contracts in the future with other individuals with the potential to generate significant brand income, and in some cases, with the affiliates of these individuals, whom we refer to, together with the individual, as the contract party. We are actively pursuing these additional brand contracts, but as of April 21, 2014 we have no current commitments to enter into another brand contract. All of our brand contracts, including those that we enter into in the future with other contract parties, are or are expected to be contingent upon obtaining financing to fund the acquisition of the minority interest in the respective brands, and we intend to finance the acquisition of additional brands through the issuance of additional tracking stocks linked to the value of such brands.

        We were incorporated on September 14, 2012 as a wholly-owned subsidiary of Fantex Holdings, our parent. Fantex Holdings was incorporated in Delaware on April 9, 2012. We have little operational history and limited assets and resources, have never generated any revenues, and to date we have relied on our parent to conduct our operations through its employees. Following the consummation of our first public offering we intend to operate under a management agreement with our parent, which we describe in more detail below but pursuant to which our parent will provide us with certain management and administrative services, including providing and compensating our executive management and other personnel, as well as services relating to information technology support, brand management and other support operations, facilities, human resources, tax planning and administration,

 

1


Table of Contents

accounting, treasury and insurance. We will begin to assume management and administrative tasks at such time in the future as the actual cost of these services is less than our service fee to Fantex Holdings, which we do not anticipate would occur until we begin to receive significant cash flows from multiple brand contracts. However, if our parent is unable to perform any of the services that they are required to perform under the management agreement, due to financial difficulty or otherwise, then we may be forced to assume management and administrative tasks, and incur additional expenses, sooner than we anticipate. Until such time we will continue to rely on our parent to conduct our operations in accordance with the management agreement.

Evaluation, Acquisition and Enhancement of Brands

        Prior to entering into a brand contract, we conduct a detailed evaluation of the brand and the contract party to determine whether, in our opinion, the brand would be a suitable brand with the potential to generate significant brand income based on the criteria set forth below. We consider a brand to be a distillation of a complex set of associations people make with respect to an individual, including performance, appearance, history and personal story, products or services such individual is associated with, public statements or positions on matters of public concern, how an individual acts or the image such individual projects to the world. We seek brands that convey images and associations that we believe will be recognized and valued in the market place.

        As part of our brand evaluation, we review the brand's reputation and relative standing in their principal field, such as a top tight end, running back or quarterback in the NFL, collect and analyze widely followed statistics, review existing contracts and potential for future contracts, assess the character and reputation of the contract party, assess potential future cash flow expected to be generated by the contract party as well as examine the brand's current positioning and marketing footprint (such as, for example, if they are on Twitter, the reach (how many followers), engagement level (how engaged are the followers), and potential for growth). This evaluation provides a framework to develop further marketing strategies to aid us in our efforts to enhance the value of the brand.

        We believe we have extensive industry contacts among the board of directors, employees, consultants and advisors of our company and our affiliates, Fantex Holdings and FBS, which we utilize to access individuals and brands that meet our criteria. Through our contacts we seek to establish working relationships with these brands and their key advisors to begin the process of educating them about our business and the benefits of a brand contract and a continuing relationship. We enter into an arm's-length negotiation primarily to finalize a purchase price, our percentage of the contract party's brand income, which we refer to as the acquired brand income, or ABI, and the scope of brand income, including whether or not there would be any specific exclusions. We do, however, have limited experience in evaluating and entering into similar contracts with athletes, entertainers and other high-profile individuals because we are pioneering a new business model and to date we have only entered into three brand contracts.

        We believe that developing a diverse portfolio of global brands will enable us to increase brand reach across our portfolio and allow us to provide unique insights that contract parties may employ to increase consumer awareness of their brands and our brands more generally. We believe that our combined efforts could lead to increased consumer engagement with the brands by optimizing message delivery, including driving engagement through the use of content developed by us or third parties. We seek to aid our brands in fostering positive brand associations in order to create a unique position in the marketplace that is independent of their primary occupation, such as an athlete in the NFL. We believe this will drive greater engagement with a connected audience and lead to greater longevity of the brands. We also believe that investors in a tracking stock linked to a brand are more likely to be consumer advocates for that brand. Investors in a tracking stock would have an economic interest in the growth of the associated tracking stock brand, and therefore we believe they may be more likely to follow and share brand information and be more active promoters of the associated brand than other

 

2


Table of Contents

fans or social network followers of the athlete. However, we have no history to demonstrate, and we can make no assurances, that any of our investors will in fact actively promote the associated brand.

        In addition to our services intended to help optimize the reach of the brand, we intend to provide advice to contract parties based on our experience that would aid them in obtaining more attractive terms in their negotiations with future sponsors. We believe that our proprietary internal data and our marketing insights will assist our contract parties to more accurately evaluate their brand value in the marketplace and potentially increase future endorsement amounts and brand longevity post career.

        We note, however, that we have no contractual obligation to the contract party to engage in any of these activities that may enhance the value of our brands, and the contract party has no contractual obligation to implement any advice that we may provide. Brand development is a long-term strategy, and any investment we may make to promote our acquired brands will be for long-or medium-term results and would not be expected to increase brand income in the near-term, if at all. Moreover, as with other forms of marketing and brand enhancement strategies, the impact of our efforts on brand value may be difficult to determine objectively. Even if our promotion activities increase the endorsement income to a contract party, they may nonetheless have a negative impact on the market value of shares of the associated tracking stock because we will only receive a portion of any increased brand income. For example, because the ABI under our Vernon Davis brand contract is 10% of brand income, our promotion efforts must produce brand income equal to at least ten times our costs for such promotion efforts in order to return our investment.

        If our brand enhancement strategy is unsuccessful, or if the contract party chooses not to accept any brand enhancement assistance from us, then the success of any brands we acquire will be entirely dependent upon the efforts of the contract party. In addition, the contract party is neither our affiliate, nor a director, officer or employee of our company and owes no fiduciary duties to us or any of our stockholders, and has no obligation to take any action whatsoever to enhance the value of the brand.

Our Tracking Units and Tracking Stocks

        To date we have entered into three brand contracts, created a tracking unit related to each of these brand contracts, which we refer to generally as "tracking stock brands," and created a tracking stock related to such tracking stock brands, with each of:

Contract Party
  Effective Date of Brand Contract   Tracking Unit related to the Brand Contract   Tracking Stock related to the Tracking Stock Brand
Vernon Davis   October 30, 2013   Vernon Davis Brand   Fantex Series Vernon Davis

EJ Manuel

 

February 14, 2014

 

EJ Manuel Brand

 

Fantex Series EJ Manuel

Arian Foster

 

February 28, 2013

 

Arian Foster Brand

 

Fantex Series Arian Foster

        For a more detailed description of the brand contracts and our tracking stock brands, please see the sections entitled "Business—Our Brands" and "Management and Attribution Policies."

        We will initially attribute the following assets and liabilities to our initial tracking stock brands:

    95% of our ABI under the associated brand contract;

    any and all of our liabilities, costs and expenses that are directly attributable to the associated tracking stock brand, such as our direct costs arising out of our promotion of the associated brand or arising out of or related to the maintenance and enforcement of the associated brand contract, provided, however, that we will not attribute any of the expenses or costs related to this offering (other than the underwriting discount) or incurred by us or our parent prior to the

 

3


Table of Contents

      consummation of this offering, including our efforts to build our business model and enter into our brand contracts with the contract parties listed above, to the associated tracking stock brand;

    a pro rata share of our general liabilities, costs and expenses not directly attributable to any specific tracking stock (calculated based on attributable income) but excluding any non-cash expenses that are allocated from our parent to us. Attributable expenses would include, for example, a pro rata portion of the service fee we pay to our parent pursuant to the management agreement (5% of our cash receipts). Expenses that would not be attributed would include expenses incurred by our parent, including any expenses incurred in providing services to us under the management agreement, to the extent in excess of our service fee to them;

    as income, any covered amounts, as described in "Management and Attribution Policies—Attribution—Covered Amounts," for the associated brand contract; and

    as an expense, the pro rata share of any covered amounts, as described in "Management and Attribution Policies—Attribution—Covered Amounts," relating to any tracking stock brand (including the pro rata share of any covered amounts for the associated tracking stock brand).

        As described above, income (and assets) will generally be attributed to any of our tracking stocks based on the earnings of the associated tracking stock brand. However, while we intend for our tracking stocks, including Fantex Series Vernon Davis, to track the performance of the associated tracking stock brand (in this case, the Vernon Davis Brand), we cannot provide any guarantee that any tracking stock will in fact track the performance of the associated tracking stock brand. Our board of directors has discretion to reattribute assets, liabilities, revenues, expenses and cash flows without the approval of shareholders of a particular tracking stock, which discretion will be exercised in accordance with its fiduciary duties under Delaware law and only where its decisions are in the best interests of the company and the stockholders as a whole. In certain circumstances, decisions of our board of directors may also be subject to the approval of the conflicts committee of our board of directors. For a more detailed description, please see "Management and Attribution Policies—Fiduciary and Management Responsibilities, Conflicts Committee." Furthermore, in the event we do not receive cash payments from one or more of our brand contracts to which we otherwise would have been entitled because of debtor relief laws, then the attributed income for the corresponding tracking stock will nonetheless be credited with the amount which we would otherwise have been entitled to receive. In such a case, the difference between such attributed amount and the actual income we receive from such brand contract will be attributed as a general expense of Fantex. As a result, each of our tracking stocks will share on a pro rata basis (calculated based on attributable income) the burden of any non-performing brand contracts, whether or not included in the assets attributed to such tracking stock, and the economic performance of any of our tracking stocks, including Fantex Series Vernon Davis, will be dependent, in part, upon the aggregate financial performance of Fantex. Therefore, prior to purchasing our Fantex Series Vernon Davis, you should understand our aggregate operating performance and our aggregate assets and liabilities. Until such time as we acquire additional brands and issue additional tracking stocks, the risk of bankruptcy of Vernon Davis will be borne solely by holders of our Fantex Series Vernon Davis. Furthermore, we intend to acquire additional minority interests in other brands in the future so our operating performance will depend upon the soundness of our business plan and our ability to execute on that plan, including entering into additional brand contracts in the future.

        Given that the economic performance of each of our tracking stocks is dependent, in part, upon the aggregate financial performance of Fantex, Fantex Series Vernon Davis could be affected by any of our other brand contracts we have entered into or may enter into in the future. The risk profile of the shares of the Fantex Series Vernon Davis could likewise be materially and adversely impacted by the performance of our other tracking stock brands if the offerings of our other tracking stocks are consummated, or by any additional brand contracts entered into subsequent to your investment in the Fantex Series Vernon Davis.

 

4


Table of Contents

        Our Vernon Davis Brand is not a separate legal entity and cannot issue securities. Holders of shares of Fantex Series Vernon Davis will not have an ownership interest in our Vernon Davis Brand, or any of our affiliated entities. Rather, investors in our Fantex Series Vernon Davis will be our common stockholders. The issuance of the Fantex Series Vernon Davis will not result in the actual transfer of our assets or the creation of a separate legal entity. Vernon Davis and his affiliated persons are, and we expect they will continue to be, individuals and legal entities that are separate and independent from us, with separate ownership, management and operations.

        In addition, there are certain features that may distinguish our tracking stock from more traditional investments. For example, the Fantex Series Vernon Davis is intended to track the performance of Vernon Davis's brand over his lifetime, which could potentially be very short, and thereafter. Although we intend to build brands that outlast an athlete's playing career, some brands may not produce income beyond the playing career of the athlete associated with such brand. Furthermore, potential gains on your investment will likely come from dividends paid by us. Most of the dividends paid in the early years of your investment will, for U.S. federal income tax purposes, be considered a return of your capital (rather than a gain on your investment), similar to the generally accepted accounting principles in the United States, or GAAP, treatment described in the critical accounting policies section of our "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the heading "Income (Loss) from Brand Contracts." The anticipated returns in the earlier years under the brand contract are amounts currently expected to be paid from Vernon Davis's existing contracts and endorsement contracts expected to be entered into in the near future based on his current brand value. As a result, any potential gains on your investment will only be realized if, and will be deferred until, we can enhance Vernon Davis's brand value over time and we monetize on this expanded brand. Moreover, the Vernon Davis Brand does not currently represent a separate business division of Fantex, but rather will be a business division of ours following the completion of this offering and thus we will have no prior operating history with this brand prior to consummation of this offering.

Conversion into Platform Common Stock

        Our board of directors may at any time following the two-year anniversary of the filing of a certificate of designation creating a new tracking stock, resolve to convert such tracking stock into fully paid and non-assessable shares of our platform common stock at a conversion ratio to be determined by dividing the fair value of a share of such tracking stock by the fair value of a share of our platform common stock. For instance, our board of directors may convert any tracking stock into platform common stock where such tracking stock is no longer an actively traded stock, as determined in good faith by our board of directors or a committee of our board of directors, such as, for example, if the athlete, entertainer or other high profile individual suffers an injury, illness, medical condition or disability, or he dies, and his brand income diminishes as a result and there is little if any expectation that his brand income will materially increase in the future. In this case, our board of directors may convert the shares of such tracking stock into platform common stock as a means of retiring the tracking stock. As a result, you are not likely to receive a new security of significant value because such conversion is likely to occur at a time when the tracking stock has little or no value. Our board of directors may also convert shares of any tracking stock into platform common stock, at any time following the two-year anniversary of the filing of a certificate of designation creating a new tracking stock, if some other special or extraordinary circumstances exist, such as a potential restructuring, reorganization or change of control of Fantex. Our platform common stock is not convertible into any other shares of our capital stock.

        Our platform common stock is intended to track and reflect the economic performance of all of our tracking stock brands by having a small percentage of ABI from these tracking stock brands attributed to it. We will also initially attribute to our platform common stock any liabilities not directly

 

5


Table of Contents

attributable to tracking stocks or general expenses of the Company not attributable to any tracking stocks.

Vernon Davis Brand

Vernon Davis Brand Contract

        Our brand contract with Vernon Davis entitles us to receive 10% of brand income for Vernon Davis from and after October 30, 2013. Brand income generally means gross monies or other consideration (including rights to make investments) that Vernon Davis receives as a result of his skills and brand, including salary and wages from being an athlete in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes).

        As consideration for the acquired brand income under the brand contract, we will pay Vernon Davis a one-time cash amount of $4.0 million contingent upon our ability to obtain financing, which we intend to do through this offering. We will have no further financial obligation to Vernon Davis under the brand contract once this payment has been made. The brand contract is intended to remain in effect indefinitely and, except as set forth below, may be terminated only upon mutual agreement of Vernon Davis and us. If Vernon Davis resigns from the NFL within two years of the date of this offering for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $4.2 million (net of any amounts previously paid to us by him pursuant to the brand contract). We are also entitled to certain other ongoing information and audit rights.

        For a further description of our brand contract with Vernon Davis please see "Business—Vernon Davis Brand—Vernon Davis Brand Contract."

Vernon Davis

        Vernon Davis is a tight end for the 49ers in the NFL. He has been in the NFL since 2006. Vernon Davis attended the University of Maryland, where he was the starting tight end for his sophomore and junior seasons. Vernon Davis entered the NFL draft after his junior year and was selected in the first round, 6th overall, by the San Francisco 49ers. Vernon Davis was born on January 31, 1984 and is 30 years old as of April 21, 2014. He currently lives in San Jose, California. During the 2009 NFL season, Vernon Davis was selected to the Pro Bowl after posting career highs of 78 receptions, 965 yards, and 13 touchdown receptions. At the time, that number of touchdown receptions tied the NFL single season record for a tight end.

        On September 24, 2006, Vernon Davis left a regular season NFL game in the third quarter after sustaining a fracture to his right fibula. This injury caused him to miss six games during the 2006 NFL regular season. After suffering a concussion, Vernon Davis was forced to temporarily leave a regular season game on December 31, 2006. On September 23, 2007, Vernon Davis left a regular season NFL game early after suffering a sprain to his right knee. This injury caused him to miss the following two regular season games. Vernon Davis also missed portions of two regular season NFL games in the 2010 season following a reported ankle injury. On December 23, 2012, Vernon Davis was reported to leave an NFL game early after suffering a concussion. On September 15, 2013, Vernon Davis left a regular season NFL game early in the fourth quarter with a hamstring strain, which injury also caused him to miss a game the subsequent week. Most recently, on November 10, 2013, Vernon Davis was reported to leave a regular season game early as a result of suffering a concussion. Vernon Davis has experienced these and other instances of normal wear and tear as an athlete in the NFL and we expect that Vernon Davis will continue to experience such wear and tear. Any worsening of these conditions, or re-injury or new injury, could materially and adversely affect Vernon Davis's playing performance and the value of the Vernon Davis Brand.

 

6


Table of Contents

Vernon Davis Brand Income

        Vernon Davis's brand income currently includes amounts from his NFL player contract with the 49ers and several endorsement agreements. Substantially all of his current brand income is derived from his NFL player contract. In addition, approximately 77.3% (before applying any discount rates for future earnings) of the total brand income that we estimated for Vernon Davis is derived from anticipated future contracts that do not exist as of the date of this prospectus, such as future endorsements, playing contracts and/or additional brand income generated from coaching, broadcasting or the like. The opportunity to receive a return of capital or any profit from an investment in our Fantex Series Vernon Davis will depend in large part upon Vernon Davis's ability to enter into at least one additional multi-year NFL player contract for at least $33 million and on his ability over the same period and beyond to enter into and maintain endorsement contracts (or earn other brand income) that compensate him in amounts that are in excess of compensation that he has had historically from these sources. We will not know for a number of years, including up to two years for his NFL player contract, whether and on what terms Vernon Davis would be able to secure such contracts. For a more detailed description of the valuation of the Vernon Davis Brand Contract, please see section entitled "—Vernon Davis Brand Contract, at Estimated Fair Value" beginning on page 97.

    NFL Player Contract

        Vernon Davis has completed the fourth year of a six year player contract with the 49ers, pursuant to which he received or is eligible to receive for the 2013 season (from and after October 30, 2013) through the 2015 season a salary of up to an aggregate of $12.62 million ($3.57 million in 2013, $4.7 million in 2014 and $4.35 million in 2015, none of which is guaranteed), plus bonuses of up to an aggregate of $1.4 million. Each of these payments would be considered brand income when received by Vernon Davis, and thus we would be entitled to 10% of these amounts when paid. To the extent Vernon Davis elects to defer receipt of his compensation under the NFL player contract, pursuant to Article 26, Section 6 of the Collective Bargaining Agreement by and between National Football League Management Council and the National Football League Players Association (the "CBA"), for purposes of the brand contract, such deferred compensation will be deemed to have been received by Vernon Davis on the due date provided in his NFL player contract, prior to any such deferral, and we will be entitled to 10% of these amounts as of such due date. Payments under the NFL player contract are made in installments over the course of the applicable regular season period. Therefore, we expect that the Vernon Davis Brand will be subject to seasonal fluctuations in attributed income.

        The 49ers may terminate Vernon Davis's player contract at any time, in the sole judgment of the 49ers, if Vernon Davis's skill or performance has been unsatisfactory as compared with that of other players competing for positions on the 49ers' roster, or if Vernon Davis has engaged in personal conduct reasonably judged by the 49ers to adversely affect or reflect on the 49ers. In addition, during the period any salary cap is legally in effect, the player contract may be terminated if, in the 49ers' opinion, Vernon Davis is anticipated to make less of a contribution to the 49ers' ability to compete on the playing field than another player or players whom the 49ers intend to sign or attempt to sign, or another player or players who is or are already on the 49ers' roster, and for whom the 49ers need room. The 49ers may also terminate the player contract if Vernon Davis fails to establish or maintain his excellent physical condition to the satisfaction of the 49ers' physician, or make the required full and complete disclosure and good faith responses to the 49ers' physician of any physical or mental condition known to him which might impair his performance under this contract and to respond fully and in good faith when questioned by the 49ers' physician about such condition.

        For a further description of the duration, compensation and other material provisions of the NFL player contract, please see "Business—Vernon Davis Brand—Vernon Davis Brand Income—NFL Player Contract—San Francisco Forty Niners (the 49ers)."

 

7


Table of Contents

    Other Contracts

        As of December 31, 2013 Vernon Davis was a party to the following included contracts: Hungry Fish Media, LLC (d/b/a/ NutraClick), New League Productions, Inc., Krave Pure Foods and KGO-TV. These contracts generally have terms that end in 2015, with KGO-TV completed as of the end of the 2013 NFL season, and require Vernon Davis to exclusively endorse certain categories of products, make certain appearances, participate in the production of promotional materials and social media activities and sign autographs. Vernon Davis is entitled to total compensation under these agreements of up to approximately $403,423.

        These contracts may be terminated in the event of breach of contract by Vernon Davis or if Vernon Davis fails to play in the NFL, play for the 49ers, is charged with criminal behavior or engages in conduct that adversely reflects on the sponsor. For example, as a result of Vernon Davis tweeting about a competing product, a coconut water company recently terminated its contract with him as a spokesperson. In addition, certain endorsement contracts may be terminated due to changes to NFL rules preventing reasonable use of the endorsement product.

Other Brands

EJ Manuel Brand

        Our brand contract with EJ Manuel entitles us to receive 10% of brand income for EJ Manuel from and after February 14, 2014. Brand income generally means gross monies or other consideration (including rights to make investments) that EJ Manuel receives as a result of his skills and brand, including salary and wages from being an athlete in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes).

        As consideration for the acquired brand income under the brand contract, we will pay EJ Manuel a one-time cash amount of $4.98 million contingent upon our ability to obtain financing, which we intend to do through an offering of shares of our Fantex Series EJ Manuel. We will have no further financial obligation to EJ Manuel under the brand contract once this payment has been made. The brand contract is intended to remain in effect indefinitely and, except as set forth below, may be terminated only upon mutual agreement of EJ Manuel and us. If EJ Manuel resigns from the NFL within two years of the date of the offering of Fantex Series EJ Manuel for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $5.24 million (net of any amounts previously paid to us by him pursuant to the brand contract). We are also entitled to certain other ongoing information and audit rights.

        For a further description of our brand contract with EJ Manuel please see "Business—Other Brands—EJ Manuel Brand."

Arian Foster Brand

        Our brand contract with Arian Foster entitles us to receive 20% of brand income for Arian Foster from and after February 28, 2013. Brand income generally means gross monies or other consideration (including rights to make investments) that Arian Foster receives as a result of his skills and brand, including salary and wages from being an athlete in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching, subject to specified exceptions.

        As consideration for the acquired brand income under the brand contract, we will pay Arian Foster a one-time cash amount of $10.0 million contingent upon our ability to obtain financing, which we intend to do through an offering of shares of our Fantex Series Arian Foster. We will have no further financial obligation to Arian Foster under the brand contract once this payment has been made. The brand contract is intended to remain in effect indefinitely and, except as set forth below, may be

 

8


Table of Contents

terminated only upon mutual agreement of Arian Foster and us. If Arian Foster resigns from the NFL within two years of the date of such offering of Fantex Series Arian Foster for any reason other than injury, illness or a medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $10.5 million (net of any amounts previously paid to us by him pursuant to the brand contract). We are also entitled to certain other ongoing information and audit rights.

        On November 12, 2013, after confirming reports that Arian Foster will undergo season ending back surgery, we announced that we are postponing the offering for Fantex Series Arian Foster. Although we will continue to work with Arian Foster through his recovery and intend to continue with the offering of Fantex Series Arian Foster at an appropriate time in the future, we cannot guarantee that the offering of Fantex Series Arian Foster will be consummated or that the offering will be resumed upon the same terms.

        For a further description of our brand contract with Arian Foster please see "Business—Other Brands—Arian Foster Brand."

Management Agreement

        We have entered into a management agreement with our parent that will become effective upon the consummation of our first public offering, and pursuant to which our parent will provide us with management and administrative services, including providing and compensating our executive management and other personnel, as well as services relating to information technology support, brand management and other support operations, facilities, human resources, tax planning and administration, accounting, treasury and insurance. We have agreed to pay 5% of the amount of the gross cash received by us, if any, pursuant to our brand contracts during any quarterly period as remuneration for the services provided. The amount of gross cash received used to calculate this 5% fee will include any portion allocated to reduction in carrying value on our financial statements but shall not take into account the changes in fair value of the brand contracts. As such, the service fee under the management agreement will be determined based on the total amount of actual cash received under the brand contracts in a given quarterly period prior to any adjustments for fair value and without regard to the expected cash receipts in such quarter as reflected in the financial statements for that quarter. To the extent we receive no cash for any period then we would not owe any fee for any services provided during that period. We may evaluate the service fee from time to time to assess the continued appropriateness of the percentage of our cash receipts upon which the service fee is calculated, in light of the services being provided by our parent at the time and cost of those services.

        The agreement has an initial term through December 31, 2014, and will automatically renew for successive one-year terms each December 31 unless either party provides written notice of its intent not to renew at least three months prior to such renewal. We may also terminate any specific service and/or the agreement, without penalty, with 30 days prior written notice to Fantex Holdings. Fantex Holdings may terminate any specific service and/or the agreement with 180 days prior written notice to us, but if we, using our commercially reasonable efforts, are unable to either perform the services ourselves or enter into a reasonable arrangement with a third party to perform the services that we are unable perform ourselves, then Fantex Holdings will continue to perform such services for an additional period of 180 days.

 

9


Table of Contents

Risks Associated with Our Business

        Our ability to implement our business strategy is subject to numerous risks and uncertainties. We face many risks inherent in our business generally. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading "Risk Factors," prior to making an investment in our Fantex Series Vernon Davis. These risks include, among others, the following:

Risks Relating to Our Limited Operating History, Financial Position and Capital Needs

    We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.

    We have a very limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability. Our business model also requires us to make substantial upfront payments to our contract parties in exchange for rights to future payments.

    To date, we have not generated any revenues or cash flow from any brand contract, and following completion of this offering, our brand contract with Vernon Davis will represent our only source of revenue or cash flow. We may not receive the cash amounts that we expect, or any at all, from our brand contract with Vernon Davis or from any future brand contracts and we may never generate sufficient revenue to become profitable.

    We will need to obtain additional funding to acquire additional brands and we may also need additional funding to continue operations. If we fail to obtain the necessary financing, or fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and we may be forced to significantly delay, scale back or discontinue our operations.

Risks Relating to Our Brand Contracts and Our Business

    Our principal source of cash flow for the foreseeable future will be derived from our brand contracts.

    We do not have any experience managing brand contracts and we do not have any historical performance data about our brand contracts.

    Our cash flows under our brand contracts will depend upon the continued satisfactory performance of the related contract party, and we do not have any rights to require the contract party to take any actions to attract or maintain or otherwise generate brand income.

    The contract party is neither our affiliate, nor a director, officer or employee of our company and owes no fiduciary duties to us or any of our stockholders. The contract party has no obligation to enhance the value of the brand or disclose harmful information to the stockholders.

    Profitability of our brand contracts may also depend upon the contract party's ability to attract and maintain endorsements and attract and maintain other brand income generating activities.

    Brand income may decrease due to factors outside the control of the contract party, such as an injury, illness, medical condition or death of the contract party, or due to other factors such as public scandal or other reputational harm to the contract party. In any such event, it is likely that the brand income with respect to such brand contract will not return to its prior levels or may cease completely.

 

10


Table of Contents

    The contract party or other third parties may refuse or fail to make payments to us under the brand contracts.

    Our brand contracts are not secured by any collateral or guaranteed or insured by any third party other than the contract party, and you must rely on Fantex to pursue remedies against the contract party in the event of any default.

    The brand contract does not restrict the contract party from incurring unsecured or secured debt, nor does it impose any other financial restrictions on the contract party.

    The financial and other information that we obtain from the contract party or other third parties may be inaccurate and may not accurately reflect the true financial position of the contract party, and the risk of default on the brand contract may be significant and may be higher than we anticipate.

    Our due diligence procedures may not reveal all relevant information regarding a targeted brand acquisition and may result in an inaccurate assessment of the projected value of an acquired brand.

    The valuation of our brand contracts and expected ABI requires us to make material assumptions that may ultimately prove to be incorrect. In such an event, we could suffer significant losses that could materially and adversely affect our results of operations.

    Changes in government policy, legislation or regulatory interpretations could cause our business operations or offerings of tracking stocks to become subject to additional regulatory or legal requirements (including insurance and other regulations) that may adversely affect our business operations and ability to offer additional tracking stocks.

    The leagues, team owners, players associations, endorsement partners, elected officials or others may take actions that could restrict our ability or make it more costly for us to enter into future brand contracts.

    We are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan in a timely manner, or at all.

Risks Relating to Each of Our Contract Parties

    Our ability to increase the value of our tracking stock brands may be limited and our investments in the promotion of such tracking stock brands may cause the market value of our stock to decline.

    The value of our tracking stock brands is dependent upon the performance of, and to a lesser extent, the popularity of our contract parties.

    Contract parties in the NFL could be negatively affected by an NFL work stoppage.

    Contract parties in the NFL could be negatively affected by current and future rules of the NFL.

    There could be a decline in the popularity of the NFL and/or the team on which the contract party plays in the NFL, or a decline in the contract party's popularity.

Risks Relating to Vernon Davis

    Vernon Davis's NFL player contract is a significant portion of the current amounts we would receive under his brand contract.

    The profitability of Vernon Davis's brand contract is substantially dependent upon Vernon Davis's ability to enter into at least one additional high-value, multi-year NFL player contract,

 

11


Table of Contents

      and on his ability to successfully attract and retain endorsements during his playing career and thereafter in excess of amounts he has attracted historically and/or generate other brand income after his playing career. If Vernon Davis does enter into an additional high-value, multi-year NFL player contract, there is no guarantee that any portion of such contract will consist of guaranteed money. For a more detailed description of the valuation of the Vernon Davis Brand Contract, please see section entitled "—Vernon Davis Brand Contract, at Estimated Fair Value" beginning on page 97.

    Vernon Davis has incurred other secured debt, including auto loans and mortgage payables, the payment of which may adversely impact his ability to make payments under the brand contract.

    Vernon Davis may suffer from an injury, illness or a medical condition; any injuries, illnesses or medical conditions of Vernon Davis may affect the cash received by us under the brand contract.

    Future negative publicity could damage Vernon Davis's reputation and impair the value of his brand.

Risks Relating to EJ Manuel

    EJ Manuel's NFL player contract is a significant portion of the current amounts we would receive under his brand contract.

    The profitability of EJ Manuel's brand contract is substantially dependent upon EJ Manuel's ability to enter into additional high-value, multi-year NFL player contracts, and on his ability to successfully attract and retain endorsements during his playing career and thereafter significantly in excess of amounts he has attracted historically and/or generate other brand income after his playing career. For a more detailed description of the valuation of the EJ Manuel Brand Contract, please see section entitled "—EJ Manuel Brand Contract, at Estimated Fair Value" beginning on page 100.

    EJ Manuel has been an NFL football player for only one season and has limited historical data upon which to base our valuation and projections of his future earnings potential.

    EJ Manuel has incurred other secured debt, including mortgage payables, the payment of which may adversely impact his ability to make payments under the brand contract.

    EJ Manuel may suffer from an injury, illness or a medical condition; any injuries, illnesses or medical conditions of EJ Manuel may affect the cash received by us under the brand contract.

    Future negative publicity could damage EJ Manuel's reputation and impair the value of his brand.

Risks Relating to Arian Foster

    Arian Foster's NFL player contract is a significant portion of the current amounts we would receive under his brand contract.

    The profitability of Arian Foster's brand contract is substantially dependent upon Arian Foster's ability to enter into at least one additional multi-year NFL player contract on economic terms that are comparable to his existing NFL player contract, and, to a lesser extent, on his ability to successfully attract and retain endorsements during his playing career and thereafter in excess of amounts he has attracted historically and/or generate other brand income after his playing career. For a more detailed description of the valuation of the Arian Foster Brand Contract, please see section entitled "—Arian Foster Brand Contract, at Estimated Fair Value" beginning on page 107.

 

12


Table of Contents

    Arian Foster may suffer from an injury, illness or a medical condition. For example, during a regular season NFL game on November 3, 2013 Arian Foster suffered a back injury, which required surgery and resulted in him missing the rest of the 2013 NFL playing season.

    Future negative publicity could damage Arian Foster's reputation and impair the value of his brand.

Risks Relating to our Tracking Stock Structure

    A specified portion of the ABI associated with each of our brand contracts will be attributed to our platform common stock rather than the associated tracking stock. Therefore each of our tracking stocks will only partially reflect the economic performance of the associated brand contract and other assets and expenses of the associated tracking stock brand.

    As a series of our common stock, each of our tracking stocks will be exposed to additional risks associated with our company as a whole, including any individual tracking stock that exists at the time of the offering or that we may establish and issue in the future.

    The market price of our tracking stocks may not reflect the intrinsic value or performance of the associated tracking stock brand.

    The market price of our tracking stocks may be more volatile than other publicly traded common stock because of our unique capital structure.

    Our capital structure may create conflicts of interest for our board of directors and management, which could have a material adverse effect on the market value of any of our tracking stocks.

    Our parent, Fantex Holdings, Inc., or Fantex Holdings, as a holder of our platform common stock, will have control over key decision making as a result of their control over a majority of our voting stock.

    Ownership of our platform common stock by our parent company and any of our officers or directors, may create, or appear to create, conflicts of interest with holders of our tracking stocks.

    Our officers and directors may have a conflict of interest or appear to have a conflict since almost all of our officers are also officers of Fantex Holdings.

    Our capital structure may decrease the amounts available for the payment of dividends to holders of our tracking stocks.

    Our board of directors has the ability to change our attribution policies at any time without a vote of our stockholders, which may adversely affect the market value of our Fantex Series Vernon Davis.

    Our board of directors may, in its sole discretion, elect to convert any of our tracking stocks into our platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, thereby changing the nature of your investment and possibly diluting your economic interest in Fantex or creating market uncertainty regarding the nature of your investment, any of which could result in a loss in value to holders of our tracking stocks.

Risks Relating to this Offering and the Offering Process

    There is no current trading market for our Fantex Series Vernon Davis or any other series of our capital stock and if a trading market does not develop, purchasers of our Fantex Series Vernon Davis may not be able to sell, or may have difficulty selling, their shares.

 

13


Table of Contents

    Our Fantex Series Vernon Davis is not a "covered security," or otherwise exempt from the "blue sky" securities laws governing sales and purchases of Fantex Series Vernon Davis in each of the fifty states, and therefore we must register in each state in which offers and sales will be made.

    State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell shares of our Fantex Series Vernon Davis.

    We expect that our offering will primarily attract individual investors, and therefore our initial public offering price may not be sustainable if and when trading begins, and the price of our Fantex Series Vernon Davis could decline rapidly and significantly.

    We intend to issue additional tracking stocks, which would reduce then-existing investors' percentage of ownership in Fantex and may dilute our share value.

    Transaction costs for trades on the FBS ATS could decrease the liquidity of your investment in our Fantex Series Vernon Davis and could reduce or eliminate any positive return on your investment in our Fantex Series Vernon Davis.

    Our compliance burdens and costs will be significant as a result of operating as a public company, particularly as a result of our tracking stock structure. Our management will be required to devote substantial time to compliance matters.

    If Fantex Series Vernon Davis is not treated as a class of common stock of Fantex, adverse federal income tax consequences will result.

Risks Relating to the Issuance of Additional Tracking Stocks, Including the Issuance of Fantex Series EJ Manuel and Fantex Series Arian Foster, which issuance has currently been postponed and which may not be consummated on terms described elsewhere in this prospectus, if at all.

    Our Fantex Series Vernon Davis may be adversely impacted by any non-performing brand contracts, whether or not such brand contracts are included in the assets attributed to our Fantex Series Vernon Davis.

    If a blog post published about us in August 2013 were held to be in violation of the Securities Act, we could be required to repurchase securities sold, if any, in our offering of Fantex Series Arian Foster. You should rely only on statements made in this prospectus in determining whether to purchase shares of our Fantex Series Vernon Davis. For a more detailed discussion, please see the risk factor concerning the August 2013 blog post beginning on page 70.

    Our business may be adversely impacted by the postponement of our offering of the Fantex Series Arian Foster.

Risks Relating to Our Affiliate, FBS, and the FBS ATS

    To own or trade our Fantex Series Vernon Davis, you must have a brokerage account with FBS and our Fantex Series Vernon Davis will be traded in the secondary market only through the FBS ATS.

    The securities settlement process at FBS exposes it to certain risks specific to broker-dealers that clear their own trades, which include greater sanctions for errors vis-a-vis brokers that outsource these functions to third-party providers.

    The FBS website and the FBS ATS are each operated on computer hardware that is currently located in a third-party Web hosting facility and there may be interruptions or delays in service that are out of our, FBS's or the third party's control, which may result in an inability to sell your shares.

 

14


Table of Contents

    If security measures at the FBS website and the FBS ATS are breached and unauthorized access is obtained to a customer's data, the FBS ATS may be perceived as not being secure and customers may curtail or stop trading on the platform.

Risks Relating to the Latitude Given to Our Board and Fantex Holdings

        Our board of directors and Fantex Holdings will have extraordinary latitude to make decisions without your consent, and any of these decisions may have a material and adverse effect on your investment. Our board of directors will make any such decision in accordance with its good faith business judgment that such decision is in the best interests of our company and the best interests of all of our stockholders as a whole. In certain circumstances, decisions of our board of directors may also be subject to the approval of the conflicts committee. This may mean that our board of directors may make a decision that is not necessarily in your best interest but that may be in the best interests of all of our stockholders as a whole. Significant decisions that may be made by Fantex Holdings or our board of directors without your consent include the following:

    Voting.  Holders of shares of our tracking stocks and our platform common stock are each entitled to one vote per share of such stock. Following the consummation of this offering, Fantex Holdings, our parent company, will hold all 100,000,000 outstanding shares of our platform common stock, and thus will hold substantially all of the voting power of our outstanding common stock. As a result, our parent, Fantex Holdings will have control over key decision making as a result of their control over a majority of our voting stock, including, for example, election of our board of directors and other major stockholder decisions, such as a whether or not to enter into a change of control of the company.

    Conversion.  Our board of directors may, in its sole discretion, elect to convert any of our tracking stocks into our platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, thereby changing the nature of your investment and possibly diluting your economic interest in our company, which could result in a loss in value to holders of our tracking stocks.

    Dividends.  Our board of directors is permitted, but not required, to declare and pay dividends on our platform common stock or any of our tracking stocks. Our board of directors has discretion to declare a dividend on any series of common stock without declaring a dividend on any other series of our common stock, but not in excess of the available dividend amounts for each series. We intend to pay cash dividends from time to time out of available cash for each tracking stock equal to an amount in excess of 20% of the "available dividend amount" for such tracking stock. Our board of directors may change its dividend policy at any time and from time to time. However, our board of directors will not in any event change the definition of "available dividend amount" for any series of our common stock or declare dividends on any series of our common stock in excess of the "available dividend amount" for that series.

    Sale of Brands.  Our board of directors may in its discretion sell all or substantially all of the assets of a tracking stock brand. If we do so (but not in connection with a sale of our company as a whole), our board of directors has the discretion to either pay a dividend to holders of the related tracking stock, redeem shares of the related tracking stock, convert the outstanding shares of the related tracking stock into platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, or they may choose any combination of the foregoing (however, they must choose one of these options).

    Attribution Policies.  Our board of directors may, without stockholder approval, modify, change, rescind or create exceptions to our management and attribution policies for purposes of attributing our assets and liabilities between and among our platform unit and various other business units that we intend to establish from time to time, and attributing between these

 

15


Table of Contents

      different business units other items (such as debt, corporate overhead, taxes, corporate opportunities and other charges and obligations) in a manner we deem reasonable after taking into account all material factors. However, our board of directors will not in any event reallocate the "underlying assets" for any tracking stock, as such term is defined in the certificate of designation for that tracking stock. For the Fantex Series Vernon Davis, the "underlying assets" are 95% of the ABI.

Conflicts of Interest

        The offering is being conducted in accordance with the applicable provisions of Rule 5121 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc., or FINRA, because one of the underwriters, FBS, will have a "conflict of interest" pursuant to Rule 5121(f)(5)(B) because Fantex is under common control with FBS, and pursuant to Rule 5121(f)(5)(C)(ii) because at least five percent of the net offering proceeds, not including underwriting compensation, are intended to be directed to an affiliate of FBS. Rule 5121 requires that a "qualified independent underwriter" as defined in FINRA Rule 5121 must participate in the preparation of the registration statement of which this prospectus forms a part and perform due diligence investigations with respect to the registration statement and this prospectus. Accordingly, Stifel, Nicolaus & Company, Incorporated is assuming the responsibilities of acting as the "qualified independent underwriter" in the offering. In consideration for its services and expenses as the qualified independent underwriter, FBS has agreed to pay Stifel, Nicolaus & Company, Incorporated a fee equal to $105,275, assuming the sale of 421,100 shares of the Fantex Series Vernon Davis in this offering at an initial public offering price of $10.00 per share (in each case, the amounts set forth on the front cover of this prospectus). Pursuant to FINRA Rule 5121, FBS will not confirm sales to accounts in which it exercises discretionary authority, if any, without the specific prior written approval of the account holder. See "Underwriting (Conflicts of Interest)—Conflicts of Interest."

Corporate Information

        Our principal executive offices are located at 330 Townsend Street, Suite 234, San Francisco, CA 94107, and our telephone number is (415) 592-5950. Our website address is www.fantexinc.com. The website address for FBS is www.fantex.com. Neither information contained on our website or the website of FBS is incorporated by reference into this prospectus, and you should not consider information contained on either of these websites to be part of this prospectus.

        Our logo, "Fantex," and other trademarks or service marks of Fantex Holdings, our parent company, appearing in this prospectus are the property of Fantex Holdings. This prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of other companies' trade names, trademarks or service marks to imply relationships with, or endorsement or sponsorship of us by, these other companies. Subsequent use of such trademarks and service marks in this prospectus and prospectus supplements may occur without their respective superscript symbols (TM or SM) in order to facilitate readability and does not constitute a waiver of any rights that might be associated with the respective trademarks or service marks.

Implications of Being an Emerging Growth Company

        As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

    a requirement to have only two years of audited financial statements and only two years of related MD&A;

 

16


Table of Contents

    an exemption from the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

    an extended transition period for complying with new or revised accounting standards;

    reduced disclosure about the company's executive compensation arrangements; and

    no non-binding advisory votes on executive compensation or golden parachute arrangements.

        We may take advantage of these provisions for up to the last day of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act or such earlier time when we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our capital stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of other reduced reporting requirements in this prospectus, and we may choose to do so in future filings. To the extent we do, the information that we provide stockholders may be different than you might get from other public companies in which you hold equity interests.

 

17


Table of Contents


THE OFFERING

Shares offered

  421,100 shares of Fantex Series Vernon Davis.

Common stock to be outstanding after this offering

  100,000,000 shares of platform common stock and 421,100 shares of Fantex Series Vernon Davis.

Offering type

  The offering is being conducted on a best efforts, all or none basis. To the extent that there is insufficient interest in shares of our Fantex Series Vernon Davis, this offering will be cancelled and no shares of our Fantex Series Vernon Davis would be sold to the public.

Voting rights

  The holders of shares of our tracking stock, including Fantex Series Vernon Davis, and our platform common stock are each entitled to one vote per share of such stock. Following the consummation of this offering, Fantex Holdings, our parent company, will continue to hold substantially all of the voting power of our outstanding common stock. See "Description of Capital Stock."

Conversion

  Our board of directors may at any time following the two-year anniversary of the filing of a certificate of designation creating Fantex Series Vernon Davis, convert shares of our Fantex Series Vernon Davis into fully paid and non-assessable shares of our platform common stock at a conversion ratio to be determined by dividing the fair value of a share of our Fantex Series Vernon Davis by the fair value of a share of our platform common stock. For a further description, including how we would determine the fair value of shares of our platform common stock and our Fantex Series Vernon Davis, please see "Description of Capital Stock."

Liquidation

  In the event of a liquidation, dissolution or winding up of Fantex, including a change of control of Fantex, after payment or provision for payment of our debts and liabilities, each share of our common stock (including each of our tracking stocks and the platform common stock) will be entitled to receive a proportionate interest in the net assets of Fantex remaining for distribution to holders of common stock equal to the fair value of such share, provided that if the assets legally available for distribution to the holders of common stock are insufficient to permit the payment in full to each share of common stock the amount to which they would otherwise be entitled, then such assets available for distribution to the holders of common stock will be distributed to all holders of common stock ratably in proportion to the full amounts which they would be entitled to receive on shares of common stock held by them. If all distributions required above are made and there remain any assets available for distribution to holders of common stock such assets shall be divided among the holders of common stock in proportion to the amounts that were payable as required above in respect of the shares held by them. For a further description, including how we would determine the fair value of shares of our platform common stock and our Fantex Series Vernon Davis, please see "Description of Capital Stock."

 

18


Table of Contents

Dividends

  To date, we have never declared or paid any cash dividends on our capital stock. Following this offering, we intend to pay cash dividends from time to time out of available cash for each tracking stock, including our Fantex Series Vernon Davis, equal to an amount in excess of 20% of the "available dividend amount" for such series. The available dividend amount for any tracking stock is, as of any particular date, an amount equal to the lesser of (a) total assets of our company legally available for the payment of dividends under Delaware law and (b) an amount equal to (i) the excess of the total assets attributed to the applicable tracking stock brand over the total liabilities attributed to such tracking stock brand, less the par value of the outstanding shares of such stock; or (ii) if there is no such excess, the attributable income of the tracking stock brand for the fiscal year in which the dividend is being declared and/or the preceding fiscal year.

Use of proceeds

  As consideration for the ABI under our brand contract with Vernon Davis we will pay him a one-time cash amount of $4.0 million contingent upon our ability to obtain financing. We will use up to $4.0 million of our net proceeds from this offering, together with existing cash and cash equivalents if necessary, to fund the payment of this purchase price to Vernon Davis. See "Use of Proceeds."

Electronic form and transferability

  The Fantex Series Vernon Davis (and any shares of our platform common stock issuable upon conversion of the Fantex Series Vernon Davis) will be issued in electronic form only and will be available exclusively through our broker-dealer affiliate, FBS. Shares of our Fantex Series Vernon Davis are new securities; there are currently none issued and there is currently no established market. We do not intend to apply for a listing of our Fantex Series Vernon Davis or our platform common stock on any securities exchange or for their inclusion in any established automated dealer quotation system. Accordingly, we cannot assure you as to the development or liquidity of any market for our Fantex Series Vernon Davis or our platform common stock. Neither Fantex Series Vernon Davis nor our platform common stock will be listed on any exchange and neither will be transferable except through the FBS ATS. There can be no assurance that an active trading market for the Fantex Series Vernon Davis or platform common stock will develop, or that you will be able to resell shares of our Fantex Series Vernon Davis or platform common stock at a price that would reflect their fundamental value, if at all.

U.S. federal income tax consequences

  For material U.S. federal income tax consequences of the acquisition, ownership, disposition and conversion of the Fantex Series Vernon Davis and platform common stock, please see "Material U.S. Federal Income Tax Considerations" herein.

 

19


Table of Contents

Maximum Investment Limits and Financial Suitability

  An investment in Fantex Series Vernon Davis is subject to certain maximum investment limits, some of which are based on financial suitability. See "Underwriting (Conflicts of Interest)—Offering Process—Maximum Investment Limits and Financial Suitability."

Standby Purchases

  We expect that Fantex Holdings, our parent company, will agree to purchase from FBS, at the initial public offering price, up to 200,000 shares of Fantex Series Vernon Davis in this offering. Sales of shares to Fantex Holdings pursuant to the underwriting agreement will only be made if FBS represents in writing that it is unable to locate other qualified purchasers to purchase the shares at the initial public offering price. Under the terms of the underwriting agreement and pursuant to FINRA Rule 5110(g)(1), Fantex Holdings will not sell, transfer, assign, pledge or hypothecate such shares of Fantex Series Vernon Davis, nor will it engage in any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of any shares purchased by it for a period of 180 days after the effective date of this offering. For further information regarding these standby shares, please see the section entitled "Underwriting (Conflicts of Interest)."

Risk factors

  You should read "Risk Factors" for a discussion of factors you should carefully consider before deciding to invest in our Fantex Series Vernon Davis.

FBS ATS trading symbol

  Fantex Vernon Davis

        The number of shares of our common stock to be outstanding after this offering is based on 100,000,000 shares of our platform common stock outstanding as of December 31, 2013 and no shares of our tracking stock outstanding as of December 31, 2013 and excludes (1) 523,700 shares of our Fantex Series EJ Manuel that may be issuable upon the consummation of the offering of our Fantex Series EJ Manuel pursuant to the EJ Manuel Registration Statement, (2) 1,055,000 shares of our Fantex Series Arian Foster that may be issuable upon the consummation of the offering of our Fantex Series Arian Foster pursuant to the Arian Foster Registration Statement, and (3) 7,500,000 shares of our platform common stock that will be reserved for future issuance under our 2013 Equity Incentive Award Plan.

        Except as otherwise indicated, all information in this prospectus assumes 

    that our certificate of designations for the Fantex Series Vernon Davis, which we will file in connection with the consummation of this offering, is in effect; and

    no purchases of Fantex Series Vernon Davis by Fantex Holdings in this offering. We expect Fantex Holdings will agree to purchase up to 200,000 shares of our common stock in this offering (up to approximately 47.5% of the shares being offered by this prospectus) at the initial public offering price upon written confirmation from FBS that it is unable to locate other qualified purchasers for the shares at the initial public offering price.

 

20


Table of Contents


QUESTIONS AND ANSWERS

Q:
What is our business?

A:
We are a brand acquisition, marketing and brand development company whose focus is on acquiring minority interests in the income associated with the brands of professional athletes, entertainers and other high-profile individuals and assisting such individuals in enhancing the reach and value of their respective brands. We intend to focus our business on three core areas: evaluating, targeting and accessing individuals and brands with the potential to generate significant brand income, acquiring minority interests in such brand income, and assisting our acquired brands in increasing their value via technology and through leveraging our marketing, advertising and strategic partnering expertise.

Q:
What are the securities that we are offering?

A:
We are offering shares of our Fantex Series Vernon Davis. We have entered into a brand contract with Vernon Davis, a professional athlete in the National Football League, or NFL, pursuant to which we will acquire an interest equal to 10% of the gross monies or other consideration (including rights to make investments) that Vernon Davis receives from and after October 30, 2013, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes), as a result of his activities in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching. We are attributing 95% of our acquired brand income, or ABI, under the Vernon Davis brand contract to a tracking unit that we refer to as the Vernon Davis Brand. Our Fantex Series Vernon Davis is intended to track and reflect the separate economic performance of the Vernon Davis Brand. In addition, we will attribute to the Vernon Davis Brand certain expenses of Fantex, including in certain cases expenses related to other series of our common stock that may be issued from time to time in the future. See "Management and Attribution Policies."

Holders of shares of our Fantex Series Vernon Davis will have no direct investment in the businesses or assets attributed to the Vernon Davis Brand. Rather, an investment in Fantex Series Vernon Davis will represent an ownership interest in our company as a whole.

Q:
Are there any risks associated with an investment in our Fantex Series Vernon Davis?

A:
Yes. Our Fantex Series Vernon Davis is highly risky and speculative. Investing in our Fantex Series Vernon Davis should be considered only by persons who can afford the loss of their entire investment. Please see "Risk Factors" beginning on page 37.

Q:    Will we offer additional securities in the future?

A:
We have also entered into brand contracts with Arian Foster, effective February 28, 2013, as amended, and EJ Manuel, effective February 14, 2014. We intend to enter into additional brand contracts in the future with other individuals with the potential to generate significant brand income, and in some cases, with the affiliates of these individuals, who we refer to, together with the individual, as the contract party. We are actively pursuing these additional brand contracts, but as of April 21, 2014 we have no current commitments to enter into another brand contract. All of our brand contracts, including those that we enter into in the future with other contract parties, are or are expected to be contingent upon obtaining financing to fund the acquisition of the minority interest in the respective brands, and we intend to finance the acquisition of additional brands, at least in part, through the issuance of additional tracking stocks linked to the value of such brands.

 

21


Table of Contents

Q:
What happens to the remaining 5% of the ABI under the Vernon Davis brand contract?

A:
The Vernon Davis Brand will initially include as an attributed asset 95% of ABI under our Vernon Davis brand contract. The remaining 5% of our ABI under the Vernon Davis brand contract will be attributed to another series of our common stock that we refer to as our platform common stock. We also intend to attribute a similar interest of each of our future brand contracts to our platform common stock, such that our platform common stock would have an interest in the ABI of all of our brand contracts. We intend to use the income attributed to our platform common stock for general corporate and working capital purposes, including investments and expenses that may be generally applicable to all our brands. The attribution of this income to the platform common stock also gives our platform common stock a value for purposes of any future conversion of any of our tracking stocks, including our Fantex Series Vernon Davis, into the platform common stock.

The 5% of our ABI under the Vernon Davis brand contract that is attributed to the platform common stock is in addition to a fee in an amount equal to 5% of the amount of gross cash received by us, if any, payable to our parent for services provided by our parent under a management agreement between our parent and us. For a more detailed description of the management agreement, please see "Transactions with Related Persons—Management Agreement."

Q:
Who is Vernon Davis?

A:
Vernon Davis is a tight end for the 49ers in the NFL. He has been in the NFL since 2006. Vernon Davis attended the University of Maryland, where he was the starting tight end for his sophomore and junior seasons. Vernon Davis entered the NFL draft after his junior year and was selected in the first round, 6th overall, by the San Francisco 49ers. Vernon Davis was born on January 31, 1984 and is 30 years old as of April 21, 2014. He currently lives in San Jose, California. During the 2009 NFL season, Vernon Davis was selected to the Pro Bowl after posting career highs of 78 receptions, 965 yards, and 13 touchdown receptions. At the time, that number of touchdown receptions tied the NFL single season record for a tight end.

In 2006, Vernon Davis sustained a fracture to his right fibula, causing him to miss six games during the 2006 NFL regular season. He has also suffered other injuries, including a knee sprain, ankle injury, hamstring pull and several reported concussions, that have caused him to miss playing time during his career. Vernon Davis has experienced these and other instances of normal wear and tear as an athlete in the NFL and we expect that Vernon Davis will continue to experience such wear and tear. Any worsening of these conditions, or re-injury or new injury, could materially and adversely affect Vernon Davis's playing performance and the value of the Vernon Davis Brand.

Q:
What is the Vernon Davis brand contract?

A:
The brand contract is a contract between us and Vernon Davis, assigning to us 10% of the Vernon Davis brand income from and after October 30, 2013. In exchange, we have agreed, subject to completion of this offering, to pay Vernon Davis $4.0 million, after which we will have no further payment obligations to him under the Vernon Davis brand contract. The brand contract is intended to be effective in perpetuity and may be terminated only upon mutual agreement of Vernon Davis and us. Any decision by us to terminate the brand contract will be made solely by our board of directors in good faith and will not be submitted to a vote of our stockholders. We do not intend to terminate the brand contract with Vernon Davis unless we are paid consideration by him that we deem sufficient to compensate us for any reasonably expected future ABI at the time, or if our expectation of future ABI under the brand contract is not sufficient in our view to justify incurring continued expense in connection with maintenance of such brand contract.

 

22


Table of Contents

Q:
What is brand income under the Vernon Davis brand contract?

A:
Brand income means any amounts that Vernon Davis may receive from and after October 30, 2013, subject to specified exceptions, as a result of his activities in the sport of football (including NFL and non-NFL activities), including his employment as a professional athlete and the license or assignment of rights in his persona, including use of his name, voice, likeness, image, signature, talents, live or taped performances, in connection with motion pictures, television and Internet programming, radio, music, literary, talent engagements, personal appearances, public appearances, records and recording, or publications; any use of his persona for purposes of advertising, merchandising, or trade, including sponsorships, endorsements and appearances, and any other license or assignment of rights in his persona, to generate income; and any other personal services performed by Vernon Davis which are of the type typically performed by individuals in the field of football because of their status as a professional athlete or other professional within the field of football (including, without limitation, sports casting, coaching, participating in sports camps, acting as spokesperson). For example, on November 20, 2013 Vernon Davis appeared on a FX network television series, The League, as himself. Compensation that is paid to Vernon Davis for this role would be included as brand income because it would be derived from the use of his persona in a television appearance.

Q:
Is there anything excluded from brand income under the Vernon Davis brand contract?

A:
Yes. We will not be entitled to any amounts related to any income received by Vernon Davis that is not specifically included in his brand income, such as investments and income not related to professional football and related fields. In addition, Vernon Davis has elected to exclude from brand income (i) income derived from any sports agency or athlete management company owned by him, the opportunity for him to purchase an interest in a professional sports team; and the use of his name to promote a franchise of a third party company where such franchise is owned by him; (ii) income derived from his performance as a painter, sculptor or artist in any other fine or graphic arts medium, related to Gallery 85 or any other art gallery owned by him or related to any school for the arts established in part by him, whether charitable or for profit; (iii) any income of the Vernon Davis Foundation or any other charitable foundation or organization as a result of personal services performed by Vernon Davis; and (iv) any amounts received from the following entities (or their affiliates as agreed as of October 30, 2013): (1) Ike Shehadeh and Ike's Love & Sandwiches Franchising LLC and (2) Jamba Juice Company. You should not consider any of these when considering an investment in the Fantex Series Vernon Davis.

Q:
Do investors in the Fantex Series Vernon Davis invest directly in Vernon Davis?

A:
No. Investors in our Fantex Series Vernon Davis are investing in Fantex and not in the brand contract or Vernon Davis. However, Fantex Series Vernon Davis is intended to track and reflect the separate economic performance of the businesses and assets to be attributed to the Vernon Davis Brand. Only Fantex will have rights under the brand contract and recourse against Vernon Davis.

Q:
Will you report separate financial information about the Vernon Davis Brand?

A:
Yes. Although investors in our Fantex Series Vernon Davis are investing in our securities and not in the brand contract or Vernon Davis, we will report and include as an exhibit in our periodic filings that we make under the Securities Exchange Act of 1934, as amended, or the Exchange Act, unaudited attributed financial information that will include balance sheet, statement of operations and cash flow information for each tracking stock, including Fantex Series Vernon Davis, as well as an explanation of the methods used in attributing the information to the tracking stock. In addition, we would provide in such exhibit for each tracking stock comparative financial information together with a discussion and analysis of that information that described reasons for

 

23


Table of Contents

    changes between periods and other developments or events material to the performance of such tracking stock.

    In addition, at least until such time as we no longer have significant concentration among our brands relative to our consolidated financials we will include in our audited annual reports statements of cash receipts from included contracts with respect to each of our brand contracts.

Q:
How did we verify information provided by Vernon Davis?

A:
Prior to entering into the brand contract with Vernon Davis, we conducted due diligence and reviewed the included contracts and other documents to support our estimate of his projected brand income. We also ran credit checks on Vernon Davis to verify his payment history and track record of performing under other obligations. We also commissioned a third-party background check to determine whether there was any other relevant information that might be useful in our evaluation of the Vernon Davis Brand.

Q:
How will we verify information about the brand income of Vernon Davis in the future?

A:
Under the Vernon Davis brand contract Vernon Davis is required to make ongoing payments and reports to us of brand income as well as other material information, and we have audit rights that we will utilize to verify the information that we receive. In addition, as noted above, at least until such time as we no longer have significant concentration among our brands relative to our consolidated financials, a statement of cash receipts from included contracts with respect to each of our brand contracts, including the Vernon Davis brand contract, will be audited on an annual basis.

Q:
How did we determine the purchase price for the ABI under the Vernon Davis brand contract?

A:
We determined the purchase price for the ABI based on an arm's-length negotiation with Vernon Davis. As part of our assessment of the value of the ABI, we applied a discounted cash flow analysis to our estimate of the lifetime brand income earning potential of Vernon Davis based on a number of our own estimates and assumptions. Please see "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies" for further discussion of the type of factors that we generally consider in our assessments of value of brands we seek to acquire, as well as specific factors that we considered in our assessment of Vernon Davis's lifetime brand income earning potential.

There can be no assurances that our assumptions and estimates will be accurate, and a failure of any of our assumptions or estimates to be accurate could have a materially adverse impact on your investment return on our Fantex Series Vernon Davis. It is also important to note that Vernon Davis was one of the first contract parties with whom we entered into a brand contract. As a result, our assumptions and estimates underlying our valuation of his brand are necessarily subject to greater uncertainty than we expect would be the case for future brand valuations. In particular, we estimated a significant increase in the lifetime brand income that we believe Vernon Davis may earn as a result of our assumption that he will enter into at least one additional multi-year NFL player contract for at least $33 million. We do not know, however, whether any of our other assumptions and expectations discussed in this prospectus will prove to be true.

Before you make an investment in our Fantex Series Vernon Davis, you should make your own assessment of the value of the brand contract and the shares of our Fantex Series Vernon Davis, including for example your own assessment of Vernon Davis's lifetime brand income earning potential (both from his NFL playing career, endorsements and other brand income generating activity) as well as the present value of those potential lifetime earnings based on discount rates you think are appropriate to account for the risks inherent in the assumptions and estimates underlying such assessments.

 

24


Table of Contents

Q:
Is the Vernon Davis brand contract secured by any collateral?

A:
No. The Vernon Davis brand contract is not secured by any collateral. In addition, the Vernon Davis brand contract also does not impose any other financial restrictions on him, including any restriction from incurring unsecured debt. The amounts that Vernon Davis owes us under the brand contract are unsecured and payments to us depend on Vernon Davis's creditworthiness, which may change in the future. If Vernon Davis incurs additional secured or unsecured debt after this offering, or if he incurs excessive expenses, he may be impaired in his ability to make payments to us under the brand contract. In addition, additional debt or expenses may adversely affect his creditworthiness generally, and could result in his financial distress, insolvency, or bankruptcy. If Vernon Davis incurs other indebtedness or expenses and cannot pay all of his indebtedness or expenses, he may choose to make payments to other creditors rather than us. If Vernon Davis declares bankruptcy any amounts owed to us will only be paid out after all of his secured debt, including auto loans and mortgage payables, is repaid.

Q:
To the extent that Vernon Davis fails to make a required payment under the brand contract can the investors in our Fantex Series Vernon Davis collect payments themselves?

A:
No. The brand contract is between Vernon Davis and us, and as a stockholder, you have no rights under the brand contract as a third-party beneficiary, or otherwise. In the event of any default under the brand contract, you must rely on us to collect any amounts due and you will be unable to pursue any claims against Vernon Davis directly. We intend to enforce all contractual obligations to the extent we deem necessary and in the best interest of the company and its stockholders. Express remedies provided in the brand contract in the event of late payments include (1) payment of interest at prime rate plus 3% per year, and (2) public disclosure of such late payments as well as other remedies available to us at law, including the ability to file a judicial action seeking the payment of all amounts owed to us from Vernon Davis and, as applicable, the counterparties to the included contracts with Vernon Davis.

Q:
What happens if Vernon Davis is injured or suffers any other illness or medical condition, retires or fails to make an NFL roster?

A:
A significant portion of Vernon Davis's brand income is dependent on his continued satisfactory performance in the NFL and is not guaranteed. If he retires from the NFL at any time within two years following this offering, other than as a result of injury, illness or medical condition, we may elect in our sole discretion to terminate the brand contract and he will be required to pay us approximately $4.2 million (net of any amounts previously paid to us by him pursuant to the brand contract). Otherwise, if he stops playing in the NFL for any reason, either voluntary or involuntary, his brand income would likely decline. Vernon Davis has no obligation to take any actions to generate brand income, and subject to the limited obligation to reimburse us funds as discussed above, he may choose not to do anything to generate brand income following the date on which we pay the purchase price.

Q:
Will we make dividend payments on Fantex Series Vernon Davis or other series of our common stock that may be outstanding in the future?

A:
Our board of directors would be permitted, but not required, to declare dividends from time to time on any series of our common stock, including the Fantex Series Vernon Davis. Dividends will be limited to an amount up to the "available dividend amount" for such series. Following this offering, we intend to pay periodic cash dividends out of available cash for each tracking stock, including Fantex Series Vernon Davis, equal to an amount in excess of 20% of the "available dividend amount" for each such tracking stock. Our board of directors may change its dividend policy at any time and from time to time, and we may retain some or all available funds and future income to support our operations and finance the growth and development of our business as well

 

25


Table of Contents

    as, in some circumstances, invest some of the available funds to further enhance a brand or acquire additional ABI in a brand if we believe that those would be more productive uses of some or all of the available funds. However, our board of directors will not in any event change the definition of "available dividend amount" for any series of our common stock or declare dividends on any series of our common stock in excess of the "available dividend amount" for that series. Please see "Dividend Policy."

Q:
What happens if we convert shares of Fantex Series Vernon Davis into platform common stock?

A:
Our board of directors may at any time following the two-year anniversary of the filing of a certificate of designation creating Fantex Series Vernon Davis, resolve to convert shares of our Fantex Series Vernon Davis into fully paid and non-assessable shares of our platform common stock at a conversion ratio to be determined by dividing the fair value of a share of our Fantex Series Vernon Davis by the fair value of a share of our platform common stock. For example, if a share of Fantex Series Vernon Davis had at the time of determination a fair value of $10.00, and a share of platform common stock had at the time of determination a fair value of $5.00, then if our board of directors elected to convert the Fantex Series Vernon Davis into platform common stock, each holder of Fantex Series Vernon Davis would receive two shares of platform common stock for each share of Fantex Series Vernon Davis held by them. For a further description, including how we would determine the fair value of shares of our platform common stock and our Fantex Series Vernon Davis, please see "Description of Capital Stock."

Q:
Under what circumstances do we anticipate that we might convert shares of Fantex Series Vernon Davis into platform common stock?

A:
Although our board of directors may at any time following the two-year anniversary of the filing of a certificate of designation creating Fantex Series Vernon Davis, resolve to convert shares of our Fantex Series Vernon Davis into shares of our platform common stock, we anticipate doing so only in the following circumstances:

    the Fantex Series Vernon Davis is no longer an actively traded stock as determined in good faith by our board of directors or a committee of our board of directors, such as, for example, if Vernon Davis suffers an injury, illness, medical condition or dies, and his brand income diminishes as a result and there is little if any expectation that his brand income will materially increase in the future. In this case our board of directors may convert the shares of Fantex Series Vernon Davis into platform common stock as a means of retiring the Fantex Series Vernon Davis, and our board of directors may do so in this circumstance even if the platform common stock is not an actively traded stock as determined in good faith by our board of directors or a committee of our board of directors.

    other special or extraordinary circumstances exist, such as a potential restructuring, reorganization or change of control of Fantex. We would not expect our board of directors to approve a conversion in this circumstance unless there is an active trading market for the platform common stock at the time of such conversion.

    We structured our tracking stocks to provide the board with discretion to determine whether and when to convert a tracking stock into platform common stock in part because our tracking stock and our business model are each unique and unproven and we wanted to maintain flexibility to reorganize our operations if our board of directors deems it to be in the best interest of the Company and all of our stockholders.

Q:
What happens if we sell all or substantially all of our assets of the Vernon Davis Brand?

A:
If we sell all or substantially all of the assets of the Vernon Davis Brand (but not in connection with a sale of our company), our board of directors will either pay a dividend to holders of our

 

26


Table of Contents

    Fantex Series Vernon Davis, redeem shares of Fantex Series Vernon Davis, convert the outstanding shares of our Fantex Series Vernon Davis into our platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock or any combination of the foregoing. See "Description of Capital Stock—Common Stock—Mandatory Dividend, Redemption and/or Conversion on Disposition of Assets."

Q:
What happens if we are sold or are otherwise liquidated?

A:
In the event of a sale or a liquidation, dissolution or winding up of our company, including a change of control, and after payment or provision for payment of our debts and liabilities, each share of our common stock will be entitled to receive a proportionate interest in our net assets remaining for distribution to holders of common stock equal to the fair value of such share, or if sufficient funds are not available (including, for example, as a result of satisfying liabilities of the Company), then a portion of such amount shared ratably with other holders of common stock. As a result, holders of Fantex Series Vernon Davis would not necessarily receive upon a liquidation amounts equal to the cash received by Fantex under the Vernon Davis brand contract, after expenses that are attributable to the Fantex Series Vernon Davis. See "Description of Capital Stock."

Q:
How will shares of my Fantex Series Vernon Davis be treated for United States federal income tax purposes?

A:
The Fantex Series Vernon Davis should be treated as stock of our company for U.S. federal income tax purposes. There are, however, no court decisions or other authorities directly bearing on the tax effects of the issuance and classification of stock with the features of Fantex Series Vernon Davis, so the matter is not free from doubt. In addition, the Internal Revenue Service has announced that it will not issue advance rulings on the classification of an instrument with characteristics similar to those of Fantex Series Vernon Davis. Accordingly, no assurance can be given that the views expressed in this paragraph, if contested, would be sustained by a court. It is possible that the Internal Revenue Service could successfully assert that the issuance of the Fantex Series Vernon Davis could be taxable to us and the exchange of the Fantex Series Vernon Davis for shares of our platform common stock would not qualify as a tax-free recapitalization. You should consult your tax advisor regarding the tax consequences of an investment in Fantex Series Vernon Davis.

Q:
How is the Fantex Series Vernon Davis being offered?

A:
Our Fantex Series Vernon Davis is being offered through a best efforts, all or none basis, by the underwriters, with Stifel, Nicolaus & Company, Incorporated, acting as the "qualified independent underwriter." To the extent that there is insufficient interest in shares of our Fantex Series Vernon Davis, this offering will be cancelled and no shares of our Fantex Series Vernon Davis would be sold to the public. The process for placing orders in the offering is different from that used for most public offerings of equity securities. You should carefully read the section entitled "Underwriting (Conflicts of Interest)—Offering Process" for additional information regarding how to place an order for our Fantex Series Vernon Davis.

Q:    Will I receive a certificate for my Fantex Series Vernon Davis?

A:
No. The shares of our Fantex Series Vernon Davis will be issued in book-entry form only. We will act as registrar and transfer agent and will maintain a book-entry record of the holders of shares of our Fantex Series Vernon Davis.

 

27


Table of Contents

Q:
Will the Fantex Series Vernon Davis be listed on an exchange?

A:
To the extent available, buy and sell orders will be posted and executed by the FBS ATS, which is an alternative trading system as defined under the Exchange Act. Our Fantex Series Vernon Davis will not be listed on a stock exchange such as the New York Stock Exchange or NASDAQ.

Q:
Can I purchase Fantex Series Vernon Davis using my existing brokerage account?

A:
No. In order to purchase shares of our Fantex Series Vernon Davis, either in this offering or subsequent to this offering, investors are required to open a brokerage account with our broker-dealer affiliate, FBS. You will not be able to purchase or sell any shares of our Fantex Series Vernon Davis through any other brokerage account or any exchange or trading system. See "Underwriting (Conflicts of Interest)—Offering Process."

Q:
What is FBS and what role does it play in the offering and subsequent trading market?

A:
FBS is our affiliated broker-dealer and is regulated by the SEC and FINRA. FBS is serving as an underwriter in this offering, along with Stifel, Nicolaus & Company, Incorporated, a "qualified independent underwriter" as defined in FINRA Rule 5121. In addition, FBS is registered as an alternative trading system, which we refer to as the FBS ATS, with the SEC. Upon completion of this offering, buy and sell orders for shares of our Fantex Series Vernon Davis will be posted on the FBS ATS under the symbol "Fantex Vernon Davis." FBS will be the exclusive broker-dealer for executing trades in our Fantex Series Vernon Davis. Therefore, if you would like to execute any trades in our securities you first must open a brokerage account with FBS. Stifel, Nicolaus & Company, Incorporated will not be responsible for executing any trades in our Fantex Series Vernon Davis following this offering. FBS may act as principal or agent in these transactions, and may also act as a market-maker in the secondary market from time to time. However, it is not obligated to make a market in the Fantex Series Vernon Davis and if it does so it may discontinue any market-making at any time without notice, in its sole discretion. Currently, FBS is not expecting to act as a market-maker in the secondary trading market for the Fantex Series Vernon Davis, though it will periodically reassess whether to do so. FBS may in the future also consider contacting other broker-dealers to assess their interest in making markets in the securities of Fantex on the FBS ATS. If we have limited or no market-makers at any time, the liquidity of the secondary market for the Fantex Series Vernon Davis may be materially adversely affected.

Q:
What is the FBS ATS?

A:
Our affiliate, FBS, operates an alternative trading system, registered with the SEC. Qualified investors will be required to open brokerage accounts with FBS in order to invest in our securities, initially the Fantex Series Vernon Davis being offered hereby, and in the future, additional securities that we may register and issue from time to time. Investors who have an account with FBS may post "bid" and "ask" orders for our securities with FBS that will be matched with other orders on the FBS ATS. Our securities will be exclusively traded on the FBS ATS. FBS will accept only limit orders for trades in Fantex Series Vernon Davis and other securities on the FBS ATS.

Q:
How can I sell my shares in Fantex Series Vernon Davis if I decide that I no longer wish to hold them?

A:
FBS ATS has agreed to post buy and sell orders for shares of our Fantex Series Vernon Davis upon completion of this offering. If you decide to sell shares of our Fantex Series Vernon Davis, you must pay a commission to FBS. Payment of this brokerage fee may negate or mitigate any appreciation on shares of our Fantex Series Vernon Davis or cause you to incur a loss on your investment.

 

28


Table of Contents

Q:
Does Fantex participate in the FBS ATS as an investor?

A:
No. Neither we nor the officers, directors, employees, promoters or affiliates of Fantex, Fantex Holdings or FBS will be allowed to purchase any shares in the offering or execute trades in the secondary market for our or their own accounts through FBS or on the FBS ATS, except with respect to any standby purchases made by Fantex Holdings or where FBS is acting as a market-maker on the FBS ATS. FBS has no current intention of acting as a market-maker in the secondary market for Fantex Series Vernon Davis.

Q:
What is the relationship between Fantex, Fantex Holdings and FBS?

A:
Fantex Holdings was incorporated on April 9, 2012. FBS was formed on May 7, 2012 as a wholly-owned subsidiary of Fantex Holdings. We were incorporated on September 14, 2012 as a wholly-owned subsidiary of Fantex Holdings. Following this offering, FBS will continue to be a wholly-owned subsidiary of Fantex Holdings, and Fantex Holdings will own 100% of our outstanding shares of platform common stock and no shares of our Fantex Series Vernon Davis. To date, Fantex Holdings has incurred expenses on our behalf and contributed working capital towards our operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations and—Liquidity and Capital Resources."

 

29


Table of Contents


GLOSSARY OF CERTAIN TERMS

        Set forth below is a glossary of certain terms used throughout this prospectus.

        "acquired brand income" or "ABI" means as context requires: (1) with respect to the Vernon Davis brand contract, the 10% of the brand income of Vernon Davis that we are acquiring pursuant to his brand contract; (2) with respect to the EJ Manuel brand contract, the 10% of the brand income of EJ Manuel that we are acquiring pursuant to his brand contract; (3) with respect to the Arian Foster brand contract, the 20% of the brand income of Arian Foster that we are acquiring pursuant to such brand contract; and (4) with respect to future brand contracts, the negotiated amount of brand income of such contract party that we acquire pursuant to such brand contract.

        "Arian Foster" (including related pronouns) means Arian Foster, a running back for the Houston Texans in the NFL and/or The Ugly Duck, LLC, an affiliate of Arian Foster, or both jointly and severally, as the context requires.

        "Arian Foster Brand" is a tracking unit that our board of directors intends to establish, upon the consummation of the offering of our Fantex Series Arian Foster. For a description of the assets and liabilities that we are attributing to the Arian Foster Brand, please see "Management and Attribution Policies—Attribution—Other Tracking Stock Brands."

        "Arian Foster Registration Statement" is a separate registration statement on Form S-1 (333-191772) with respect to shares of our Fantex Series Arian Foster Convertible Tracking Stock, filed with the SEC pursuant to the Securities Act.

        "attributable income" with respect to any tracking stock as of any date of determination means the attributable income for such tracking stock brand as reflected in the unaudited attributed financial information included as an exhibit to our most recent Exchange Act report.

        "brand contract" means as context requires: (1) when referring to Vernon Davis, that certain Brand Agreement dated as of October 30, 2013, between Vernon Davis and Fantex; (2) when referring to EJ Manuel, that certain Brand Agreement dated as of February 14, 2014 between EJ Manuel and Fantex; (3) when referring to Arian Foster, that certain Brand Agreement dated as of February 28, 2013, and as amended and restated on May 24, 2013 and August 21, 2013, between Arian Foster and Fantex; or (4) generally, any future brand agreement that Fantex may enter into with a contract party.

        "brand income" means, other than excluded income, as the context requires:

    with respect to Vernon Davis, contingent on our payment of the purchase price to him,

    the gross monies or other consideration (including rights to make investments) that he receives from and after October 30, 2013, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes) as a result of his activities in the sport of football (including NFL and non-NFL activities), including salaries and wages from his employment as a professional athlete and the license or assignment of rights in his persona, including use of his name, voice, likeness, image, signature, talents, live or taped performances, in connection with motion pictures, television and Internet programming, radio, music, literary, talent engagements, personal appearances, public appearances, records and recording, or publications; any use of his persona for purposes of advertising, merchandising, or trade, including sponsorships, endorsements and appearances, and any other license or assignment of rights in his persona, to generate income; and any other personal services performed by Vernon Davis which are of the type typically performed by individuals in the field of football because of their status as a professional athlete or other professional within the field of football (including, without limitation, sports casting, coaching, participating in sports camps, acting as spokesperson); and

30


Table of Contents

      in the event Vernon Davis receives, pursuant to any Brand Income Contract, stock or other equity interests (including membership interests and partnership interests), or options, warrants or other rights to acquire any of the foregoing interests, he shall provide us with advance written notice pursuant to which we can elect to participate in the equity award by being issued a direct equity interest in the applicable issuer and to the extent we fail to make such an election or the applicable issuer does not agree to issue to us the equity interests, we shall have the right to indirectly participate in the applicable equity interest by receiving our percentage (10%) of the distributions made on the equity, including any distributions, dividends, profit payments, proceeds resulting from the sale, lease, license, exchange, liquidation or other disposition of any equity or assets of the applicable issuer, in each case subject to us making a payment of any consideration for such equity interests proportional to our interest in the equity award (or such other negotiated price in the event that Vernon Davis receives a discounted investment opportunity as a result of the performance of personal services that are not customary within celebrity endorsements), including without limitation, payments required by the terms of exercise of any options, warrants or other similar rights to acquire stock or other equity interests;

    with respect to EJ Manuel, contingent on our payment of the purchase price to him,

    the gross monies or other consideration (including rights to make investments) that he receives from and after February 14, 2014, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes) as a result of his activities in the sport of football (including NFL and non-NFL activities), including salaries and wages from his employment as a professional athlete and the license or assignment of rights in his persona, including use of his name, voice, likeness, image, signature, talents, live or taped performances, in connection with motion pictures, television and Internet programming, radio, music, literary, talent engagements, personal appearances, public appearances, records and recording, or publications; any use of his persona for purposes of advertising, merchandising, or trade, including sponsorships, endorsements and appearances, and any other license or assignment of rights in his persona, to generate income; and any other personal services performed by EJ Manuel which are of the type typically performed by individuals in the field of football because of their status as a professional athlete or other professional within the field of football (including, without limitation, sports casting, coaching, participating in sports camps, acting as spokesperson); and

    in the event EJ Manuel receives, pursuant to any Brand Income Contract, stock or other equity interests (including membership interests and partnership interests), or options, warrants or other rights to acquire any of the foregoing interests, he shall provide us with advance written notice pursuant to which we can elect to participate in the equity award by being issued a direct equity interest in the applicable issuer and to the extent we fail to make such an election or the applicable issuer does not agree to issue to us the equity interests, we shall have the right to indirectly participate in the applicable equity interest by receiving our percentage (10%) of the distributions made on the equity, including any distributions, dividends, profit payments, proceeds resulting from the sale, lease, license, exchange, liquidation or other disposition of any equity or assets of the applicable issuer, in each case subject to us making a payment of any consideration for such equity interests proportional to our interest in the equity award (or such other negotiated price in the event that EJ Manuel receives a discounted investment opportunity as a result of the performance of personal services that are not customary within celebrity endorsements), including without limitation, payments required by the terms of exercise of any options, warrants or other similar rights to acquire stock or other equity interests;

31


Table of Contents

    with respect to Arian Foster, contingent on our payment of the purchase price to him,

    the gross monies or other consideration (including rights to make investments) that he receives from and after February 28, 2013 generally as a result of his skills and brand, including salary and wages from being an NFL football player and related fields (including activities in a non-NFL football league), which consists of other compensation from his involvement in coaching, football camps, television or Internet programming (with respect to which he either performs in the role of a professional or amateur football player, or performs as himself), radio (terrestrial or satellite), motion picture (solely to the extent Arian Foster appears as himself, such as in a documentary, or is an actor in a motion picture playing the role of himself or an amateur or professional football), literary works the subject of which is Arian Foster, publications, personal appearances, memorabilia signings and events, and the use of Arian Foster's name, voice, likeness, biography or talents for purposes of advertising and trade, including without limitation sponsorships, endorsements, merchandising and appearances; and

    in the event Arian Foster receives, pursuant to any Brand Income Contract, stock or other equity interests (including membership interests and partnership interests), or options, warrants or other rights to acquire any of the foregoing interests, he shall provide us with advance written notice pursuant to which we can elect to participate in the equity award by being issued a direct equity interest in the applicable issuer and to the extent we fail to make such an election or the applicable issuer does not agree to issue to us the equity interests, we shall have the right to indirectly participate in the applicable equity interest by receiving our percentage (20%) of the distributions made on the equity, including any distributions, dividends, profit payments, proceeds resulting from the sale, lease, license, exchange, liquidation or other disposition of any equity or assets of the applicable issuer, in each case subject to us making a payment of any consideration for such equity interests proportional to our interest in the equity award, including without limitation, payments required by the terms of exercise of any options, warrants or other similar rights to acquire stock or other equity interests; or

    with respect to other contract parties, the gross monies that such party receives generally as a result of their skills and brand, including salary and wages from participation in their defined primary occupation, such as an athlete in the NFL, and related fields (including activities in a non-NFL football league), such as broadcasting and coaching.

        "contract party" may as context requires refer to: (1) Vernon Davis; (2) EJ Manuel; (3) Arian Foster; or (4) any specified counterparty to a brand contract, which may include an individual such as a professional athlete or entertainer, and/or affiliates or affiliated entities of such individual on a joint and several basis.

        "EJ Manuel" (including related pronouns) means Erik "EJ" Manuel, Jr., a quarterback for the Buffalo Bills in the NFL and/or Kire Enterprises LLC, an affiliate of EJ Manuel, or both jointly and severally, as the context requires.

        "EJ Manuel Brand" is a tracking unit that our board of directors intends to establish, upon the consummation of the offering of our Fantex Series EJ Manuel. For a description of the assets and liabilities that we are attributing to the EJ Manuel Brand, please see "Management and Attribution Policies—Attribution—Other Tracking Stock Brands."

        "EJ Manuel Registration Statement" is a separate registration statement on Form S-1 (333-194256) with respect to shares of our Fantex Series EJ Manuel Convertible Tracking Stock, filed with the SEC pursuant to the Securities Act.

32


Table of Contents

        "excluded income" means as the context requires:

    with respect to Vernon Davis:

    any cash receipts resulting from his investments in stocks or other equity, bonds, commodities, derivatives, debt, franchises or real estate, so long as such stocks or other equity, bonds, commodities, derivatives, debt investments, franchises and real estate are not received by him as compensation for activities (including licensing of rights) in the "field" as defined in his brand contract,

    any income received from employment, services rendered or other activities not related to professional football and related fields,

    any reasonable reimbursement of incidental expenses actually incurred by Vernon Davis, including without limitation, travel, lodging, per diem and other incidental expenses, or the value of any such items paid by a third party on his behalf,

    any income of: (1) the Vernon Davis Foundation or (2) any other charitable foundation or organization as a result of personal services performed by Vernon Davis,

    any proceeds of the insurance policy purchased by Vernon Davis against the risk of injury or disability,

    certain future pension and benefit payments under the CBA, except that income deferred pursuant to Article 26, Section 6 of such CBA shall not be deemed to be future pension payments and as such, shall be included in brand income;

    merchandise, services or service plans or merchandise, service or service plan credit up to the lesser of $40,000 and 4% of all brand income during any applicable calendar year and as otherwise agreed by Fantex in its discretion; and

    the following specifically excluded income:

    income derived from his performance as a painter, sculptor or artist in any other fine or graphic arts medium, related of Gallery 85 or any other art gallery owned by him or from any school for the arts established in part by him, whether charitable or for profit, regardless of whether he participates or his persona is used to market or promote such school);

    any and all cash or other consideration, in any form whatsoever, received by Vernon Davis from the following entities (or their affiliates as agreed as of October 30, 2013): (1) Ike Shehadeh and Ike's Love & Sandwiches Franchising LLC and (2) Jamba Juice Company;

    with respect to EJ Manuel:

    any cash receipts resulting from the contract party's investments in stocks or other equity, bonds, commodities, derivatives, debt or real estate, so long as (a) such stocks or other equity, bonds, commodities, derivatives, debt investments and real estate are not received by him as compensation or consideration for activities (including licensing of rights) in the "field" as defined in his brand contract, (b) the contract party is not obligated to provide any services related to the "field" in connection with such investment and (c) the business or commercial venture related to such investment does not use the contract party's persona in its legal name or "dba," or in connection with its marketing, advertising or promotion,

    any income received from employment, services rendered or other activities not related to professional football and related fields,

33


Table of Contents

      any reasonable reimbursement of incidental expenses actually incurred by EJ Manuel, including without limitation, travel, lodging, per diem and other incidental expenses, or the value of any such items paid by a third party on his behalf,

      certain future pension and benefit payments under the CBA, except that income deferred pursuant to Article 26, Section 6 of such CBA shall not be deemed to be future pension payments and as such, shall be included in brand income; and

      merchandise, services or service plans or merchandise, service or service plan credit up to the lesser of $40,000 and 4% of all brand income during any applicable calendar year and as otherwise agreed by Fantex in its discretion;

    with respect to Arian Foster:

    any revenues resulting from Arian Foster's investments in stocks or other equity, bonds, commodities, derivatives, debt, franchises or real estate, so long as (a) such stocks or other equity, bonds, commodities, derivatives or real estate are not received by Arian Foster as compensation for activities (including licensing of rights) in the field, and (b) any such debt is not used to finance, and any such franchise is not participating in or related to, activities in the Field,

    any income received from employment, services rendered or other activities not related to professional football,

    any reasonable reimbursement of incidental expenses actually incurred by Arian Foster, including without limitation, travel, lodging, per diem and other incidental expenses, or the value of any such items paid by a third party on Participant's behalf,

    certain future pension and benefit payments under the CBA, except that income deferred pursuant to Article 26, Section 6 of such CBA shall not be deemed to be future pension payments and as such, shall be included in brand income;

    merchandise, services or service plans or merchandise, service or service plan credit up to the lesser of $40,000 and 4% of all brand income during any applicable calendar year and as otherwise agreed by Fantex in its discretion; and

    the following specifically excluded income:

    income derived from: motion pictures and television (unless, in each case, Arian Foster either performs in the role of a professional or amateur football player, or performs as himself), music (including writing, recording, publishing, artist management, touring), children's books, and any and all merchandising and exploitation rights relating to any of these foregoing excluded categories;

    any and all cash or other consideration, in any form whatsoever, received by Arian Foster from the following entities (or their affiliates as of February 28, 2013): (A) Fuse Science, Inc. and (B) Mobli Media Inc.;

    $6.25 million received by Arian Foster in March 2013 as the final payment to him from the Texans for his signing bonus from the March 5, 2012 contract with the Texans; or

    any merchandise credit (or value thereof) payable to Arian Foster pursuant to the agreement, dated effective as of March 1, 2012, between Arian Foster and Under Armour, Inc. and any merchandise credit of the same or lesser value in any renewals, extensions or amendments and/or restatements thereof; or

    with respect to other contract parties, as specified in the respective brand contract between such contract party and Fantex.

34


Table of Contents

        "fair value" means:

    generally, the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied; and

    specifically, with respect to any share of our platform common stock or any of our tracking stocks, fair value will be determined as the volume weighted average of the closing bid or sale prices, whichever is applicable, of such share over the 20-trading day period ending on the trading day before the date of determination. However, such value will only be used for any series of our common stock if our board of directors determines in its good faith judgment that there is an active trading market for that series. If our board of directors makes a determination that there is no active trading market for any series of our common stock, then the fair value for such series will be determined, at the discretion of our board of directors, either by our board of directors in their good faith judgment or by a reputable and independent investment banking or valuation firm experienced in the valuation of securities selected in good faith by our board of directors, provided, however, that to the extent that our board of directors determines in its good faith judgment that such series does not have any material value in terms of assets attributable to such series, including but not limited to any material future brand income or assets, events or circumstances that our management or our board of directors believe could reasonably result in material brand income in the future, then the fair value for such series may be determined by our board of directors in their good faith judgment alone. Any such valuation determination will be made, whether by our board of directors or any independent investment banking, financial advisory or other valuation firm, based on the contractual value of the brand assets related to the applicable tracking stock, and shall not include any discount for lack of marketability or liquidity or any minority interest discount (including that such series may not have the rights contractually or otherwise, to receive dividends). Our board of directors intends to use such firm as a general matter unless the assets and expected valuation of the tracking stock are not material.

        "Fantex" means Fantex, Inc. In addition, all other references in this prospectus to "the Company," "our company," "we," "us" and "our" refer to Fantex.

        "Fantex Series Arian Foster" is the tracking stock designated to track the Arian Foster Brand and being offered pursuant to the Arian Foster Registration Statement.

        "Fantex Series EJ Manuel" is the tracking stock designated to track the EJ Manuel Brand and being offered pursuant to the EJ Manuel Registration Statement.

        "Fantex Series Vernon Davis" is the tracking stock designated to track the Vernon Davis Brand and being offered in this offering.

        "FBS" means Fantex Brokerage Services, LLC, a registered broker-dealer affiliated with Fantex.

        "FBS ATS" means the alternative trading system operated by FBS.

        "platform common stock" means the series of our common stock provided for in our amended and restated certificate of incorporation into which our board of directors may determine to convert any tracking stocks, following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, based on the relative fair values of a share of platform common stock and such tracking stock at the time of any such conversion.

        "qualified independent underwriter" means a qualified independent underwriter as defined under FINRA Rule 5121, and which means a securities firm that does not have a conflict of interest and that

35


Table of Contents

has agreed, in acting as a qualified independent underwriter, to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including those inherent in Section 11 thereof.

        "tracking stock" means any series of our common stock that our board of directors from time to time may designate as tracking a specified tracking stock brand. See "Description of Capital Stock."

        "tracking stock brand" or "tracking unit" means a business unit relating to a specified brand contract, which the corresponding tracking stock is designated to track. See "Management and Attribution Policies."

        "underwriters" refers to, as the context requires, FBS together with Stifel, Nicolaus & Company, Incorporated, the "qualified independent underwriter" (as defined in FINRA Rule 5121) in this offering.

        "Vernon Davis" (including related pronouns) means Vernon Davis, a tight end for the 49ers in the NFL and/or The Duke Marketing LLC, an affiliate of Vernon Davis, or both jointly and severally, as the context requires.

        "Vernon Davis Brand" is a tracking unit that our board of directors is establishing upon the consummation of this offering. For a description of the assets and liabilities that we are attributing to the Vernon Davis Brand, please see "Management and Attribution Policies—Attribution—Vernon Davis Brand."

36


Table of Contents


RISK FACTORS

        Investing in our Fantex Series Vernon Davis involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus, and the sections in this prospectus entitled "Business" and "Description of Capital Stock," before making any decision to invest in shares of our Fantex Series Vernon Davis. If any of the events discussed in the risk factors below occur it could have a material and adverse impact on our business, results of operations, financial condition and cash flows. If that were to happen, the trading price of our Fantex Series Vernon Davis could decline, and you could lose all or part of your investment.

Risks Relating to Our Limited Operating History, Financial Position and Capital Needs

We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.

        We incorporated in Delaware in September 2012 as a wholly-owned subsidiary of Fantex Holdings. We are currently in a start-up phase and to date have relied on our parent to conduct our operations. We therefore have a very limited operating history. Investment in our company is highly speculative because it entails substantial upfront cost and significant risk that we may never become commercially viable. We have not generated any revenue to date, and our parent has incurred significant expenses on our behalf. Following this offering, our parent will not be obligated to continue to incur expenses on our behalf except as required under our management agreement with them, and we expect that we will incur significant expenses related to our ongoing operations. For the years ended December 31, 2013 and 2012, we reported a net loss of approximately $3.6 million and approximately $1.1 million, respectively, and had accumulated losses since inception of approximately $4.6 million.

        We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue evaluating, targeting and accessing brands and negotiating the acquisition of minority interests in those brands that meet our criteria, and as we develop the infrastructure necessary to support our ongoing operations. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses, the rate at which we are able to acquire brands that meet our criteria and the ability of our acquired brands to generate revenues and cash flow. Even if our brands generate cash flows they may not produce payments quickly enough to cover our expenses. If Vernon Davis, or any other individuals with whom we have or may contract in the future, fail to make payments in amounts we expect, or at all, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our expected future losses will have an adverse effect on our stockholders' equity and working capital.

We have a very limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability. Our business model also requires us to make substantial upfront payments to our contract parties in exchange for rights to future payments.

        Our operations to date have been limited to organizing and staffing our company, evaluating, targeting and accessing brands that meet our criteria, negotiating the acquisition of minority interests in those brands and commencing the registration process for the offering of shares of our Fantex Series EJ Manuel and Fantex Series Arian Foster.

        As of April 21, 2014, we have entered into three brand contracts one with Vernon Davis, EJ Manuel and Arian Foster, each professional athletes in the NFL. We intend to enter into additional brand contracts in the future with other contract parties and are actively pursuing these brand contracts, but as of April 21, 2014 we have no current commitments to enter into another brand

37


Table of Contents

contract. Our contract with Vernon Davis requires us to make an upfront cash payment to him of $4.0 million (less $0.2 million to be held in escrow to satisfy future payment obligations to us), and we expect that any other brand contracts that we enter into in the future with other contract parties will also require us to make upfront payments in return for the right to future payments based on our ABI.

        Therefore, our business model requires us to make substantial upfront payments to our contract parties in exchange for rights to future payments. We will be at risk if for any reason we do not receive those future payments, or if they are less than we would need to be profitable or to offset our expenses. We have no history to demonstrate, and we can make no assurances, that our business model will be successful, or whether any of our brand contracts, including our brand contract with Vernon Davis, will be profitable. Consequently, it will be difficult for anyone to predict our future success, performance or viability, and more difficult than it would be if we had a longer operating history and/or successful brand contracts to judge the viability of our business model, and any such predictions may not be accurate or reliable.

To date, we have not generated any revenues or cash flow from any brand contract, and following completion of this offering, our brand contract with Vernon Davis will represent our only source of revenue or cash flow. We may not receive the cash amounts that we expect, or any at all, from our brand contract with Vernon Davis or from any future brand contracts and we may never generate sufficient revenue to become profitable.

        To date, we have not generated any revenues or cash flow from any brand contract and following completion of this offering, our brand contract with Vernon Davis will represent our only source of cash flows. We may not receive the cash amounts that we expect, or any at all, from our brand contract with Vernon Davis or from any other brand contracts.

        Our ability to generate revenue and become profitable will depend, among other things, upon our ability to successfully evaluate, target and access brands that have the potential to generate significant brand income, acquire a minority interest in the brand income from these brands for an appropriate purchase price, aid our acquired brands in enhancing their value in amounts sufficient to provide a return on our investment, and enforce the brand contracts and collect our ABI with respect to these brands. Even if we are able to successfully do these and other things that are within our control there are numerous other factors, some of which are not within our control, that might impact our ability to generate revenue or cash flows or be profitable, including those discussed in these Risk Factors and elsewhere in this prospectus.

        In addition, there are numerous risks and uncertainties associated with the brands in which we invest, including that the success of our brand contracts will depend upon the contributions, success and longevity of an individual in his primary occupation, such as an athlete in the NFL. Therefore, we are unable to predict the timing or amount of future cash receipts, or when or if we will be able to achieve or maintain profitability. Even if we are able to acquire, manage and develop brands as described above, we anticipate incurring significant costs associated with our efforts to achieve or maintain profitability.

Our business strategy depends in large part on our ability to build a robust platform of brands by entering into additional brand contracts. Even if we complete this offering of Fantex Series Vernon Davis we may not be able to enter into additional brand contracts in the future, or enter into the number of additional brand contracts that we anticipate would be necessary to support our business model.

        Our strategy of enhancing brand reach and brand value for our acquired brands depends in large part on our ability to build a robust platform of brands and benefit from economies of scale and an ability to cross-pollinate and share best practices across our acquired brands. For example, any direct investment of resources that we make in any promotional activities relative to our Vernon Davis Brand must exceed a return that is ten times our investment in order to increase the value of such tracking stock brand. Thus, unless we achieve significant economies of scale in our ability to deliver brand

38


Table of Contents

enhancing value at a low cost across all our tracking stock brands (by, for example, utilizing fixed, in-house personnel rather than incurring out-of-pocket third party costs), then we will not likely be able to make investments at a cost that would allow for a positive return on our investment. Accordingly, we are actively pursuing additional brand contracts that we intend to enter into in the future. However, as of April 21, 2014, we have no current commitments to enter into another brand contract.

        We do not know if future potential contract parties will agree to enter into additional brand contracts and we may not be able to attract sufficient additional brand contracts. For example, future potential contract parties may not view the brand contract as an attractive value proposition to them due to any number of factors, including differing expectations of an appropriate purchase price that reflects the agreed upon ABI, which may be based on any number of factors, such as:

    we and future potential contract parties may not agree on the assumptions and estimates used to determine the estimated future earnings of potential contract parties;

    potential contract parties may not want to incur legal, tax and other burdens associated with entering into a brand contract, including, for example, ongoing information and disclosure requirements, as well as the potential risk, due to the lack of any currently binding or authoritative guidance from the IRS, that the ABI we are purchasing from the contract party could be reportable income for the contract party, and, as a result, that it may not be fully deductible for U.S. federal income tax purposes;

    the potential impact of possible disclosure of the terms of material included contracts, and the impact that these disclosure obligations may have on the ability of a contract party to enter into additional endorsement deals or to participate in other brand-income generating activities;

    any negative perception by the media, fans, leagues, clubs or others of our business model;

    any negative perception by the media, fans, leagues, clubs or others of any of our current contract parties or other future contract parties as a result of their decision to enter into a brand contract with us, or otherwise; and

    the performance of our brand contracts or other brand contracts that we may enter into in the future, and/or the performance of the related tracking stock, which may be worse than anticipated.

        As a result, we may be forced to revise our business model to attract additional brand contracts. For example, we are not currently contractually obligated to expend capital on enhancing the brand value of our contract parties. Contract parties may require us to contractually agree to provide certain minimum levels of marketing services in order to enter into brand contracts, which we may not be able to provide or which may not give us sufficient return on capital to make the brand contract profitable. Moreover, we or our parent may be asked to provide an indemnity to the contract party against any tax risk to them as a result of the uncertainty discussed above. For example, our parent has agreed to provide an indemnity to each of our current contract parties if their respective ABI is reportable and not deductible, and either we or our parent may have to agree to similar tax indemnities for future contract parties until there is additional guidance in this area or sufficient history with our contract parties. Even if potential contract parties are willing to agree to enter into additional brand contracts with us, the leagues, team owners, players associations, endorsement partners, elected officials or others may take actions that could restrict our ability or make it more costly for us to enter into future brand contracts. And even if we are successful in entering into additional brand contracts with additional contract parties, we may not be successful in conducting offerings to finance the purchase price under these brand contracts.

39


Table of Contents

We will need to obtain additional funding to acquire additional brands and we may also need additional funding to continue operations. If we fail to obtain the necessary financing, or fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and we may be forced to significantly delay, scale back or discontinue our operations.

        We will require additional capital to fund our operations, and if we fail to obtain necessary financing, our business plan may not be successful.

        Any brand contracts that we enter into in the future with other contract parties will require us to make substantial upfront payments to acquire the ABI under such brand contracts. We do not, and following this offering we do not expect to have, the necessary funds that we would need to make any of these upfront payments under future brand contracts. Therefore, we expect that our future brand contracts for the foreseeable future will be contingent upon obtaining financing to fund the acquisition of the ABI in the respective brands, and we intend to finance these acquisitions through the issuance of additional tracking stocks linked to the value of such brands. Such financing may be expensive and time consuming to obtain, and we may not have investor interest that would enable us to obtain such financing.

        In addition, our operations (excluding upfront payments under future brand contracts) have consumed substantial amounts of cash since inception, and we expect they will continue to consume substantial amounts of cash as we aggressively build our platform of brands and our internal marketing, compliance and other administrative functions. To date, these operations have been financed exclusively by equity contributions from our parent. We are dependent on the continued support of our parent; at this time our parent intends to continue to fund operations for at least the next 12 months. Our parent has no obligation to continue to finance our operations except as required under our management agreement with them. Although we believe the net proceeds from this offering together with existing cash and cash equivalents and interest thereon will be sufficient to fund our projected operating expenses for the next 12 months, as noted above, we will require additional capital to finance the acquisition of future brands, and we may also need to raise additional funds sooner if our operating and other expenses are higher than we expect or our cash received from brand contracts is lower than we expect.

        Until we can generate a sufficient amount of cash from our brand contracts, if ever, we expect to finance future cash needs through public or private equity or debt offerings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may not be able to continue to acquire additional ABI in other brands and we may have to significantly delay, scale back or discontinue our operations. If we raise additional funds through the issuance of additional debt or equity securities it could result in dilution to our existing stockholders, and/or fixed payment obligations that could reduce our ability to pay dividends or otherwise fund our other operations. Furthermore, these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license brands without consent and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

        Our forecast of the period of time through which our financial resources will be adequate to support our operations (excluding upfront payments under future brand contracts) is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this "Risk Factors" section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital

40


Table of Contents

resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

    the rate at which we begin to realize revenue under our brand contracts with Vernon Davis, EJ Manuel and Arian Foster (the related offering of which has been postponed and which may not be consummated on terms described elsewhere in this prospectus, if at all), as well as under any additional brand contracts that we may enter into in the future;

    the cost of our efforts to evaluate, target and access the brands that meet our criteria, as well as the cost and expense of negotiating any new brand contracts;

    our ability to enter into additional brand contracts, and if so the amount of the upfront purchase price that we would have to pay to acquire rights under any such brand contracts;

    the number and characteristics of any new brand contracts that we may enter into;

    the cost and expenses of any equity or debt financings that would be necessary to pay the purchase price under any additional brand contracts, and any regulatory or other delays in any of these offering processes;

    the effect of competing technological and market developments;

    the cost of establishing and building our sales, marketing and compliance capabilities; and

    the rate at which we invest in marketing and other costs to assist our acquired brands in building and enhancing the value of their brands.

        If a lack of available capital means that we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected.

Risks Relating to Our Brand Contracts and Our Business

Our principal source of cash flows for the foreseeable future will be derived from our brand contracts.

        Our principal source of cash flows for the foreseeable future will be derived from our brand contracts. There are a number of risks relating to brand contracts. If any of these risks occur it could have a material and adverse impact on our business, financial condition and results of operations.

We do not have any experience managing brand contracts and we do not have any historical performance data about our brand contracts.

        We entered into our first brand contract with Arian Foster on February 28, 2013, a subsequent contract with Vernon Davis on October 30, 2013 and finally, a contract with EJ Manuel on February 14, 2014. As of April 21, 2014, we have not received any cash under these brand contracts. Due to our limited experience with brand contracts, we do not have any historical performance data regarding our ability to generate cash receipts from the management of brand contracts and the likelihood of long-term performance of the contract party, or our ability to aid our brands in enhancing their brand reach and brand value. As a result, the brand contracts that we enter into may generate lower ABI than we anticipate, or none at all. We may therefore pay a purchase price for ABI that is too high. As we gain more experience with our brand contracts, we may change how we estimate the brand value of future brand contracts, and investors who invest early may not benefit from the experience that we gain from our early brand contracts.

41


Table of Contents

Our cash received under our brand contracts will depend upon the continued satisfactory performance of the related contract party, and we do not have any rights to require the contract party to take any actions to attract or maintain or otherwise generate brand income.

        Some or all of the brand income that a contract party is expected to generate is contingent on continued satisfactory performance and is not guaranteed. Although we structure our brand contracts so that the contract party maintains the substantial majority of future brand income to help ensure that the contract party will maintain incentives to continue to generate brand income, we can provide no assurances that the contract party will do so. The contract party may retire from such contract party's primary occupation, such as an athlete in the NFL, at any time and for any reason, subject only to a requirement to repay us the amount of the purchase price we paid such contract party, plus certain expenses and net of any amounts already paid to us, if the contract party retires within two years. In addition, if the contract party voluntarily retires during such period, such contract party may have other obligations under other contracts to pay back upfront payments, such as a signing bonus, and the contract party may not have the funds to meet all of its obligations at that time. The contract party has no obligation to take any actions to generate brand income, and may choose not to do anything to generate brand income. In addition, even if the contract party chooses to engage in additional brand income generating activities, their ability to do so may be restricted under their existing contracts. For example, Krave Pure Foods, Inc. prohibits Vernon Davis from entering into an agreement to endorse any other jerky product through the term of its contract with Vernon Davis. Moreover, brand income under our brand contracts generally only includes income that the contract party may receive in the future in such contract party's primary occupation at the time, such as an athlete in the NFL, and related fields, such as broadcasting and coaching. Our brand contract contains no restriction on the ability of the contract party to change professions or earn money in unrelated fields, and such income may not be brand income. In any of these events, we may lose some or all of the brand income in the future under a brand contract, in which case our cash receipts would decline.

The contract party is neither our affiliate, nor a director, officer or employee of our company and owes no fiduciary duties to us or any of our stockholders. The contract party has no obligation to enhance the value of the brand or disclose information to our stockholders.

        Events in the contract party's personal life, including relationships with spouse, family, friends, etc. could have a significant impact on the contract party's performance on the field. The contract party's obligations to disclose such personal events is limited to the obligations under the brand contract and the contract party is under no obligation to disclose any personal matters to the holders of shares of our tracking stocks. Furthermore, although the contract party is contractually obligated to disclose all material facts to us, we cannot guarantee that the contract party will comply with such disclosure requirements or that we can independently verify or uncover material events in the contract party's personal life. In addition, the contract party has no obligation to enhance the value of his brand. For example, a contract party in the NFL may agree to a salary reduction to assist his team in staying within the league salary cap, to be on a more competitive team, or to stay with a specific team, all of which may have the effect of reducing potential brand income and conflict with stockholders' interests in maximizing brand income. Since the contract party's obligations under the brand contract are solely limited to obligations owed to us, the holders of shares of our tracking stocks have no contractual right to enforce such obligations against the contract party. Furthermore, since the contract party is neither a director nor an officer of our company, such contract party owes no fiduciary obligations to the holders of shares of our tracking stocks. As a result, our stockholders will have no recourse directly against the contract party, either under the brand contract or under the securities laws.

42


Table of Contents

Profitability of our brand contracts may also depend upon the contract party's ability to attract and maintain endorsements and attract and maintain other brand income generating activities.

        The purchase price that we expect to pay for future ABI under our brand contracts is based on our assumption that the contract party will generate brand income in excess of that which may be predictable under existing contracts that are included in brand income, or included contracts. Therefore, we expect that the contract party will need to be able to maintain existing included contracts as well as attract and maintain additional endorsements and other brand income generating activities. As noted above, the contract party has no obligation to take any actions to generate brand income, or to take any actions to increase the amount of brand income that the contract party currently generates. However, even if the contract party desires to and attempts to attract and maintain additional endorsements and other brand income generating activities there can be no assurances that such contract party will be able to do so.

        Competition for endorsements and other brand income opportunities is intense. These opportunities may depend on a variety of factors, including the primary occupation, such as an athlete in the NFL, and perceived value of such profession to marketing executives, and on-field factors in the primary occupation, such as quality of the contract party's performance, whether or not the contract party plays for a winning team, plays in post-season games or wins individual awards or is named to the Pro Bowl or All-Pro Team, the market in which the contract party performs, skill of the contract party at the contract party's position, the style of play and potential to perform in the future, as well as intangible traits off the field such as personality, personal drive and ambition, "likability," authenticity and consistency. Thus, future endorsements and other brand income opportunities may be difficult to attract and maintain, and they may not generate as much brand income as we expect or that they have historically. A downturn in the performance of the contract party or even the team on which the contract party plays, whether the current team or a different team, could adversely affect such contract party's ability to attract and maintain endorsements. Even if the contract party enters into multi-year agreements that are capable of generating significant brand income, such agreements may have termination clauses relating to performance, character or other reasons, or such agreements may become the subject of disputes. We will have no rights under our brand contracts to require the contract party to pursue any remedies or engage in any disputes with any third parties.

Brand income may decrease due to factors outside the control of the contract party, such as an injury, illness, medical condition or death of the contract party, or due to other factors such as public scandal or other reputational harm to the contract party. In any such event, it is likely that the brand income with respect to such brand contract will not return to its prior levels or may cease completely.

        Our focus for the foreseeable future is to enter into brand contracts with high-profile athletes who play professional sports. For example, Vernon Davis and Arian Foster are athletes in the NFL. There is a high risk of injury in many professional sports, and in particular in the NFL. For instance, on November 12, 2013, Arian Foster was placed on season-ending injured reserve list as a result of suffering a back injury. Nevertheless, we do not maintain any insurance against the loss of any brand income as a result of injury, illness, medical condition or death of the contract party. Although, as of April 21, 2014, Vernon Davis has purchased an insurance policy against the risk of injury or disability, any proceeds received by Vernon Davis from such policy would not be brand income. Therefore, if a contract party becomes injured or sustains a serious illness or other adverse medical condition in the course of his professional career or otherwise, or dies, the brand income, and thus our ABI, would likely be dramatically less than we anticipate, and it is likely that such brand income would not return to its prior levels or may cease completely.

        We also expect to receive brand income from existing and future endorsement agreements entered into by the contract party, as well as other public activities related to the primary occupation of the contract party, such as television broadcasting. We believe that the contract party's ability to attract and

43


Table of Contents

maintain endorsement agreements as well as other sources of brand income will depend on the contract party's reputation and ability to be viewed favorably by the public. Prior to entering into a brand contract, we assess the character and reputation of the contract party and the brand through our independent assessments, industry references and background checks conducted by third parties. However, there can be no assurance that our review process uncovers all facts and characteristics that could adversely affect the reputation of a contract party or the value of the brand contract. Even if our review process provides us with an accurate assessment of the character and integrity of a contract party as of the date of our review, there can be no assurance that circumstances in the future will not change, or that a contract party will continue to behave in a manner consistent with past behavior.

        Any harm to the public reputation of a contract party, or association of the contract party's name with a public scandal, may reduce the contract party's ability to enter into and maintain future endorsements and other sources of brand income and as a result, brand income would likely decrease or may cease completely.

The contract party or other third parties may refuse or fail to make payments to us under the brand contracts.

        Our cash flows depend on contract parties and other third parties making payments of ABI to us. A contract party or other third party may dispute amounts to which we believe we are entitled, or may be unwilling or unable to make payments to which we are entitled, including for reasons discussed elsewhere in these risk factors.

        In either event, we may become involved in a dispute with the contract party or other third party regarding the payment of such amounts, including possible litigation. Disputes of this nature could harm the relationship between us and the contract party or other third party, and could be costly and time-consuming for us to pursue.

        Failure of the contract party or other third party to make payments of our ABI to us for any reason would adversely affect our business and in particular the value of your tracking stock if the failure to pay relates to the brand contract associated with any tracking stocks.

        In addition, if the contract party or other third party who may be obligated to make payments to us were to become the subject of a proceeding under the United States Bankruptcy Code or a similar proceeding or arrangement under another state, federal or foreign law, our rights and interests under the brand contract or otherwise may be prejudiced or impaired, perhaps significantly so. In such circumstances, we may be precluded, stayed or otherwise limited in enforcing some or all of our rights under the brand contract or otherwise and realizing the economic and other benefits contemplated therein. To the extent we do not receive payments under a brand contract to which we would otherwise be entitled as a result of any such debtor relief laws, then the amount of such payments we do not receive will nonetheless be attributable to the respective tracking stock brand. In such an event, such shortfall in income will be treated as a general expense of Fantex and be shared pro rata (calculated based on attributable income) among all of our then outstanding tracking stocks. As a result, the market value of your tracking stock could decline if another brand contract that is not related to your tracking stock is unenforceable as a result of debtor relief laws. For a further description of covered amounts please see "Management and Attribution Policies—Attribution—Covered Amounts."

Our brand contracts are not secured by any collateral or guaranteed or insured by any third party other than the contract party, and you must rely on Fantex to pursue remedies against the contract party in the event of any default.

        The payments under a brand contract will be unsecured obligations of the contract party and will not be secured by any collateral, nor guaranteed or insured by any third party or governmental authority. Therefore, we will be limited in our ability to collect any payments that may be owed to us

44


Table of Contents

under a brand contract if those amounts are not paid. Generally, we would have to pursue remedies against the contract party or other third parties to whom our ABI was assigned by the contract party.

        If the contract party defaults under the brand contract, there can be no assurances that the contract party will have adequate resources, if any, to satisfy any obligations to us under the brand contract. In addition, our brand contracts will require that our ABI be directly assigned to us by the contract party where commercially practicable. It may be necessary, therefore, for us to also pursue remedies against counterparties to included contracts. These counterparties may assert that the assignment of brand income by the contract party did not create an obligation of their part to pay any brand income to us.

        Moreover, payment of the ABI is an obligation of the contract party to us, not obligations to our stockholders, including holders of shares of our Fantex Series Vernon Davis. Our stockholders will have no recourse directly against the contract party.

The brand contract does not restrict the contract party from incurring unsecured or secured debt, nor does it impose any other financial restrictions on the contract party.

        If the contract party incurs additional secured or unsecured debt after entering into a brand contract with us, or if the contract party incurs excessive expenses, the contract party may be impaired in its ability to make payments to us under the brand contract. In addition, additional debt or expenses may adversely affect the contract party's creditworthiness generally, and could result in the financial distress, insolvency, or bankruptcy of the contract party. To the extent that the contract party has or incurs other indebtedness and expenses and cannot pay all of its indebtedness or expenses, the contract party may choose to make payments to other creditors rather than us.

        To the extent a contract party incurs other indebtedness that is secured, such as mortgage, home equity, or auto loans, the ability of the secured creditors to exercise remedies against the assets of the contract party may impair the contract party's ability to make payments to us under the brand contract. The contract party may also choose to repay obligations under secured indebtedness before making required payments on the brand contract because the contract party has no collateral at risk in the case of the brand contract.

The financial and other information that we obtain from the contract party or other third parties may be inaccurate and may not accurately reflect the true financial position of the contract party, and the risk of default on the brand contract may be significant and may be higher than we anticipate.

        Prior to entering into a brand contract, we conduct a review of the contract party that includes collecting financial and other information from the contract party to evaluate financial suitability of the contract party, including a review of assets, liabilities, existing commitments, tax returns and credit scores. We also conduct background checks and obtain credit reports from the major credit rating agencies to help us assess the ability of the contract party to meet their financial obligations. However, we do not verify this information and it may be inaccurate or incomplete. For example, the credit score assigned to a contract party may not accurately reflect the actual likelihood that the contract party will perform under the brand contract because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data, and we do not verify the information obtained from the contract party's credit report. If information that is supplied to us by the contract party or other third parties is inaccurate or incomplete, the risk of default on the brand contract may be significant and may be higher than we anticipate.

45


Table of Contents

Our due diligence procedures may not reveal all relevant information regarding a targeted brand acquisition and may result in an inaccurate assessment of the projected value of an acquired brand.

        Prior to entering into a brand contract with an athlete, entertainer or other high profile individual, we conduct due diligence and review the included contracts of such contract party and other documents to support our estimate of such contract party's projected brand income. As part of this due diligence process and assessment, we will rely in part on the contract party to fully address our questions by disclosing all relevant information and, in some cases, on information provided by third parties. However, our due diligence processes may not uncover all relevant facts, and our brand acquisitions may not be profitable. Although our brand contract with Vernon Davis obligates him to, and we intend to require future contract parties, if any, to contractually agree to, disclose all material facts to us, we cannot guarantee that Vernon Davis or any future contract party will comply with such disclosure requirements or that we can independently verify or uncover material events about Vernon Davis or any such future contract parties. For instance, in a documentary released in September 2013, Arian Foster admitted to receiving money as a college football player during his senior year at the University of Tennessee, in violation of NCAA rules. While it is difficult to assess the reputational harm of such a disclosure, an athlete's, entertainer's or other high profile individual's failure during our due diligence process to reveal all relevant information prior to our entering into the brand contract with such athlete, entertainer or other high profile individual may result in an inaccurate assessment of such contract party's projected brand value potentially leading to acquisitions that may not be profitable.

The valuation of our brand contracts and expected ABI requires us to make material assumptions that may ultimately prove to be incorrect. In such an event, we could suffer significant losses that could materially and adversely affect our results of operations.

        Our principal assets are expected to be derived from our brand contracts with athletes, entertainers and other high-profile individuals. Those assets are considered "Level 3" assets under ASC 820, Fair Value Measurements and Disclosures, as there is currently no active market where we are able to observe quoted prices for identical assets. As a result, our valuation of those assets incorporates significant inputs that are not observable. Fair value of future expected brand income is determined by measuring expected returns on player contracts, anticipated lengths of player careers and related contracts, anticipated future endorsements and anticipated renewals of existing contracts based on comparable individuals in the same industry. However, valuation of the expected brand income is highly speculative due to the heavily subjective nature of identifying comparable athletes or entertainers and is inherently difficult due to the uniqueness of each professional athlete or entertainer and the limited number of available comparable athletes and entertainers.

        The fair value measurement of Level 3 assets is inherently uncertain and creates additional volatility in our financial statements that are not necessarily related to the performance of the underlying assets. To determine the amount of our purchase price (and the equivalent fair value at the time) of our brand contract with Vernon Davis we applied discount rates ranging from 4.5% to 15%, with a weighted average of 11.4%. We subjectively determined the discount rates applied in our analysis based on assumptions that have not been reviewed by any independent financial advisor. If we determine in the future that the discount rates we used were too low, then our estimate of the fair value of any of our brand contracts may be too high. See the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a further discussion of fair value measurements.

Failure of a contract party to adequately protect their intellectual property could injure the value of the contract party's brand.

        We invest in high-profile brands through our brand contracts. Therefore, the success of our brand contracts is dependent on the contract party protecting their brand from intellectual property

46


Table of Contents

infringement (such as counterfeiting and other unauthorized uses of their intellectual property rights). Although the contract parties may seek to protect the intellectual property rights associated with their brand by ensuring that they own and control certain intellectual property rights in and to those assets and, where appropriate, by enforcing those intellectual property rights, it may not be possible to detect all instances of brand infringement. Additionally, where instances of brand infringement are detected, we cannot guarantee that such instances will be prevented as there may be legal or factual circumstances that give rise to uncertainty as to the validity, scope and enforceability of a contract party's intellectual property rights. We will have no rights under the brand contract to enforce any intellectual property rights of the contract party or the brand. Infringement of their trademark, copyright and other intellectual property rights by others could have an adverse effect on the brand income, and thus the ABI that we receive under the brand contract. If any contract party were to fail or be unable to secure, protect, maintain and/or enforce the intellectual property rights that vest in his brand, then we could lose a portion of our cash stream that would have been received from such brand assets.

Our cash received under brand contracts may fluctuate due to seasonality.

        The cash receipts under our brand contracts may be subject to seasonal variation, limiting the overall comparability of interim financial periods. For example, the salary under NFL contracts is usually paid out in even installments during the course of the NFL season, or as a signing bonus according to varying schedules. The NFL season occurs primarily in the third and fourth quarters of each calendar year. As a result, our interim results and any quarterly financial information may not be indicative of the financial performance for the whole year.

An economic downturn and adverse economic conditions may harm a contract party's earning potential.

        The recent economic downturn and adverse conditions in the global markets may negatively affect the earnings of a contract party. For example, the NFL market salary cap is dependent upon the revenues the NFL receives. In addition, endorsements may depend in part on the actual or perceived personal disposable income of consumers and marketing budgets of endorsement partners. These commercial contract payments are contingent upon the expenditures of businesses across a wide range of industries, which industries may cut costs in response to any economic downturn.

Our ability to increase the value of any of our brands may be limited and our investments in the promotion of any of our brands may cause the market value of our stock to decline.

        Our management and board of directors will have complete discretion in determining the scope and execution of our brand promotion efforts, if any, with respect to our tracking stock brands. Any investment we may make to promote our acquired brands will be for long-or medium-term results and would not be expected to increase brand income in the near-term, if at all. Any expenditures that we may make on promotional activities that are attributable to a single tracking stock brand will be an attributable expense to that tracking stock brand. To the extent that our promotional activities increase the attributable income of a tracking stock brand by an amount less than the attributable expenses for the promotion, the attributed retained earnings of that tracking stock brand would decline. There can be no assurances that our management will promote any of our tracking stock brands in a manner that creates value for the associated tracking stock or any of our other stockholders.

Confidentiality agreements with employees and others may not adequately prevent disclosures of our proprietary information and confidential information of the contract party.

        We have taken measures to protect our proprietary information and confidential information of the contract parties, but these measures may not be effective. We require new employees and consultants to execute confidentiality agreements upon the commencement of an employment or

47


Table of Contents

consulting arrangement with us. These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual's relationship with us, including for example, information we acquire about the contract parties, be kept confidential and not disclosed to third parties. These agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. Nevertheless, employees, collaborators or consultants may still disclose or misuse our confidential information, and we may not be able to meaningfully protect our proprietary information and confidential information of the contract parties. In addition, others may independently develop substantially equivalent information or techniques or otherwise lawfully gain access to our proprietary information and confidential information of the contract parties, and thereafter communicate this information to others without maintaining its confidentiality. If this occurs, it may negatively impact our business and relationships with our current or future contract parties, and may damage our reputation and limit our ability to enter into new brand contracts. In addition, costly and time-consuming litigation could be necessary to enforce our proprietary rights or limit the prohibited disclosure of confidential information, and failure to obtain or maintain protection of our proprietary information or the confidential information of the contract parties could adversely affect our competitive business position.

Changes in government policy, legislation or regulatory or judicial interpretations could hinder or prevent our ability to conduct our business operations, including by hindering or preventing our ability to enforce our brand contracts or conduct offerings of tracking stocks.

        Changes in government policy, legislation or regulatory or judicial interpretations could hinder or prevent our ability to conduct our business operations, including by hindering or preventing our ability to enforce our brand contracts or conduct offerings of tracking stocks. For example, we could be deemed to be subject to insurance and other regulations, which in some circumstances may be applied retrospectively. In addition, our brand contracts are intended to be effective in perpetuity and may be terminated only upon mutual agreement of the contract party and us. In some jurisdictions perpetual contracts have been found to be against public policy and therefore terminable in some circumstances. Our brand contracts are governed by California law, and California legal decisions do not disfavor express contractual terms for indefinite duration. However, we can provide no assurances that a California court may not rule differently in the future, or that a court of another jurisdiction might attempt to apply a different choice of law to our brand contracts. If this occurs then we may become involved in expensive and time consuming litigation, or may be unable in certain cases to enforce our brand contracts. Any other changes in or interpretations of current laws and regulations could also require us to increase our compliance expenditures, inhibit our ability to enter into new brand contracts or cause us to significantly alter or to discontinue offerings of additional tracking stocks. Altering the terms of our brand contracts or tracking stocks to comply with changes in or interpretations of applicable laws and regulations could require significant legal expenditures, increase the cost of managing or acquiring our brand contracts or make offerings of our tracking stocks less attractive to investors. In addition, our failure to comply with applicable laws and regulations could lead to significant penalties, fines or other sanctions. If we are unable to effectively respond to any such changes or comply with existing and future laws and regulations, our competitive position, results of operations, financial condition and cash flows could be materially adversely impacted.

The leagues, team owners, players associations, endorsement partners, elected officials or others may take actions that could restrict our ability or make it more costly for us to enter into future brand contracts.

        Our business model depends on the cooperation of various third parties. Because the brand contracts and offerings of tracking stocks linked to the income of professional athletes and entertainers is a novel business model, there may be influential parties with interests that are adverse or perceived to be adverse to our business, such as sports leagues, sports teams, fantasy sports networks or gambling institutions. These parties may seek to change the rules, policies, laws, regulations or legal

48


Table of Contents

interpretations in ways to prohibit, or limit the success of, our business. For example, in 2010 the Cantor Futures Exchange received approval from the Commodities Futures Trading Commission to launch the Hollywood Stock Exchange as a contract market for the trading of box office futures; however, the Motion Picture Association of America successfully lobbied members of the U.S. congress to pass legislation making trading in box office futures illegal. In a similar manner, influential parties that perceive our business model to be a threat to their business or detrimental to professional sports may attempt to lobby leagues, team owners, players associations, endorsement partners and elected officials to adopt rules, policies, laws, regulations or legal interpretations that inhibit us from conducting our business. Any such changes may adversely affect the ability of our contract parties to perform their obligations under brand contracts, or inhibit our ability to enter into new brand contracts with other contract parties. These changes could cover various requirements of the brand contract, such as prohibiting the sale or assignment of a portion of personal income, limiting the ability to enter into contracts with an indefinite term or limiting the ability of the contract party to disclose information about included contracts to us. Any such changes prohibiting, or limiting the enforceability of, any terms in the brand contract could prevent or inhibit our collection of the ABI to which we are entitled under the brand contract. Any limitations on the ability of the contract party to disclose information about included contracts to us, or the SEC if we deemed it necessary, could limit the ability of a contract party to enter into such agreements subsequent to entering into a brand contract with us. Any increase in the expenses associated with our management of the brand contract or decrease in the expected ABI that we will collect could materially and adversely affect the value of shares of our Fantex Series Vernon Davis.

We are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan in a timely manner, or at all.

        Our success depends largely upon the continued services of our executive officers and other key personnel, particularly Cornell "Buck" French, our Chief Executive Officer, David Mullin, our Chief Financial Officer, and David Beirne, Chairman of our board of directors. Neither we nor Fantex Holdings have employment agreements with any of our executive officers or key employees, other than Messrs. French and Mullin. The material terms of the agreements with Messrs. French and Mullin are described under "Executive Compensation—Executive Compensation Arrangements." Our executive officers or key employees could terminate their employment with Fantex Holdings or us at any time without penalty. In addition, we do not maintain key person life insurance policies on any of our employees or any of our contract parties. The loss of one or more of these executive officers or key employees could seriously harm our business and may prevent us from implementing our business plan in a timely manner, or at all.

Risks Relating to Each of Our Contract Parties

Our ability to increase the value of our tracking stock brands may be limited and our investments in the promotion of such tracking stock brands may cause the market value of our stock to decline.

        Based on publicly reported and widely available information, endorsement deals with professional football players historically appear to have been significantly smaller than endorsement deals with athletes from other professional sports such as golf and basketball. As a result, the endorsement potential of each of our contract parties may be limited and we may be unable to increase the value of the associated tracking stock brands despite our efforts. To the extent that our promotional activities are unsuccessful, the market value of shares of such tracking stock brands may decline. Furthermore, even if our promotion activities increase the endorsement income to the contract parties, they may nonetheless have a negative impact on the market value of shares of our tracking stock because we will only receive a portion of any increased brand income. For example, because the ABI under our Vernon Davis brand contract is 10% of brand income, our promotion efforts must exceed a return that is at least ten times our investment in order to increase the value of the Vernon Davis Brand to the extent

49


Table of Contents

that we increase our cash receipts under the brand contract. There can be no assurances that our management will promote any of our tracking stock brands in a manner that creates value for holders of shares of our tracking stock.

The value of our tracking stock brands is dependent upon the performance of, and to a lesser extent, the popularity of our contract parties.

        Our cash receipts under each of our brand contracts are driven by the performance of, and to a lesser extent, the popularity of our contract parties. The contract party's performance in his primary career directly affects, and a deterioration of his performance could adversely affect, the ABI under our brand contract. Poor or mediocre performance could cause the contract party's playing contract to be terminated and may result in sponsors cancelling their endorsements, or result in the contract party failing to qualify for additional incentive payments under existing or future endorsement contracts. We cannot ensure that any of our contract parties will continue to be successful in their playing careers.

Contract parties in the NFL could be negatively affected by an NFL work stoppage.

        If the NFL experiences a work stoppage, then the earnings of a contract party in the NFL, including each of our current contract parties, will be adversely affected. In 1974 and 1982 the NFL experienced player strikes and in 2011 the NFL owners staged a "lockout" of the players. If either a strike or a lockout occurs during an NFL season, player pay may be suspended. Each of our contract party's earnings are heavily dependent on his professional football salary and would be negatively affected by any such work stoppage. This would have a negative impact on the payments we receive under the brand contract. We can give no assurances that such work stoppages will not occur.

Contract parties in the NFL could be negatively affected by current and future rules of the NFL.

        Future changes to the NFL rules or other regulations may adversely affect the earnings of each of our contract parties in the NFL. These regulations could cover various aspects of his participation, such as changes to the rules of the game resulting in a devaluation of their respective skill sets, changes governing player eligibility and fines, and changes to the league's CBA. Changes in the format of the game and league in which the contract party plays could have a negative impact on his brand income and therefore, will impact the ABI we receive under the respective brand contract.

There could be a decline in the popularity of the NFL and/or the team on which the contract party plays in the NFL, or a decline in the contract party's popularity.

        There can be no assurance that the NFL will retain its popularity as a sport, together with the associated levels of media coverage. In addition, either the team for which the contract party plays or the contract party could suffer a decline in popularity, including as a result of poor performance or behavior by the contract party or any of his teammates or the team in general, particularly if such performance or behavior tarnishes the contract party's brand image. A contract party may be traded to another club in the NFL that has a smaller media market and/or is less popular than the current team, or other teams or players in the NFL may gain popularity relative to the contract party by performing at a higher level, exhibiting more appealing behavior, or otherwise. Any decline in popularity of the NFL, the team on which the contract party plays in the NFL, or the contract party, or relative decline as compared to other teams or players, could result in lower offers for future endorsements and NFL player contracts, a reduction in the value of the contract party or his brand, and a resulting decline in the value of shares of our tracking stock linked to the value and performance of the contract party's brand. Even if the contract party and the team on which he plays in the NFL is successful, a substantial decline in the popularity of the NFL, whether as a result of increase in the popularity of other professional sports or the emergence of new spectator sports, could have a material adverse effect on shares of our tracking stocks, including shares of our Fantex Series EJ Manuel. Any one of these events or a combination of such events could have a material adverse effect on the trading volume of our tracking stock and on the cash received under the brand contract associated with such contract party.

50


Table of Contents

Risks Relating to Vernon Davis

Vernon Davis's NFL player contract is a significant portion of the current cash we would receive under his brand contract.

        In 2010, Vernon Davis signed a six year contract with the 49ers worth up to $42.5 million, and his professional football compensation in the year ended December 31, 2012 made up over 90% of his annual income. This 2010 NFL player contract included a $10.0 million signing bonus with the remaining $32.5 million to be paid out over the term of the contract. The available brand income remaining as of October 30, 2013 under his existing NFL player contract was $14.0 million, none of which is guaranteed. Therefore, much of the cash expected to be received under our brand contract with Vernon Davis is tied to his professional football career and is not guaranteed. If he does not play for any reason or if the 49ers decide to release him because of a decline in the quality of his play, an injury, illness or medical condition or for any other reason, then he will not receive any of the remaining salary other than the guaranteed portion. We cannot guarantee that Vernon Davis will continue to be paid according to the terms of his current NFL player contract, or that he will be able to enter into a new NFL player contract when the existing contract expires.

The profitability of Vernon Davis's brand contract is substantially dependent upon Vernon Davis's ability to enter into at least one additional high-value, multi-year NFL player contract, and on his ability to successfully attract and retain endorsements during his playing career and thereafter in excess of amounts he has attracted historically and/or generate other brand income after his playing career. If Vernon Davis does enter into an additional high-value, multi-year NFL player contract, there is no guarantee that any portion of such contract will consist of guaranteed money.

        We anticipate that we will receive the majority of payments due under our brand contract with Vernon Davis during the period of his NFL playing career. His current NFL player contract represents the source of substantially all of the brand income, and we expect that Vernon Davis's annual income will continue to be more heavily weighted toward his NFL player contract than on other brand income generating activities.

        The length of Vernon Davis's NFL playing career is uncertain, however, tight ends generally retire from the NFL by their early 30s. Vernon Davis was born on January 31, 1984, and thus was 29 years old at the start of the 2013 NFL season. Unless earlier terminated, Vernon Davis's current NFL player contract with the 49ers will expire at the conclusion of the 2015 NFL season. Because Vernon Davis will be 32 years old prior to the beginning of the 2016 season, NFL teams may be unwilling to enter into a long-term NFL player contract with Vernon Davis on terms comparable to his current NFL player contract, if at all. As a result, Vernon Davis may have already reached the peak of his earnings from his football salary. In addition, Vernon Davis may not continue to perform well as an NFL player and therefore, future earnings may be substantially less than those realized over the past few years. If Vernon Davis is unable to sign a new NFL player contract or the terms are materially worse than his current NFL player contract, the cash receipts from our Vernon Davis Brand will decline, which in turn may cause the market value of shares of our Fantex Series Vernon Davis to decline.

        In addition, in valuing Vernon Davis's potential lifetime brand income we estimated an increase in the brand income Vernon Davis may earn as a result of his endorsements, as compared to his historical earnings from endorsements. However, we do not know if his endorsement income will increase in the future, and we do not know if his reputation and brand will be enhanced as a result of his being one of our first contract parties. In fact, his reputation and brand may be negatively affected by his willingness to enter into a brand contract and trade potential future earnings for present income. If future endorsement partners or NFL teams suspect that Vernon Davis has hidden motives behind accepting an upfront cash payment in exchange for a portion of his future earnings, future endorsement partners may be less willing to enter into contracts with Vernon Davis and may not find his promises of future performance under such contracts reliable. In addition, none of Vernon Davis's current endorsement

51


Table of Contents

contracts last beyond the third quarter of 2016, and at least one of the endorsement contracts included in his brand income (likely also including those he may enter into during his NFL playing career) may be terminated if Vernon Davis does not play for an NFL football team. Furthermore, Vernon Davis's ability to successfully attract and retain endorsements is dependent on Vernon Davis complying with the contractual requirements of those endorsements and there is no guarantee that Vernon Davis will do so. For example, as a result of Vernon Davis tweeting about a competing product, a coconut water company recently terminated its contract with him as a spokesperson. Moreover, future endorsement partners may be less willing to enter into contracts with Vernon Davis as a result of his entering into the brand contract with us in order to avoid public disclosure of their arrangements with Vernon Davis. For the aforementioned reasons, Vernon Davis may be unable to renew existing endorsement deals on favorable terms, if at all, or may not be able to enter into new endorsement deals. In addition, his ability to generate other brand income after his playing career, such as through coaching or broadcasting, is unproven. His failure to attract and maintain key endorsements or generate other brand income after his playing career could have a negative impact on our cash received under the brand contract.

        The opportunity to receive a return of capital or any profit from an investment in our Fantex Series Vernon Davis will depend in large part upon Vernon Davis's ability to enter into at least one additional high-value, multi-year NFL player contract, and on his ability over the same period and beyond to enter into and maintain endorsement contracts that are in excess of those he has had historically. If Vernon Davis does enter into an additional high-value, multi-year NFL player contract, there is no guarantee that any portion of such contract will consist of guaranteed money. For a more detailed description of the valuation of the Vernon Davis Brand Contract, please see section entitled "—Vernon Davis Brand Contract, at Estimated Fair Value" beginning on page 97.

Vernon Davis has incurred other secured debt, including auto loans and mortgage payables, the payment of which may adversely impact his ability to make payments under the brand contract.

        There exist several outstanding auto and mortgage loans payable by Vernon Davis to secured creditors. The ability of secured creditors to exercise remedies against the assets of Vernon Davis, including his automobile and several real estate properties, may impair Vernon Davis's ability to make payments to us under the brand contract. Vernon Davis may also choose to repay obligations under secured indebtedness before making required payments on the brand contract because the contract party has no collateral at risk in the case of the brand contract. If Vernon Davis declares bankruptcy any amounts owed to us may only be paid out after all of his secured debt is repaid.

Vernon Davis may suffer from an injury, illness or a medical condition; any injuries, illnesses or medical conditions of Vernon Davis may affect the cash received by us under the brand contract.

        Any injury, illness or a medical condition of Vernon Davis could cause you to lose a substantial portion or all of your investment in Fantex Series Vernon Davis. Even if not career ending, an injury, illness or a medical condition could have a negative effect upon Vernon Davis's performance and may result in a loss of brand income that would otherwise have resulted from current and future NFL player contracts. A reduction in brand income will reduce our ABI, our ability to make dividend payments, if any, and have a negative impact on the value of shares of our Fantex Series Vernon Davis. Any of these outcomes could also affect our ability to enter into additional brand contracts or to finance the acquisition of additional brands, which would have an adverse impact on our ability to execute on our business strategy.

        On September 24, 2006, Vernon Davis left a regular season NFL game in the third quarter after sustaining a fracture to his left fibula. This injury caused him to miss six games during the 2006 NFL regular season. After suffering a concussion, Vernon Davis was forced to temporarily leave a regular season game on December 31, 2006. On September 23, 2007, Vernon Davis left a regular season NFL

52


Table of Contents

game early after suffering a sprain to his right knee. This injury caused him to miss the following two regular season games. Vernon Davis also missed portions of two regular season NFL games in the 2010 season following a reported ankle injury. On December 23, 2012, Vernon Davis was reported to leave an NFL game early after suffering a concussion. On September 15, 2013, Vernon Davis left a regular season NFL game early in the fourth quarter with a hamstring strain, which injury also caused him to miss a game the subsequent week. Most recently, on November 10, 2013, Vernon Davis was reported to leave a regular season game early as a result of suffering a concussion. Vernon Davis has experienced these and other instances of normal wear and tear as an athlete in the NFL and we expect that Vernon Davis will continue to experience such wear and tear. Any worsening of these conditions, or re-injury or new injury, could materially and adversely affect Vernon Davis's playing performance and the value of the Vernon Davis Brand.

        A substantial portion of our income under the brand contract is attributable to Vernon Davis's NFL player contract. To the extent that the value of your investment is dependent on the competitive success of Vernon Davis, the likelihood of achieving such success is substantially reduced by serious or untimely injuries to Vernon Davis. Vernon Davis is not contractually guaranteed to receive any portion of his NFL player contract. If Vernon Davis is unable to play as a result of any injury, illness or a medical condition he may lose those portions of his contract payable on the achievement of performance based incentives, those portions of his contract not guaranteed against injury, illness or a medical condition and may be unable to enter into any future NFL player contracts. Additionally, Vernon Davis may not be paid under his endorsement contracts if he fails to play in a specified number of NFL games. Even if Vernon Davis continues to receive payments under his endorsement contracts, his ability to maintain sponsors and his ability to attract new sponsors may be severely diminished.

Future negative publicity could damage Vernon Davis's reputation and impair the value of his brand.

        The return on your investment in shares of our Fantex Series Vernon Davis heavily depends on the value and strength of Vernon Davis's brand and reputation as well as the financial success of Fantex as a whole. Vernon Davis has in the past received, and we expect that in the future he will continue to receive, media coverage. Unfavorable publicity regarding his professional performance or his behavior off the field could negatively affect his brand and reputation. For example, in September 2010, it was widely reported that Vernon Davis initiated a fight at training camp with a fellow teammate leading to some negative media coverage. Any future negative publicity as a result of similar incidents or otherwise could damage his reputation and impair the value of his brand. Moreover, certain of Vernon Davis's endorsement agreements contain "morality" clauses which would permit counterparties to endorsement agreements to terminate those agreements in certain circumstances (such as if he were charged with a felony or other crime involving fraud, dishonesty, violence, physical harm to another person, possession or use of illegal drugs or moral turpitude), further reducing our ABI.

Risks Relating to EJ Manuel

EJ Manuel's NFL player contract is a significant portion of the current cash we would receive under his brand contract.

        In 2013, EJ Manuel signed a four year contract with the Bills worth up to $8.89 million, and his professional football compensation in the year ended December 31, 2013 made up over 90% of his annual income. This 2013 NFL player contract included a $4.84 million signing bonus with the remaining $4.05 million to be paid out over the term of the contract. The available brand income remaining as of February 14, 2014 under his existing NFL player contract was $3.64 million, all of which is guaranteed. We cannot guarantee that EJ Manuel will be able to enter into a new NFL player contract when the existing contract expires.

53


Table of Contents

The profitability of EJ Manuel's brand contract is substantially dependent upon his ability to enter into additional high-value, multi-year NFL player contracts, and on his ability to successfully attract and retain endorsements during his playing career and thereafter significantly in excess of amounts he has attracted historically and/or generate other brand income after his playing career.

        We anticipate that we will receive the majority of payments due under our brand contract with EJ Manuel during the period of his NFL playing career. His current NFL player contract represents the source of substantially all of the brand income, and we expect that EJ Manuel's annual income will continue to be more heavily weighted toward his NFL player contract than on other brand income generating activities.

        The length of EJ Manuel's NFL playing career is uncertain. EJ Manuel was born on March 19, 1990, and thus was 23 years old at the end of the 2013 NFL season. Unless earlier terminated, EJ Manuel's current NFL player contract with the Bills will expire at the conclusion of the 2016 NFL season, but may be extended by the Bills to cover the 2017 season. Because EJ Manuel will be 27 years old prior to the beginning of the 2018 season and quarterbacks generally retire from the NFL by their early 30s, NFL teams may be unwilling to enter into an NFL player contract with EJ Manuel for any longer than three years. In addition, EJ Manuel may not continue to perform well as an NFL player and therefore, future earnings may be substantially less than those guaranteed under his current NFL contract. If EJ Manuel is unable to sign a new NFL player contract or the terms of such new contract are materially worse than his current NFL player contract, the cash receipts from our EJ Manuel Brand will decline.

        In addition, in valuing EJ Manuel's potential lifetime brand income we estimated an increase in the brand income EJ Manuel may earn as a result of his endorsements, as compared to his historical earnings from endorsements. However, we do not know if his endorsement income will increase in the future, and we do not know if his reputation and brand will be enhanced as a result of his being one of our first contract parties. In fact, his reputation and brand may be negatively affected by his willingness to enter into a brand contract and trade potential future earnings for present income. If future endorsement partners or NFL teams suspect that EJ Manuel has hidden motives behind accepting an upfront cash payment in exchange for a portion of his future earnings, future endorsement partners may be less willing to enter into contracts with EJ Manuel and may not find his promises of future performance under such contracts reliable. In addition, none of EJ Manuel's current endorsement contracts last beyond 2017, and at least one of the endorsement contracts included in his brand income (and others he may enter into during his NFL playing career) may be terminated if EJ Manuel does not play for an NFL football team. Furthermore, EJ Manuel's ability to successfully attract and retain endorsements is dependent on EJ Manuel complying with the contractual requirements of those endorsements and there is no guarantee that EJ Manuel will do so. Moreover, future endorsement partners may be less willing to enter into contracts with EJ Manuel as a result of his entering into the brand contract with us in order to avoid public disclosure of their arrangements with EJ Manuel. For the aforementioned reasons, EJ Manuel may be unable to renew existing endorsement deals on favorable terms, if at all, or may not be able to enter into new endorsement deals. In addition, his ability to generate other brand income after his playing career, such as through coaching or broadcasting, is unproven. His failure to attract and maintain key endorsements or generate other brand income after his playing career could have a negative impact on our cash received under the brand contract.

        The opportunity to receive a return of capital or any profit from our brand contract with EJ Manuel will depend in large part upon EJ Manuel's ability to enter into additional high-value, multi-year NFL player contracts and on his ability over the same period and beyond to enter into and maintain endorsement contracts that are significantly in excess of those he has had historically. For a more detailed description of the valuation of the EJ Manuel Brand Contract, please see section entitled "—EJ Manuel Brand Contract, at Estimated Fair Value" beginning on page 100.

54


Table of Contents

EJ Manuel has been an NFL football player for only one season and has limited historical data upon which to base our valuation and projections of his future earnings potential.

        EJ Manuel was drafted into the NFL prior to the 2013 season and has played in the NFL for only one season. As a result, we have less information on his ability to be a successful quarterback and have little historical data upon which to build our analysis and valuation of the future NFL player contracts, future endorsements and other post-career contracts for EJ Manuel. In addition, the lack of sufficient career statistics limited our ability to use an econometric model to predict his career length. See the section entitled, "—EJ Manuel Brand Contract, at Estimated Fair Value—EJ Manuel Career Length" beginning on page 102 for a more detailed description of how we estimated EJ Manuel's career length. As a result, our valuation was dependent on an analytical method of deriving an expected career length for EJ Manuel, which could result in a greater margin of error than under the econometric model. The determination of career length is a significant factor in the valuation of EJ Manuel's brand contract because it forms the basis from which we have determined that EJ Manuel will enter into multi-year NFL player contracts covering a career length of 10 years and that he shall continue to generate brand income from endorsement contracts spanning the course of his 10-year NFL playing career. 96.3% of EJ Manuel's estimated total lifetime brand income is based on projected player contracts, endorsements and post-career earnings, which we have discounted at a weighted-average discount rate of 15%.

EJ Manuel has incurred other secured debt, including mortgage payables, the payment of which may adversely impact his ability to make payments under the brand contract.

        There exist outstanding mortgage loans payable by EJ Manuel to secured creditors. The ability of secured creditors to exercise remedies against the assets of EJ Manuel, including his real estate properties, may impair EJ Manuel's ability to make payments to us under the brand contract. EJ Manuel may also choose to repay obligations under secured indebtedness before making required payments on the brand contract because the contract party has no collateral at risk in the case of the brand contract. If EJ Manuel declares bankruptcy any amounts owed to us may only be paid out after all of his secured debt is repaid.

EJ Manuel may suffer from an injury, illness or a medical condition; any injuries, illnesses or medical conditions of EJ Manuel may affect the cash received by us under the brand contract.

        Any injury, illness or a medical condition of EJ Manuel could adversely impact the cash received by us under our EJ Manuel brand contract. Even if not career ending, an injury, illness or a medical condition could have a negative effect upon EJ Manuel's performance and may result in a loss of brand income that would otherwise have resulted from current and future NFL player contracts. A reduction in brand income will reduce our ABI, our ability to make dividend payments, if any, and have a negative impact on the value of shares of our Fantex Series EJ Manuel. Any of these outcomes could also affect our ability to enter into additional brand contracts or to finance the acquisition of additional brands, which would have an adverse impact on our ability to execute on our business strategy.

        In August 2013 EJ Manuel had minor surgery on his left knee and missed two pre-season games. On October 3, 2013, during the third quarter in a game against the Cleveland Browns, Manuel sprained the lateral collateral ligament in his right knee. This injury caused him to miss 4 games of the 2013 season. In December 2013, EJ Manuel sprained the lateral collateral ligament in his left knee and missed the last two games of the 2013 NFL season. In January 2014, EJ Manuel had an arthroscopic procedure performed on each of his knees. EJ Manuel has experienced these knee injuries and other instances of normal wear and tear as an athlete in Division I college football and the NFL and we expect that EJ Manuel will continue to experience such wear and tear. Any worsening of these conditions, or re-injury or new injury, could materially and adversely affect EJ Manuel's playing performance and the value of the EJ Manuel Brand.

55


Table of Contents

        A substantial portion of our anticipated income under the brand contract is attributable to EJ Manuel's current and future NFL player contracts. To the extent that the value of your investment is dependent on the competitive success of EJ Manuel, the likelihood of achieving such success is substantially reduced by serious or untimely injuries to EJ Manuel. If EJ Manuel is unable to play as a result of any injury, illness or a medical condition he may be unable to enter into any future NFL player contracts. EJ Manuel may not be paid under several of his endorsement contracts if he ceases to be an NFL player for any reason, including for injury, illness or a medical condition. Even if EJ Manuel continues to receive payments under his endorsement contracts, his ability to maintain sponsors and his ability to attract new sponsors may be severely diminished.

Future negative publicity could damage EJ Manuel's reputation and impair the value of his brand.

        The cash receipts under our EJ Manuel brand contract heavily depend on the value and strength of EJ Manuel's brand and reputation. EJ Manuel has in the past received, and we expect that in the future he will continue to receive, media coverage. Unfavorable publicity regarding his professional performance or his behavior off the field could negatively affect his brand and reputation. For example, in a January 23, 2014 column published online by Sports Illustrated, writer Don Banks described EJ Manuel's rookie season as "uneven and injury marred." Mike Rodak at ESPN.com mentioned on more than one occasion that given EJ Manuel's injury history and varied performance during his first season, that the Bills will need more options for a quarterback than just EJ Manuel, which according to Chris Wesseling, an Around the League writer, is an option that the Bill's coach, Doug Morrone, is entertaining. Additional negative publicity regarding his on-field performance or otherwise could damage his reputation and impair the value of his brand. Moreover, certain of EJ Manuel's endorsement agreements contain "morality" clauses which would permit counterparties to endorsement agreements to terminate those agreements in certain circumstances (such as if he were charged with a felony or other crime involving fraud, dishonesty, violence, physical harm to another person, possession or use of illegal drugs or moral turpitude), further reducing our ABI.

Risks Relating to Arian Foster

Arian Foster's NFL player contract is a significant portion of the current cash we would receive under his brand contract.

        In 2012, Arian Foster signed a five year contract with the Texans worth up to $43.5 million, and his professional football compensation in that year made up over 90% of his annual income. This 2012 NFL player contract included a $12.5 million signing bonus with the remaining $31.0 million to be paid out over the term of the contract. The available brand income remaining as of February 28, 2013 under his existing NFL player contract was $25.3 million, of which $3.25 million was guaranteed. Therefore, much of the cash expected to be received under our brand contract with Arian Foster is tied to his professional football career and is not guaranteed. If he does not play for any reason or if the Texans decide to release him because of a decline in the quality of his play, an injury, illness or medical condition or for any other reason, then he will not receive any of the remaining salary other than the guaranteed portion. We cannot guarantee that Arian Foster will continue to be paid according to the terms of his current NFL player contract, or that he will be able to enter into a new NFL player contract when the existing contract expires.

The profitability of Arian Foster's brand contract is substantially dependent upon Arian Foster's ability to enter into at least one additional multi-year NFL player contract on economic terms that are comparable to his existing NFL player contract, and, to a lesser extent, on his ability to successfully attract and retain endorsements during his playing career and thereafter in excess of amounts he has attracted historically and/or generate other brand income after his playing career.

        We anticipate that we will receive the majority of payments due under our brand contract with Arian Foster during the period of his NFL playing career. His current NFL player contract represents

56


Table of Contents

the source of substantially all of the brand income, and we expect that Arian Foster's annual income will continue to be more heavily weighted toward his NFL player contract than on other brand income generating activities.

        The length of Arian Foster's NFL playing career is uncertain, however, running backs generally retire from the NFL by their early 30s. Arian Foster was born on August 24, 1986, and thus was 27 years old at the start of the 2013 NFL season. Unless earlier terminated, Arian Foster's current NFL player contract with the Texans will expire at the conclusion of the 2016 NFL season. Because Arian Foster will be 30 years old prior to the beginning of the 2017 season, NFL teams may be unwilling to enter into a long-term NFL player contract with Arian Foster on terms comparable to his current NFL player contract, if at all. As a result, Arian Foster may have already reached the peak of his earnings from his football salary. In addition, Arian Foster may not continue to perform well as an NFL player and therefore, future earnings may be substantially less than those realized over the past few years. If Arian Foster is unable to sign a new NFL player contract or the terms are materially worse than his current NFL player contract, the cash receipts from our Arian Foster Brand will decline.

        In addition, in valuing Arian Foster's potential lifetime brand income we estimated a significant increase in the brand income Arian Foster may earn as a result of his endorsements, as compared to his historical earnings from endorsements. We believe this was appropriate for several reasons, including that Arian Foster was an un-drafted free agent, and thus his historical endorsement earnings in his first several seasons may be significantly lower than his longer-term potential. However, we do not know if his endorsement income will increase in the future, and we do not know if his reputation and brand will be enhanced as a result of his being our first contract party. In fact, his reputation and brand may be negatively affected by his willingness to enter into a brand contract and trade potential future earnings for present income. If future endorsement partners or NFL teams suspect that Arian Foster has hidden motives behind accepting an upfront cash payment in exchange for a portion of his future earnings, future endorsement partners may be less willing to enter into contracts with Arian Foster and may not find his promises of future performance under such contracts reliable. In addition, none of Arian Foster's current endorsement contracts last beyond the first quarter of 2015, and many of the endorsement contracts included in his brand income (likely also including those he may enter into during his NFL playing career) may be terminated if Arian Foster does not play for an NFL football team. Moreover, future endorsement partners may be less willing to enter into contracts with Arian Foster as a result of his entering into the brand contract with us in order to avoid public disclosure of their arrangements with Arian Foster. For the aforementioned reasons, Arian Foster may be unable to renew existing endorsement deals on favorable terms, if at all, or may not be able to enter into new endorsement deals. In addition, his ability to generate other brand income after his playing career, such as through coaching or broadcasting, is unproven. His failure to attract and maintain key endorsements or generate other brand income after his playing career could have a negative impact on our cash received under the brand contract.

        The opportunity to receive a return of capital or any profit from our brand contract with Arian Foster will depend in large part upon Arian Foster's ability to enter into at least one additional multi-year NFL player contract on terms that are, on an average annualized basis, economically comparable to his existing NFL player contract and on his ability over the same period and beyond to enter into and maintain endorsement contracts that are significantly in excess of those he has had historically. For a more detailed description of the valuation of the Arian Foster Brand Contract, please see section entitled "—Arian Foster Brand Contract, at Estimated Fair Value" beginning on page 107.

57


Table of Contents

Arian Foster may suffer from an injury, illness or a medical condition. For example, during a regular season NFL game on November 3, 2013 Arian Foster suffered a back injury, which required surgery and resulted in him missing the rest of the 2013 NFL playing season.

        Any injury, illness or a medical condition of Arian Foster could adversely impact the cash received by us under our Arian Foster brand contract. Even if not career ending, an injury, illness or a medical condition could have a negative effect upon Arian Foster's performance and may result in a loss of brand income that would otherwise have resulted from current and future NFL player contracts. A reduction in brand income will reduce our ABI, our ability to make dividend payments, if any, and have a negative impact on the value of shares of our Fantex Series Arian Foster. Any of these outcomes could also affect our ability to enter into additional brand contracts or to finance the acquisition of additional brands, which would have an adverse impact on our ability to execute on our business strategy.

        On December 23, 2012, Arian Foster left a regular season NFL game early with an irregular heartbeat. He is also reported to have experienced a similar condition on eight prior occasions since he was 12 years old. On January 31, 2013, Alex Flanagan of the NFL Network reported that Arian Foster would likely undergo an ablation surgical procedure, a process by which biological tissue is removed using lasers or chemicals. On February 1, 2013 the Texans publicly released a statement by Arian Foster stating that he had not, and did not have any current plans to, discuss a surgery with his doctors. Any current or future heart condition could adversely affect Arian Foster's playing performance or ability to fulfill his obligations under his NFL player contract, which in turn could materially and adversely affect the revenues of our Arian Foster Brand.

        In addition, Arian Foster played with a torn meniscus, or cartilage in his knee, during the 2010 NFL season, without publicly disclosing the injury until after the season when he underwent surgery to repair the injury. Arian Foster's playing status was questionable for two games during the 2011 NFL season and was inactive for two more games in the season, missing three full games due to hamstring issues. Arian Foster re-aggravated this injury during an NFL regular season game on October 20, 2013 and left that game during the first quarter. A knee injury during the 2012 pre-season also made his season debut questionable. In addition, in May 2013, Arian Foster underwent an MRI on his right calf that was strained during off-season practice. Arian Foster missed most of 2013 training camp due to a lingering back pain and suffered a back injury on November 3, 2013 during an NFL regular season game. That injury required surgery which was performed on November 13, 2013 and resulted in Arian Foster missing the rest of his 2013 NFL playing season. Arian Foster has experienced these and other instances of normal wear and tear as an athlete in the NFL and we expect that Arian Foster will continue to experience such wear and tear. Any worsening of these conditions, or re-injury or new injury, could materially and adversely affect Arian Foster's playing performance and the value of the Arian Foster Brand. In addition, continuing to play while injured could lead to additional injuries and prematurely end Arian Foster's NFL career and significantly impair the value of the Arian Foster Brand.

        A substantial portion of our income under the brand contract is attributable to Arian Foster's NFL player contract. To the extent that the value of your investment is dependent on the competitive success of Arian Foster, the likelihood of achieving such success is substantially reduced by serious or untimely injuries to Arian Foster. Arian Foster is only contractually guaranteed to receive a portion of his NFL player contract. If Arian Foster is unable to play as a result of any injury, illness or a medical condition he may lose those portions of his contract payable on the achievement of performance based incentives, those portions of his contract not guaranteed against injury, illness or a medical condition and may be unable to enter into any future NFL player contracts. Additionally, Arian Foster may not be paid under his endorsement contracts if he fails to play in a specified number of NFL games. Even if Arian Foster continues to receive payments under his endorsement contracts, his ability to maintain sponsors and his ability to attract new sponsors may be severely diminished.

58


Table of Contents

Future negative publicity could damage Arian Foster's reputation and impair the value of his brand.

        The cash receipts under our Arian Foster brand contract heavily depend on the value and strength of Arian Foster's brand and reputation. Arian Foster has in the past received, and we expect that in the future he will continue to receive, media coverage. Unfavorable publicity regarding his professional performance or his behavior off the field could negatively affect his brand and reputation. For example, although we are not aware of any other similar incidents, in November 2006, Arian Foster and two other team members of the Tennessee Volunteer's football team were arrested after an altercation at a night club. In a documentary released in September 2013, Arian Foster admitted to receiving money as a college football player during his senior year at the University of Tennessee, in violation of NCAA rules. Arian Foster also became the subject of a recent lawsuit filed by an alleged mistress claiming harassment. Any future negative publicity as a result of similar events or otherwise could damage Arian Foster's reputation and impair the value of his brand. Moreover, certain of Arian Foster's endorsement agreements contain "morality" clauses which would permit counterparties to endorsement agreements to terminate those agreements in certain circumstances (such as if he were charged with a felony or other crime involving fraud, dishonesty, violence, physical harm to another person, possession or use of illegal drugs or moral turpitude), further reducing our ABI.

Risks Relating to our Tracking Stock Structure

There are numerous risks you should be aware of with respect to how we intend to structure our business and our proposed tracking stock structure

        Our amended and restated certificate of incorporation authorizes us to establish and issue from time to time one or more series of common stock and to determine the terms and rights of each such series. For example, we have already designated or are planning to designate the tracking stock brands and the series of tracking stocks described in the section entitled "Management and Attribution Policies" beginning on page 113. We intend to enter into additional brand contracts in the future, and we intend to establish and issue an additional series of common stock, which we refer to as our tracking stock, with each new brand contract. Each tracking stock would be intended to track and reflect the separate economic performance of the assets and expenses associated with the associated brand contract. As a result, we expect to issue multiple series of tracking stock in the future, and there are numerous risks associated with our proposed tracking stock structure. However, to the extent that we fail to issue any additional tracking stocks or fail to consummate the offering of Fantex Series EJ Manuel or Fantex Series Arian Foster, Fantex Series Vernon Davis will carry the full burden of our general liabilities, costs and expenses (including, for example, the full amount of the service fee we pay to our parent pursuant to the management agreement), and the economic performance of the Fantex Series Vernon Davis will be more heavily dependent upon our aggregate financial performance.

A specified portion of the ABI associated with each of our brand contracts will be attributed to our platform common stock rather than the associated tracking stock. Therefore each of our tracking stocks will only partially reflect the economic performance of the associated brand contract and other assets and expenses of the associated tracking stock brand.

        Our Fantex Series Vernon Davis is intended to track the performance of our Vernon Davis Brand. However, we are attributing to the Vernon Davis Brand only 95% of the ABI under the Vernon Davis brand contract. The remaining 5% of ABI under the Vernon Davis brand contract will be attributed to our platform common stock. Similarly, in the future when we issue additional tracking stocks we intend to attribute a portion of the ABI under the associated brand contracts to the platform common stock. Therefore, each of our tracking stocks will only partially reflect the economic performance of the associated brand contract and other assets and expenses of the associated tracking stock brand, even though we may use the proceeds of this offering and future tracking stock offerings to fund the full purchase price of the associated brand contract.

59


Table of Contents

        In addition, an investment in any of our tracking stocks would not represent an ownership interest in any related tracking stock brand or assets associated with any particular tracking stock. Rather, an investment in any of our tracking stocks would represent an ownership interest in one consolidated company, Fantex.

As a series of our common stock, each of our tracking stocks will be exposed to additional risks associated with our company as a whole, including any individual tracking stock that exists at the time of the offering or that we may establish and issue in the future.

        Investors in any of our tracking stocks will be our common stockholders and an investment in a tracking stock will represent an ownership interest in our company as a whole, which will expose holders to additional risks associated with any individual tracking stock that exists at the time of any investment or that we may establish and issue in the future, even if an investor only owns shares of one series of our common stock. For example, holders of Fantex Series Vernon Davis will be exposed to the risks associated with the offering of our Fantex Series Vernon Davis and Fantex Series Arian Foster, as set forth under the sections entitled "—Risks Relating to Vernon Davis," "—Risks Relating to Arian Foster," and "—Risks Relating to the Issuance of Additional Tracking Stocks." We will attribute, for financial reporting purposes, assets, liabilities, revenue, expenses and cash flows to tracking units that we establish for brands we acquire in the future, and we will include unaudited attributed financial information as part of our financial reporting for each tracked unit we establish. However, holders of any of our tracking stocks will not have any legal rights related to specific assets attributed to the associated tracked unit. Rather, Fantex will retain legal title to all of its assets, including assets attributed to any of our current tracking stock brands or any other tracking stock brand we establish in the future, and, in any liquidation, holders of our tracking stocks and holders of any other tracking stocks we may establish in the future, together with holders of our platform common stock, will be entitled to receive a proportionate share of our available net assets available for distribution to stockholders after we satisfy our creditors, including creditors of any tracking stock brand other than a tracking stock brand related to a tracking stock in which you may invest. See "Description of Capital Stock—Common Stock—Liquidation."

Our board of directors will have discretion to reattribute assets and liabilities of any tracking stock brand without the approval of our holders of that tracking stock brand.

        Our board of directors will have discretion to reattribute assets and liabilities of one tracking stock brand to another tracking stock brand without the approval of our stockholders or the holders of any tracking stocks related to the impacted tracking stock brands. This may make it difficult to assess the future prospects of the Vernon Davis Brand or any other tracking stock brand. Any reattribution made by our board of directors, as well as the existence of the right in and of itself to effect a reattribution, may impact the ability of investors to assess the future prospects of the Vernon Davis Brand or any other tracking stock brand, including its liquidity and capital resource needs. Our stockholders may also have difficulty evaluating the liquidity and capital resources of each of our tracking stock brands based on past performance, as our board of directors may use one tracking stock brand's liquidity to fund another tracking stock brand's liquidity and capital requirements through the use of inter-series loans and inter-series equity investments.

        We could be required to use assets attributed to one tracking stock brand to pay liabilities attributed to another tracking stock brand. The assets attributed to one tracking stock brand are potentially subject to the liabilities attributed to another tracking stock brand, even if those liabilities arise from lawsuits, contracts or indebtedness that are attributed to such other tracking stock brand. While our current management and attribution policies provide that reattributions of assets between tracking stock brands will result in the creation of an inter-series loan or be considered an inter-series equity investment or an offsetting reattribution of cash or other assets, no provision of our amended and restated certificate of incorporation prevents us from satisfying liabilities of one tracking stock

60


Table of Contents

brand with assets of another tracking stock brand, and our creditors will not in any way be limited by our capital structure from proceeding against any assets they could have proceeded against if we did not have any tracking stocks. As a result, although we intend for the tracking stocks to track the performance of the tracking stock brand, we cannot provide any guarantee that the tracking stock will in fact track the performance of such tracking stock brand and that a particular tracking stock, including the Fantex Series Vernon Davis, will not be subject to a disproportionate share of the burden of any non-performing brand contracts, whether or not included in the assets attributed to such tracking stock, and will not be attributed a disproportionate amount of our general liabilities, costs and expenses.

The market price of our tracking stock may not reflect the intrinsic value or performance of the associated tracking stock brand.

        The market price of our tracking stock may not reflect the performance of the associated tracking stock brand. Holders of our tracking stock will be common stockholders of Fantex as a whole and, as such, will be subject to all risks associated with an investment in Fantex and all of our tracking stock brands, assets and liabilities. As a result, the market price of our tracking stock may reflect the performance of Fantex as a whole or may more independently reflect the performance of some or all of the assets attributed to the associated tracking stock brand. We intend to value each of our brand contracts using the fair value option under ASC 825. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies." Our fair value determination may be different from the implied value of a brand contract based on the market price for our tracking stock. In addition, investors may discount the value of any of our tracking stocks because it is part of a common enterprise rather than a stand-alone entity.

The market price of our tracking stock may be more volatile than other publicly traded common stock because of our unique capital structure.

        The market price of our tracking stock may be volatile, could fluctuate substantially and could be affected by factors that do not affect other publicly-traded common stock. Our capital structure and business model is unique and we do not know how the market will react. In addition, to the extent the market prices of any of our tracking stocks reflect the performance of more focused tracking stock brands, assets and liabilities than traditional common stock, the market prices of our tracking stock may be more volatile than the market price of traditional common stock because they may be more sensitive to events or circumstances that could impact the associated tracking stock brand. The market prices of any of our tracking stock may be materially affected by, among other things:

    actual or anticipated fluctuations in brand income or expected brand income attributed to the associated tracking stock brand, or in other operating results related to the associated tracking stock brand;

    potential acquisition activity by Fantex, including in brands we acquire or that we publicly announce that we intend to acquire or that people anticipate we may acquire;

    changes in estimates of brand income by analysts or commentators;

    the complex nature and the potential difficulties investors may have in understanding the terms of our Fantex Series Vernon Davis, the terms of our platform common stock or any other tracking stock, or our business model, as well as concerns regarding the possible effect of certain of those terms on an investment in our stock;

    actual or anticipated liabilities or expenses attributed to the associated tracking stock brand or any other tracking stock brand or Fantex as a whole; and

    general market conditions.

61


Table of Contents

Our capital structure may create conflicts of interest for our board of directors and management, which could have a material adverse effect on the market value of any of our tracking stocks.

        Our tracking stock capital structure could create conflicts of interest, and our board of directors may make decisions that could adversely affect only some holders of our common stock. Our tracking stock capital structure could give rise to occasions when the interests of holders of one tracking stock might diverge or appear to diverge from the interests of holders of another tracking stock. In addition, there may be inherent conflicts of interests between any of our tracking stocks and the platform common stock. Our tracking stock brands are not separate entities and thus holders of our Fantex Series Vernon Davis, platform common stock and any future tracking stocks will not have the right to elect separate boards of directors. As a result, our officers and directors owe fiduciary duties to Fantex as a whole and all of our stockholders as opposed only to holders of a particular tracking stock. Decisions deemed to be in the best interest of Fantex and all of our stockholders may not be in the best interest of a particular tracking stock when considered independently. Examples include decisions relating to:

    the terms of any business relationships that may be created between and among any of our tracking stock brands and the platform common stock or the terms of any reattributions of assets between any of our tracking stock brands and the platform common stock;

    the timing of a merger or other change of control transaction involving Fantex and its impact on the allocation of consideration among the holders of our Fantex Series Vernon Davis, any future tracking stocks and platform common stock;

    the allocation of corporate opportunities between any of our tracking stock brands, especially where the opportunities might meet the strategic business objectives of more than one tracking stock brand;

    operational and financial matters that could be considered detrimental to one tracking stock brand but beneficial to another tracking stock brand;

    the conversion of shares of any of our tracking stock brands into shares of platform common stock;

    the creation of any new tracking stocks;

    the making of, and, if made, the subsequent increase or decrease of any inter-series equity investments that one tracking stock brand may make in another tracking stock brand;

    the internal or external financing or assets attributable to any of our tracking stock brands;

    the dispositions of assets of any of our tracking stock brands; and

    the payment of any dividends on any of our tracking stocks or our platform common stock.

Our parent, as a holder of our platform common stock, will have control over key decision making as a result of their control over a majority of our voting stock.

        Following this offering, our parent will be able to exercise voting rights with respect to an aggregate of 100,000,000 shares of common stock, representing a majority of the voting power of our outstanding capital stock following our initial public offering. Our platform common stock and each of our tracking stocks, including our Fantex Series Vernon Davis being offered in this initial public offering, are each entitled to one vote per share. We expect that our parent will agree to purchase up to 200,000 shares of our Fantex Series Vernon Davis in this offering (up to approximately 47.5% of the shares being offered by this prospectus) at the initial public offering price under specified circumstances. As a result, whether or not our parent participates in this offering, our parent will hold substantially all of the voting power of our outstanding capital stock following our initial public offering and will have the ability to control the outcome of matters submitted to our stockholders for approval,

62


Table of Contents

including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. As a stockholder, even a controlling stockholder, our parent is entitled to vote its shares in its own interests, which may not always be in the interests of our stockholders generally. Our parent will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval so long as the shares of our platform common stock represent a majority of all outstanding shares of our common stock. This concentrated control will limit your ability to influence corporate matters for the foreseeable future.

Ownership of our platform common stock by our parent company and any of our officers or directors, may create, or appear to create, conflicts of interest with holders of our tracking stocks, including Fantex Series Vernon Davis.

        Ownership of platform common stock by our parent company and any of our officers or directors, may create or appear to create conflicts of interest. Our parent company and our directors or officers directly or indirectly own an interest in platform common stock, which following the consummation of this offering will constitute substantially all of the voting power in our company. Our parent company does not hold any interests in any of our tracking stocks. However, we expect Fantex Holdings will agree to purchase up to 200,000 shares of our Fantex Series Vernon Davis in this offering at the initial public offering price under specified circumstances. If Fantex Holdings purchases any standby shares in this offering, it may hold up to 47.5% of the outstanding shares of in our Fantex Series Vernon Davis. Nevertheless, ownership of platform common stock by Fantex Holdings or any of our officers or directors could create or appear to create conflicts of interest when our parent company or any of our officers or directors are faced with decisions that could have different implications for the holders of shares of Fantex Series Vernon Davis and holders of platform common stock.

Our officers and directors may have a conflict of interest or appear to have a conflict since almost all of our officers are also officers of Fantex Holdings.

        Almost all of our officers are also the members of our parent's board and officers of our parent company. Because our parent holds all of our platform common stock, its interests are expected to conflict in certain respects with the interests of holders of our Fantex Series Vernon Davis or additional tracking stocks. Furthermore, since our parent is also required to provide services to us under the management agreement as long as such agreement is in effect, certain of its interests pursuant to that agreement are directly adverse to the interests of Fantex. These differing interests could create or appear to create conflicts of interest when our officers or directors are faced with decisions that could have different implications for Fantex Holdings and Fantex.

Our capital structure may decrease the amounts available for the payment of dividends to holders of our tracking stocks.

        We may not pay dividends on one or more tracking stocks, even if we pay dividends on our platform common stock or any other tracking stocks. If we pay dividends or make any other distributions on, or repurchases of, shares of any other series of our common stock without also making a dividend on all other series of common stock the assets that would be legally available to be paid as dividends on the shares relating to our other series of common stock under Delaware law would be reduced.

Our board of directors has the ability to change our attribution policies at any time without a vote of our stockholders, which may adversely affect the market value of our Fantex Series Vernon Davis.

        Other than pursuant to the management and attribution policies described in this prospectus, we have not adopted any specific procedures for consideration of matters involving a divergence of interests among holders of shares of our tracking stocks and our platform common stock, or among holders of different tracking stocks. Rather than develop additional specific procedures in advance, our

63


Table of Contents

board of directors intends to delegate decisions to our independent conflicts committee, which will exercise its judgment from time to time, depending on the circumstances, as to how best to:

    obtain information regarding the divergence (or potential divergence) of interests;

    determine under what circumstances to seek the assistance of outside advisers;

    determine whether a special committee of our board of directors should be appointed to address a specific matter and the appropriate members of that committee; and

    assess what is in our best interests and the best interests of all of our stockholders.

        Our board of directors believes the advantage of retaining flexibility in determining how to fulfill its responsibilities in any such circumstances as they may arise outweighs any perceived advantages of adopting additional specific procedures in advance. Our board of directors intends to adopt certain management and attribution policies described in this prospectus to serve as guidelines in making decisions regarding the relationships between the Vernon Davis Brand, any other tracking stock brand and the platform common stock with respect to matters such as tax liabilities and benefits, inter-series loans, inter-series equity investments, attribution of assets, financing alternatives, corporate opportunities and similar items. These policies also set forth the initial attribution and expected future attributions of our assets and liabilities between and among our platform common stock and our tracking stock brands. These policies are not included in our amended and restated certificate of incorporation and our board of directors may at any time change or make exceptions to these policies. Because these policies relate to matters concerning the day-to-day management of Fantex as opposed to significant corporate actions, such as a merger involving us or a sale of substantially all of our assets, stockholder approval will not be required with respect to their adoption or amendment. In addition, to the extent that our board of directors seeks stockholder approval, Fantex Holdings, as the sole holder of our platform common stock, will be able to control such vote because they will hold substantially all of the voting power of our outstanding capital stock following this offering. A decision to change, or make exceptions to, these policies or adopt additional policies could disadvantage one series of common stock while advantaging another.

You may not have any remedies under Delaware law if the actions of our directors or officers adversely affect the market value of any of our tracking stocks.

        Holders of a particular tracking stock may not have any remedies if any action by our directors or officers has an adverse effect on only that tracking stock. Principles of Delaware law and the provisions of our amended and restated certificate of incorporation may protect decisions of our board of directors that have a disparate impact upon holders of any tracking stock. Under Delaware law, the board of directors has a duty to act with due care and in the best interests of all of our stockholders, regardless of the stock, or series, they hold. Principles of Delaware law established in cases involving differing treatment of multiple classes or series of stock provide that, subject to any applicable provisions of the certificate of incorporation, a board of directors generally owes an equal duty to all stockholders and does not have separate or additional duties to any subset of stockholders. Judicial opinions in Delaware involving tracking stocks have established that decisions by directors or officers involving differing treatment of holders of tracking stocks may be judged under the business judgment rule. In some circumstances, our directors or officers may be required to make a decision that is viewed as adverse to the holders of a particular tracking stock. Under the principles of Delaware law and the business judgment rule referred to above, you may not be able to successfully challenge decisions that you believe have a disparate impact upon the stockholders of one of our tracking stocks if a majority of our board of directors, or an authorized committee thereof, is disinterested and independent with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith and in the honest belief that the board is acting in the best interest of our stockholders collectively.

64


Table of Contents

We may dispose of assets of the Vernon Davis Brand without your approval.

        Delaware law requires stockholder approval only for a sale or other disposition of all or substantially all of the assets of Fantex taken as a whole, and our amended and restated certificate of incorporation does not require a separate class vote in the case of a sale of a significant amount of assets of any of our tracking stock brands. As long as the assets attributed to the Vernon Davis Brand or the platform common stock proposed to be disposed of represent less than substantially all of our assets, we may approve sales and other dispositions of any amount of the assets of such tracking stock brand without any stockholder approval.

Holders of any of our tracking stocks may not be adequately compensated if we sell all or substantially all of the assets of the associated tracking stock brand.

        If we dispose of all or substantially all of the assets attributed to any tracking stock brand, we would be required, if the disposition is not an exempt disposition under the terms of our amended and restated certificate of incorporation, to choose one or more of the following three alternatives:

    pay a dividend to holders of the associated tracking stock brand out of the available net proceeds of such disposition; or

    if there are legally sufficient assets and the available dividend amount for the associated tracking stock would have been sufficient to pay a dividend, then: (i) if the disposition involves all of the properties and assets of the associated tracking stock brand, redeem all outstanding shares of the associated tracking stock in exchange for cash and/or securities or other assets with a fair value equal to the available net proceeds of such disposition, or (ii) if the disposition involves substantially all (but not all) of the properties and assets of the associated tracking stock brand, redeem a portion of the outstanding shares of our associated tracking stock in exchange for cash and/or securities or other assets with a fair value equal to the available net proceeds of such disposition; or

    following the two-year anniversary of the filing of a certificate of designation creating any tracking stock, convert each outstanding share of the associated tracking stock into our platform common stock at the applicable conversion ratio; or

    combine a conversion of a portion of the outstanding shares of the associated tracking stock into a number of shares of our platform common stock at the applicable conversion ratio with either the payment of a dividend on or a redemption of shares of the associated tracking stock.

        See "Description of Capital Stock" beginning on page 170.

        In this type of a transaction, holders of the disposing tracking stock brand's common stock may receive less value than the value that a third-party buyer might pay for all or substantially all of the assets of the tracking stock brand.

        Our board of directors will decide, in its sole discretion, how to proceed and is not required to select the option that would result in the highest value to holders of any particular tracking stock.

Holders of any of our tracking stocks may receive less consideration upon a sale of the assets attributed to the associated tracking stock brand than if that brand were a separate company.

        If the Vernon Davis Brand were a separate, independent company and its shares were acquired by another person, certain costs of that sale, including corporate level taxes, might not be payable in connection with that acquisition. As a result, stockholders of a separate, independent company with the same assets might receive a greater amount of proceeds than the holders of shares of Fantex Series Vernon Davis would receive upon a sale of all or substantially all of the assets of the Vernon Davis Brand. In addition, we cannot assure you that in the event of such a sale the per share consideration to

65


Table of Contents

be paid to holders of shares of Fantex Series Vernon Davis will be equal to or more than the per share value of that share of stock prior to or after the announcement of a sale of all or substantially all of the assets of the Vernon Davis Brand. Further, there is no requirement that the consideration paid be tax-free to the holders of the shares of Fantex Series Vernon Davis. Accordingly, if we sell all or substantially all of the assets attributed to the Vernon Davis Brand, our stockholders could suffer a loss in the value of their investment in Fantex.

In the event of a liquidation of Fantex, holders of any of our tracking stocks will not have a priority with respect to the assets attributed to the associated tracking stock brand remaining for distribution to stockholders.

        Under the amended and restated certificate of incorporation, upon liquidation, dissolution or winding up of Fantex as a whole, holders of our tracking stocks will be entitled to receive, subject to the prior payment in full of creditors, a proportionate interest in the assets of Fantex remaining for distribution to holders of common stock in an amount per share equal to the fair value of such share of common stock; however, if the assets of Fantex legally available for distribution to the holders of common stock are insufficient to permit the payment to shares of all of our outstanding tracking stocks the full amount to which they would otherwise be entitled, then the assets available for distribution to the holders of common stock shall be distributed to all holders of each tracking stock ratably in proportion to the full amounts to which they would otherwise have been entitled to receive. As a result, the proportionate share of Fantex's assets that any holder of our tracking stocks would be entitled to receive upon any liquidation may be less than the assets of the associated tracking stock brand, and less than the amount that you would have received if the associated tracking stock brand were a separate company.

Our board of directors may, in its sole discretion, elect to convert any of our tracking stocks into our platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, thereby changing the nature of your investment and possibly diluting your economic interest in Fantex or creating market uncertainty regarding the nature of your investment, any of which could result in a loss in value to holders of our tracking stocks.

        Our amended and restated certificate of incorporation and the certificate of designations for each of our tracking stocks will permit our board of directors, in its sole discretion, to convert all of the outstanding shares of any tracking stock into shares of our platform common stock, following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, at an exchange rate based on the relative fair value of a share of the impacted tracking stock and the fair value of a share our platform common stock at the time. Our amended and restated certificate of incorporation and the certificate of designation for future tracking stocks are expected to permit our board of directors, in its sole discretion, to convert all of the outstanding shares of any future tracking stocks into shares of platform common stock, following the two-year anniversary of the filing of a certificate of designation creating such tracking stock, at an exchange rate based on the relative fair value of the that tracking stock and the platform common stock at the time. Additional details are as described under "Description of Capital Stock—Common Stock—Conversion."

        Although we do not anticipate converting an actively traded tracking stock into platform common stock that is not also actively traded, there may be circumstances that exist in the future where our board of directors and, where applicable, the conflicts committee of our board of directors may consider it to be in the best interests of its stockholders to do so. For example, we anticipate converting a tracking stock into platform common stock in the following circumstances:

    if the tracking stock is no longer an actively traded stock, such as, for example, if the contract party for the tracking stock brand underlying that tracking stock suffers an injury, illness, medical condition or dies, and his brand income diminishes as a result and there is little if any

66


Table of Contents

      expectation that his brand income will materially increase in the future. In this case our board of directors may convert the shares of that tracking stock into platform common stock as a means of retiring the tracking stock, and our board of directors may do so in this circumstance even if the platform common stock is not an actively traded stock. As a result, the value received at the time of conversion of Fantex Series Vernon Davis to platform common stock may be limited because such conversion is likely to occur at a time when the value of Fantex Series Vernon Davis has little or no value. Furthermore, the conversion could result in you holding shares of our platform common stock that are not actively traded as determined in good faith by our board of directors or a committee of our board of directors.

    other special or extraordinary circumstances exist, such as a potential restructuring, reorganization or change of control of Fantex. We would not expect our board of directors to approve a conversion in this circumstance unless there is an active trading market for the platform common stock at the time of such conversion. Our board of directors may effect such a conversion at a time when the market value of either our platform common stock or the relevant tracking stock could cause, or be perceived to cause, the stockholders of either of such series to be disadvantaged.

        Any conversion of a tracking stock into platform common stock, whether or not the platform common stock is at the time an actively traded stock as determined in good faith by our board of directors or a committee of our board of directors, would preclude the holders of that tracking stock from retaining their investment in a security that is intended to reflect separately the performance of the relevant tracking stock brand. This uncertainty may also impact the market value of your tracking stock even if we do not ever convert your tracking stock. We cannot predict the impact on the market value of our stock because our board of directors' ability to effect any such conversion or the exercise of this conversion right by Fantex.

Our capital structure may inhibit beneficial acquisition offers.

        Our capital structure, as well as the fact that the Vernon Davis Brand is not an independent company may inhibit or prevent acquisition bids for the Vernon Davis Brand and may make it difficult for a third party to acquire us, even if doing so may be beneficial to our stockholders. If the Vernon Davis Brand were a separate independent company, any person interested in acquiring the Vernon Davis Brand without negotiating with management could seek control of that tracking stock brand by obtaining control of its outstanding voting stock, by means of a tender offer, or by means of a proxy contest. Although we intend Fantex Series Vernon Davis to reflect the separate economic performance of the Vernon Davis Brand, it is not a separate entity and a person interested in acquiring only Fantex Series Vernon Davis without negotiation with our management could obtain control of that tracking stock brand only by obtaining control of a majority in voting power of the platform common stock. The existence of shares of common stock, and different series of shares, relating to different tracking stock brands could present complexities and in certain circumstances pose obstacles, financial and otherwise, to an acquiring person that are not present in companies that do not have capital structures similar to ours.

Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a change in control of Fantex that a stockholder may consider favorable.

        Certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a change in control of Fantex that a stockholder may consider favorable. These provisions include:

    authorizing our Fantex Series Vernon Davis or any other tracking stocks;

67


Table of Contents

    classifying our board of directors with staggered three-year terms, which may lengthen the time required to gain control of our board of directors;

    from and after such time as our parent company no longer holds a majority of the voting rights of our common stock, a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

    advance notice and other requirements that stockholders, other than our parent company for so long as it holds a majority of the voting rights of our common stock, must comply with in order to nominate candidates to our board of directors and propose matters to be brought before an annual meeting of our stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of Fantex; and

    from and after such time as our parent company holds less than a majority of the voting rights of our common stock, a 75% stockholder vote is required for removal of a director with or without cause, and for the amendment, repeal or modification of certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws.

        In addition, after our parent company ceases to own 15% of our voting stock, we will be subject to Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its voting stock unless the holder has held the stock for three years or, among other things, the board of directors approved the transaction prior to such holder acquiring its 15% stake.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

        Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or the amended and restated bylaws or (v) any action asserting a claim against us governed by the internal affairs doctrine. We believe this provision benefits us by providing increased consistency in the application of Delaware law by judges particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. Any person or entity purchasing or otherwise acquiring any interest in shares of our Fantex Series Vernon Davis shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation described above. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

68


Table of Contents

Risks Relating to the Issuance of Additional Tracking Stocks

        Investors in any of our tracking stocks will be our common stockholders and an investment in a tracking stock will represent an ownership interest in our company as a whole, which will expose holders to additional risks associated with any individual tracking stock that exists at the time of any investment or that we may establish and issue in the future.

Our Fantex Series Vernon Davis may be adversely impacted by any non-performing brand contracts, whether or not such brand contracts are included in the assets attributed to our Fantex Series Vernon Davis.

        We have entered into a brand contract with each of Vernon Davis, EJ Manuel and Arian Foster, and we intend to enter into additional brand contracts on an ongoing basis. In addition, we intend to create a separate business unit in connection with each new brand contract. Income (and assets) will generally be attributed to any of our tracking stocks based on the earnings of the associated tracking stock brand. However, the assets attributed to one tracking stock brand are potentially subject to the liabilities attributed to another tracking stock brand, even if those liabilities arise from lawsuits, contracts or indebtedness that are attributed to such other tracking stock brand. While our current management and attribution policies provide that reattributions of assets between tracking stock brands will result in the creation of an inter-series loan or be considered an inter-series equity investment or an offsetting reattribution of cash or other assets, no provision of our amended and restated certificate of incorporation prevents us from satisfying liabilities of one tracking stock brand with assets of another tracking stock brand, and our creditors will not in any way be limited by our capital structure from proceeding against any assets they could have proceeded against if we did not have any tracking stocks.

        In addition, if the contract party or other third party who may be obligated to make payments to us were to become the subject of a proceeding under the United States Bankruptcy Code or a similar proceeding or arrangement under another state, federal or foreign law, our rights and interests under the brand contract or otherwise may be significantly prejudiced or impaired. In such circumstances, we may be precluded, stayed or otherwise limited in enforcing some or all of our rights under the brand contract or otherwise and realizing the economic and other benefits contemplated therein. To the extent we do not receive payments under a brand contract to which we would otherwise be entitled as a result of any such debtor relief laws, then the amount of such payments we do not receive will nonetheless be attributable to the respective tracking stock brand. In such an event, such shortfall in income will be treated as a general expense of Fantex and be shared pro rata (calculated based on attributable income) among all of our then outstanding tracking stocks, including the Fantex Series Vernon Davis. As a result, the market value of your tracking stock could decline if another brand contract that is not related to your tracking stock is unenforceable as a result of debtor relief laws. Therefore, the creditworthiness of another contract party may be relevant to your investment. For example, we have a brand contract with Arian Foster, and Arian Foster is the subject of recent allegations made by an alleged mistress who has filed a complaint in Texas courts. As a result of this allegation and/or related matters, including any litigation related to these allegations, Arian Foster could become liable for damages and/or his financial health could otherwise be adversely impacted, therefore potentially impacting his ability to comply with the obligations under the brand contract with us should that brand contract become effective, and his ability to comply with other obligations. The attributed earnings for the Vernon Davis Brand could be adversely impacted if any such financial hardship led to Arian Foster seeking any relief under debtor relief laws.

69


Table of Contents

If a blog post published about us in August 2013 were held to be in violation of the Securities Act, we could be required to repurchase securities sold, if any, in our offering of Fantex Series Arian Foster. In addition, we have received, and may continue to receive, various degrees of media coverage, including coverage that is not accurate or attributable to statements made by us. You should rely only on statements made in this prospectus in determining whether to purchase shares of our Fantex Series Vernon Davis.

        Information about us was published in a blog post hosted by an unaffiliated third party, techcrunch.com, on August 31, 2013. This blog post contains information derived from an inadvertent and unauthorized disclosure by an unaffiliated third party software developer of a confidential and preliminary beta version of a proprietary mobile software application under development for possible future use. We have declined to comment on any inquiries related to the blog post and the blog post appears to be based solely on the beta version of the mobile software application, which resulted in an inaccurate reporting of our business in isolation and without disclosure of many of the related risks and uncertainties described in this prospectus. As a result, the blog post should not be considered in isolation and you should decide whether to purchase our shares only after reading this entire prospectus carefully.

        We do not believe the blog post constitutes "gun jumping" in violation of Section 5 of the Securities Act. However, if it were held by a court to be in violation of the Securities Act, we could be required to repurchase the shares sold to purchasers in our public offering of Fantex Series Arian Foster at the original purchase price, plus statutory interest, for a period of one year following the date of the violation. We would vigorously contest any such claim that a violation of the Securities Act occurred.

        Any liability for a potential violation of Section 5 under the Securities Act and a resulting repurchase of Fantex Series Arian Foster assuming the offering of Fantex Series Arian Foster is consummated may adversely impact the financial health of our company as a whole, and therefore investors in each of our tracking stocks, including holders of our Fantex Series Vernon Davis.

        In addition, we have received, and may continue to receive, various degrees of media coverage, including coverage that is not accurate or attributable to statements made by us. You should rely only on the information contained in this prospectus in making your investment decision.

Our business may be adversely impacted by the postponement of our offering of the Fantex Series Arian Foster.

        On February 28, 2013, we entered into a brand contract with Arian Foster, a running back for the Houston Texans of the NFL and his affiliated professional services company, The Ugly Duck, LLC. The brand contract assigns to us 20% of the gross monies or other consideration (including rights to make investments) that Arian Foster will receive from and after February 28, 2013, subject to specified exceptions, as a result of his activities in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching. On November 12, 2013, after confirming reports that Arian Foster will undergo season ending back surgery, we announced that we are postponing the offering for Fantex Series Arian Foster. Although we will continue to work with Arian Foster through his recovery and intend to continue with the offering of Fantex Series Arian Foster at an appropriate time in the future, we cannot guarantee that the offering of Fantex Series Arian Foster will be consummated or that the offering will be resumed upon the same terms. Any non-performance or under performance of one of our other brand contracts or the tracking stocks related thereto, including in this case, any decline in value of Arian Foster Brand or a resulting decline in interest in Fantex Series Arian Foster, may negatively impact investors' perception of the expected performance of any of our other tracking stocks, including the performance of our Fantex Series Vernon Davis.

70


Table of Contents

Risks Relating to this Offering, the Offering Process and the Fantex Platform

Our Fantex Series Vernon Davis is a highly risky and speculative investment. Only investors who can bear the loss of their entire investment should purchase shares of our Fantex Series Vernon Davis.

        Our Fantex Series Vernon Davis is highly risky and speculative. Our Fantex Series Vernon Davis is suitable for purchase only for investors of adequate financial means. If you cannot afford to lose all of the money you plan to invest in our Fantex Series Vernon Davis, you should not purchase shares of our Fantex Series Vernon Davis.

The offering of our Fantex Series Vernon Davis may not be completed.

        We expect to cancel this offering if we do not raise at least $4,211,000 of gross proceeds. In such case, no shares of our Fantex Series Vernon Davis will be sold to the public.

There is no current trading market for our Fantex Series Vernon Davis or any other series of our capital stock and if a trading market does not develop, purchasers of our Fantex Series Vernon Davis may not be able to sell, or may have difficulty selling, their shares.

        Prior to this offering, there has been no public market for our Fantex Series Vernon Davis, or any other series of our capital stock. We do not intend to apply for a listing of our Fantex Series Vernon Davis on any securities exchange or for their inclusion in any established automated dealer quotation system. To own or trade our Fantex Series Vernon Davis, you must have a brokerage account with FBS through which you will only be permitted to enter limit orders. Our Fantex Series Vernon Davis will be traded in the secondary market only through the FBS ATS. If FBS or the FBS ATS suffers any disruption in business operations or activity for any reason, including regulatory or otherwise, you may not be able to sell shares of our Fantex Series Vernon Davis. Please see "Risks Relating to Our Affiliate, FBS, and the FBS ATS."

        Because we are an affiliate of FBS, FBS will deliver a current "market-maker" prospectus, such as this prospectus, and otherwise comply with the registration requirements of the Securities Act in connection with any secondary market sale of the shares of Fantex Series Vernon Davis, which may affect your ability to engage in secondary sales on the FBS ATS. We have agreed to make a "market-maker" prospectus generally available to FBS. If we do not have a current "market-maker" prospectus available at any time, or if we have limited or no market-makers at any time, the liquidity of the secondary market for the Fantex Series Vernon Davis may be materially adversely affected. FBS may also act as a market-maker in the secondary market from time to time, but it is not obligated to make a market in the Fantex Series Vernon Davis and may discontinue any market-making at any time without notice, in its sole discretion. FBS has no current intention of acting as a market-maker in the secondary market for the Fantex Series Vernon Davis, but may do so in the future. If FBS decides to make a market in a tracking stock, it will first amend its Form ATS filed with the SEC to reflect such change. If FBS chooses not to make a market in the Fantex Series Vernon Davis or discontinues market-making for any reason, there may be no other market-makers.

        In addition, we cannot predict the extent to which investor interest in our Fantex Series Vernon Davis or any other tracking stock will lead to the development of an active trading market for our Fantex Series Vernon Davis or how liquid any trading market might become. In addition, if Fantex Holdings purchases any standby shares (up to 200,000) in this offering, those shares of Fantex Series Vernon Davis would be restricted as a result of securities laws, FINRA rules and lock-up agreements for a period of at least 180 days as further described under the section entitled "Underwriting (Conflicts of Interest)." If an active trading market does not develop, you may be unable to sell, or have difficulty selling, any shares of our Fantex Series Vernon Davis that you purchase, and the value of such shares may not reflect their fundamental value. The initial public offering price has been set by us and FBS based on, among other things, our evaluation of Vernon Davis's historical athletic

71


Table of Contents

performance as well as estimates of the business potential and earnings prospects of Vernon Davis. Our estimates may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our Fantex Series Vernon Davis, if at all, at a price equal to or greater than the price you paid in this offering.

Certain underwriters have conflicts of interest with respect to this offering.

        Because FBS, an underwriter for this offering, is under common control with us and we will receive all of the proceeds of the offering, FBS is deemed to have a "conflict of interest" under Rule 5121 of the Conduct Rules of FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121 which requires, among other things, that a "qualified independent underwriter" has participated in the preparation of, and has exercised the usual standards of due diligence with respect to, the registration statement and this prospectus. Stifel, Nicolaus & Company, Incorporated has agreed to act as the "qualified independent underwriter" for the offering and to undertake the legal responsibilities and liabilities of an underwriter under the Securities Act, specifically including performing due diligence investigations and reviewing and participating in the preparation of the registration statement of which this prospectus forms a part. However, we cannot assure you that this will adequately address any potential conflicts of interest. See "Underwriting (Conflicts of Interest)—Conflicts of Interest." In addition, we, Fantex Holdings and FBS have agreed to indemnify Stifel, Nicolaus & Company, Incorporated for acting as "qualified independent underwriter" against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that Stifel, Nicolaus & Company, Incorporated may be required to make for those liabilities.

Our Fantex Series Vernon Davis is not a "covered security," or otherwise exempt from the "blue sky" securities laws governing sales and purchases of Fantex Series Vernon Davis in each of the fifty states, and therefore we must register in each state in which offers and sales will be made.

        Our Fantex Series Vernon Davis is not a "covered security" for purposes of the Securities Act. The term "covered security" applies to securities preempted under federal law from state securities registration requirements due to their oversight by federal authorities and self-regulatory authorities, such as national securities exchanges. Because the Fantex Series Vernon Davis is not a "covered security," the sale of our shares is subject to securities registration in various states.

State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell shares of our Fantex Series Vernon Davis.

        Secondary trading in our Fantex Series Vernon Davis sold in the offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of such state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, our Fantex Series Vernon Davis in any particular state, our Fantex Series Vernon Davis may not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our Fantex Series Vernon Davis, the liquidity for our Fantex Series Vernon Davis could be significantly affected, resulting in a potential loss on your investment.

We expect that our offering will primarily attract individual investors, and therefore our initial public offering price may not be sustainable if and when trading begins, and the price of our Fantex Series Vernon Davis could decline rapidly and significantly.

        We intend to set an initial public offering price at $10.00 per share and expect that the market for our offering will primarily be individual investors.

72


Table of Contents

        In a typical initial public offering, a majority of the shares sold to the public are purchased by professional investors that have significant experience in determining valuations for companies in connection with initial public offerings. These professional investors typically have access to, or conduct their own independent, research and analysis regarding investments in initial public offerings. Other investors typically have less access to this level of research and analysis, and as a result, may be less sensitive to price in participating in our initial public offering. As a result, our initial public offering price may be different than the price that would be established in a more traditional underwritten offering involving institutional investors.

        In addition, institutional investors typically hold acquired shares for an extended period time and trade their holdings infrequently, while individual investors may be more likely to trade their shares frequently and react to minor changes in the market value of our Fantex Series Vernon Davis, or may be more prone to have unexpected liquidity needs. This may result in greater volatility in the trading price of shares of our Fantex Series Vernon Davis. This, in turn, could cause increased imbalances in supply and demand and cause the shares of our Fantex Series Vernon Davis to decline in value.

        As a result, our stock price may not be sustainable if and when trading begins, and the price of our Fantex Series Vernon Davis may decrease once trading of our Fantex Series Vernon Davis begins.

Investors should not expect to sell our shares for a profit shortly after our Fantex Series Vernon Davis begins trading.

        During the offering process, we and our managing underwriters will monitor reservations in the offering to evaluate the demand that exists for our initial public offering. Based on this information, we and FBS may revise the price of our initial public offering set forth on the cover of this prospectus, or we may decide to change the number of shares of Fantex Series Vernon Davis offered through this prospectus. Any increases in the initial public offering price or the number of shares offered may result in there being little or no demand for our shares in secondary trading after completion of the offering. Even if we do not change the number of shares offered or the offering price, the demand for our Fantex Series Vernon Davis may be completely satisfied by the initial public offering and there may be little or no demand for shares of Fantex Series Vernon Davis in the secondary market. If this were to occur, the price of our shares would likely decline following this offering. If your objective is to make a short term profit by selling the shares you purchase in the offering shortly after trading begins, you should not submit an offer to purchase shares in this offering.

If you purchase our common stock in this offering, you will incur immediate dilution in the book value of your shares, on an as converted to platform common stock basis.

        The initial public offering price is higher than the net tangible book value per share of our common stock (including our platform common stock), on an as converted to platform common stock basis. Investors purchasing Fantex Series Vernon Davis in this offering will pay a price per share that exceeds the book value per share (on an as converted basis) of our tangible assets after subtracting our liabilities. As a result, investors purchasing Fantex Series Vernon Davis in this offering will incur immediate dilution of $0.0287 per share, on an as converted to platform common stock basis, based on the sale of 421,100 shares at an initial public offering price of $10.00 per share (or $0.0560 per share, on an as converted basis).

        Further, because we expect that we will need to raise additional capital to fund additional brand acquisitions, we intend in the future to sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of equity or equity-linked securities, together with any additional shares issued in connection with acquisitions, if any, may result in further dilution to investors. For a further description of the dilution that you will experience immediately following this offering, see "Dilution."

73


Table of Contents

We intend to issue additional tracking stocks, which would reduce then-existing investors' percentage of ownership in Fantex and may dilute our share value.

        Our amended and restated certificate of incorporation authorizes the issuance of up to 1,500,000,000 shares of common stock. Accordingly, our board of directors will be empowered, without further stockholder approval, to issue additional shares of capital stock up to the authorized amount, which could adversely affect the rights of the holders of the existing series of our common stock. We may value any stock issued in the future on an arbitrary basis and the future issuance of capital stock may result in substantial dilution in the percentage of our common stock or common stock-equivalents held by our then existing stockholders. The issuance of capital stock for future services or other corporate actions may have the effect of diluting the value of the shares held by our then-existing stockholders, and might have an adverse effect on any trading market for our Fantex Series Vernon Davis.

If analysts or commentators publish or establish target prices for our Fantex Series Vernon Davis that are below the initial public offering price or then current trading market price of our shares, the price of shares of our Fantex Series Vernon Davis may fall.

        We believe that analysts and commentators may publish price targets, and if they do they may rely upon methods to establish target prices for our Fantex Series Vernon Davis that may be different than methodologies that we use or that other investors use to value these shares. If analysts and commentators publish target prices for our Fantex Series Vernon Davis that are below our initial public offering price or the then current trading market price of our shares, it could cause our stock price to decline.

The price of our Fantex Series Vernon Davis might fluctuate significantly, and you could lose all or part of your investment.

        Volatility in the market price of our Fantex Series Vernon Davis may prevent you from being able to sell shares of our Fantex Series Vernon Davis at or above the price you paid for such shares. The trading price of our Fantex Series Vernon Davis may be volatile and subject to wide price fluctuations in response to various factors, including:

    performance of Vernon Davis in the NFL;

    our perceived financial standing and the stability of the Fantex platform;

    market interest in trading our Fantex Series Vernon Davis;

    number of shares available for trading, which may be further reduced if Fantex Holdings participates in this offering by purchasing any standby shares;

    liquidity needs of investors due to the overall performance of the equity markets or otherwise;

    industry related regulatory developments;

    investor perceptions of Vernon Davis, us and professional football;

    changes in accounting standards, policies, guidance, interpretations or principles;

    changes in tax code that may affect the economics of your investment;

    insolvency of Fantex or Vernon Davis;

    regulatory findings, determinations or changes affecting our ability to operate;

    sales of our Fantex Series Vernon Davis by a large stockholder;

    general economic conditions;

74


Table of Contents

    changes in interest rates; and

    availability of capital.

        We expect that Fantex Holdings, our parent company, will agree to purchase from FBS, at the initial public offering price, up to 200,000 shares of Fantex Series Vernon Davis in this offering under specified circumstances. To the extent Fantex Holdings purchases any shares in the offering such shares will be deemed "restricted securities" and may be sold in the public market only if registered under the Securities Act. Because only a limited number of shares of our Fantex Series Vernon Davis may be available for sale in the public market after closing of this offering if Fantex Holdings participates, sales of a substantial number of shares of our Fantex Series Vernon Davis in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of our Fantex Series Vernon Davis.

        These and other factors might cause the market price of our Fantex Series Vernon Davis to fluctuate substantially, which might limit or prevent investors from readily selling their shares of our Fantex Series Vernon Davis and may otherwise negatively affect the liquidity of our Fantex Series Vernon Davis. In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies across many industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Accordingly, the price of our Fantex Series Vernon Davis could fluctuate based upon factors that have little or nothing to do with Fantex, Vernon Davis or the contract party, and these fluctuations could materially reduce our stock price. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company's securities. This litigation, if instituted against us, could result in substantial costs, divert our management's attention and resources, and harm our business, operating results and financial condition.

Transaction costs for trades on the FBS ATS could decrease the liquidity of your investment in our Fantex Series Vernon Davis and could reduce or eliminate any positive return on your investment in our Fantex Series Vernon Davis.

        The transactions costs for you to trade on the FBS ATS are expected to be up to 1% of the total amount of the purchase or sale, respectively, with lower amounts depending on whether or not you have an active trader account. This the cost of executing trades could be high relative to the size of your investment in our Fantex Series Vernon Davis, and this cost could cause investors to trade less frequently and to increase their holding periods. Thin trading in our Fantex Series Vernon Davis could, in turn, increase the spread between the bid price at which buyers are willing to acquire shares of our Fantex Series Vernon Davis and the ask price at which sellers are willing to sell their shares, making it more difficult to buy or sell at a time and price that meets your objectives. In addition, brokerage commissions associated with your transactions in Fantex Series Vernon Davis could reduce or eliminate your return on investment in our Fantex Series Vernon Davis or cause you to incur a loss on your investment.

We may be subject to securities litigation, which is expensive and could divert management attention.

        The market price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.

75


Table of Contents

We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make shares of our Fantex Series Vernon Davis less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

        We cannot predict if investors will find our Fantex Series Vernon Davis less attractive because we will rely on these exemptions. If some investors find our Fantex Series Vernon Davis less attractive as a result, there may be a less active trading market for our Fantex Series Vernon Davis and our stock price may be more volatile.

        In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Our compliance burdens and costs will be significant as a result of operating as a public company, particularly as a result of our tracking stock structure. Our management will be required to devote substantial time to compliance matters.

        As a public company in the United States, we will incur significant legal, accounting and other expenses that we did not previously incur. Our business model depends on the ongoing issuance of tracking stocks intended to track the performance of tracking stock brands that we intend to establish with each new brand contract.

        We will become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly as a result of our tracking stock structure and to a greater extent after we are no longer an "emerging growth company." The Exchange Act requires that we file annual and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Furthermore, the need to establish the corporate infrastructure demanded of a public company, particularly one with a tracking stock structure such as ours that contemplates numerous series being issued on an ongoing basis, may divert management's attention from implementing our growth strategy, which could prevent us from improving our business, financial condition and results of operations. We will need to implement significant enhancements to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company with multiple tracking stocks. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain

76


Table of Contents

the same or similar coverage. These additional obligations could have a material adverse effect on our business, financial condition, results of operations and cash flow.

        In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business, financial condition, results of operations and cash flow could be adversely affected.

        For as long as we are an "emerging growth company" under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We could be an emerging growth company for up to five years. See "Prospectus Summary—Implications of Being an Emerging Growth Company." Furthermore, after the date we are no longer an emerging growth company, our independent registered public accounting firm will only be required to attest to the effectiveness of our internal control over financial reporting depending on our market capitalization. Even if our management concludes that our internal control over financial reporting are effective, our independent registered public accounting firm may still decline to attest to the effectiveness of our internal controls or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, in connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. Failure to comply with Section 404 could subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue, cause investors to lose confidence in the accuracy and completeness of our financial reports and negatively affect our stock price.

Noncompliance with laws and regulations may impair our ability to arrange or service the brand contracts.

        Generally, failure to comply with the laws and regulatory requirements applicable to our business may, among other things, limit our ability to collect all or part of the payments under the brand contracts and, in addition, could subject us to damages, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm our business and ability to maintain the Fantex platform and may result in contract parties attempting to rescind their brand contracts. For example, if we were deemed to be an investment company under the Investment Company Act, we would be required to institute burdensome compliance requirements and our activities may be restricted, which would materially adversely affect our business, financial condition and results of operations.

If Fantex Series Vernon Davis is not treated as a class of common stock of Fantex, adverse federal income tax consequences will result.

        If Fantex Series Vernon Davis is considered property other than common stock of Fantex, for federal income tax purposes (i) Fantex would generally be taxed on a portion of the appreciation of the

77


Table of Contents

assets, if any, attributable to Fantex Series Vernon Davis upon the issuance of such stock, (ii) the exchange of Fantex Series Vernon Davis for shares of our platform common stock would not qualify as a tax-free recapitalization, and (iii) income, gain, losses and deductions attributable to one tracking stock brand would not be offset against income, gain, losses and deductions attributable to another tracking stock brand. There are no court decisions or other authorities directly bearing on the tax effects of the issuance and classification of stock with the features of Fantex Series Vernon Davis. In addition, the Internal Revenue Service has announced that it will not issue advance rulings on the classification of an instrument with characteristics similar to those of Fantex Series Vernon Davis. As a result, there can be no assurance that Fantex Series Vernon Davis will be treated as stock of Fantex for U.S. federal income tax purposes.

Risks Relating to Our Affiliate, FBS, and the FBS ATS

To own or trade our Fantex Series Vernon Davis, you must have a brokerage account with FBS and our Fantex Series Vernon Davis will be traded in the secondary market only through the FBS ATS.

        Prior to this offering, there has been no public market for our Fantex Series Vernon Davis, or any other series of our capital stock. We do not intend to apply for a listing of our Fantex Series Vernon Davis on any securities exchange or for their inclusion in any established automated dealer quotation system. To own or trade our Fantex Series Vernon Davis, you must have a brokerage account with FBS through which you will only be permitted to enter limit orders. Our Fantex Series Vernon Davis will be traded in the secondary market only through the FBS ATS. If FBS or the FBS ATS suffers any disruption in business operations or activity for any reason, including regulatory or otherwise, you may not be able to sell your shares.

The securities settlement process at FBS exposes it to certain risks specific to broker-dealers that clear their own trades, which include greater sanctions for errors vis-a-vis brokers that outsource these functions to third-party providers.

        FBS will clear all trades effected on its ATS. Broker-dealers that clear their own trades are subject to substantially more regulatory requirements than brokers that outsource these functions to third-party providers. Errors in performing clearing functions, including clerical, technological and other errors related to the handling of funds and securities held by FBS on behalf of customers, could lead to censures, fines or other sanctions imposed by applicable regulatory authorities as well as losses and liability in related lawsuits and proceedings brought by FBS's customers. Any unsettled securities transactions or wrongly executed transactions may expose FBS's customers to adverse movements in the prices of the Fantex Series Vernon Davis. In terms of customer order entry errors, there is always a risk a customer may accidentally enter a trade in the wrong stock, and/or with incorrect pricing. Customers will be limited in almost all cases to entering trades online with substantial front end order alerts and safeguards.

The FBS website and the FBS ATS are each operated on computer hardware that is currently located in a third-party Web hosting facility and there may be interruptions or delays in service that are out of our, FBS's or the third-party's control, which may result in an inability to sell your shares.

        The FBS website and the FBS ATS are each operated on computer hardware that is currently located in a third-party Web hosting facility in Chicago, Illinois operated by Rackspace, US Inc. Neither we nor FBS control the operation of this facility, and it is subject to damage or interruption from natural disasters, fires, power loss, telecommunications failures and similar events. It is also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Despite precautions that may be taken at the facility, the occurrence of any of these unanticipated problems at the facility or any decision by Rackspace to close the facility without adequate notice could result in lengthy interruptions in the services provided by the FBS ATS, which could result in an extended period of delay during

78


Table of Contents

which time you would not be able to sell any shares. In addition, the failure by the Rackspace facility to provide required data communications capacity could result in additional interruptions.

If security measures at the FBS website and the FBS ATS are breached and unauthorized access is obtained to a customer's data, the FBS ATS may be perceived as not being secure and customers may curtail or stop trading on the platform.

        Services provided by FBS and the FBS ATS involve the storage and transmission of customers' proprietary information, and security breaches could expose FBS and the FBS ATS to a risk of loss of this information, litigation and possible liability. If the security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to one of our customers' data, our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of security occurs, the market perception of the effectiveness of the security measures at FBS and the FBS ATS could be harmed and could result in fewer sales and customers. In addition to any damage to market perception, such breaches of security measures or resulting unlawful use of confidential information could, among other things: (i) subject FBS to liability for a failure to safeguard client data, (ii) subject FBS to regulatory sanctions or burdens, based on the authority of the SEC and FINRA to enforce regulations regarding business continuity planning, and (iii) require significant capital and operating expenditures to investigate and remediate the breach.

FBS's insurance coverage may be inadequate or expensive to cover the losses resulting from any lawsuits or breaches of security.

        FBS is subject to claims in the ordinary course of business. These claims may involve substantial amounts of money and involve significant defense costs. It is not always possible to prevent or detect activities giving rise to claims, and the precautions FBS takes may not be effective in all cases.

        FBS maintains voluntary and required insurance coverage, including, among others, SIPC and fidelity bond insurance. While FBS endeavors to purchase coverage that is appropriate to its assessment of its risk, FBS is unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages. FBS's business may be negatively affected if in the future its insurance proves to be inadequate or unavailable. In addition, insurance claims may harm FBS's reputation or divert management resources away from operating FBS's business.

Failure to maintain technological capabilities, flaws in existing technology, difficulties in upgrading FBS's technology platform or the introduction of a competitive platform could have a material adverse effect on FBS's business.

        FBS depends on highly specialized and, in many cases, proprietary technology to support its business functions, including, among others, (i) securities trading and custody, (ii) customer service, (iii) accounting and internal financial processes and controls, and (iv) regulatory compliance and reporting.

        In addition, FBS's continued success depends on its ability to effectively adopt new or adapt existing technologies to meet customer, industry and regulatory demands. FBS might be required to make significant capital expenditures to maintain competitive technology. For example, the future success of FBS may depend in part on its ability to anticipate and adapt to technological advancements required to meet the changing demands of its customers. The emergence of new industry standards and practices could render FBS's existing systems obsolete or uncompetitive. Any upgrades or expansions may require significant expenditures of funds and may also cause FBS to suffer system degradations,

79


Table of Contents

outages and failures. There cannot be any assurance that FBS will have sufficient funds to adequately update and expand its networks, nor can there be any assurance that any upgrade or expansion attempts will be successful and accepted by its customers. If FBS's technology systems were to fail and FBS were unable to recover in a timely way, FBS would be unable to fulfill critical business functions, which could lead to a loss of customers and could harm FBS's reputation. A technological breakdown could also interfere with FBS's ability to comply with financial reporting and other regulatory requirements, exposing FBS to disciplinary action and to liability to its customers.

Regulatory developments and FBS's failure to comply with regulations could adversely affect FBS's business by increasing its costs and exposure to litigation, affecting FBS's reputation and making its business less profitable.

        FBS's business is subject to extensive regulation and supervision under both federal and state laws. FBS is a member of FINRA and registered as a broker-dealer with the SEC, each of the 50 states (except for Arizona), the District of Columbia, Puerto Rico and the United States Virgin Islands.

        Much of the regulation of broker-dealers has been delegated to self-regulatory organizations ("SROs"), including FINRA. The primary regulators of FBS are FINRA and the SEC.

        The SEC and FINRA as well as other U.S. governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations. There can also be no assurance that other federal or state agencies will not attempt to further regulate FBS's business. These legislative and regulatory initiatives may affect the way in which FBS conducts its business and may make FBS's business model less profitable.

        FBS's ability to conduct business in the jurisdictions in which it operates depends on its compliance with the laws, rules and regulations promulgated by federal regulatory bodies and the regulatory authorities in each of these jurisdictions. FBS's ability to comply with all applicable laws, rules and regulations is largely dependent on its establishment and maintenance of compliance, audit and reporting systems and procedures, as well as its ability to attract and retain qualified compliance, audit and risk management personnel. Policies and procedures adopted by FBS designed to comply with applicable laws, rules and regulations may not be fully effective and there can be no assurance that regulators or third parties will not raise material issues with respect to FBS's past or future compliance with applicable regulations.

        FBS's profitability could also be affected by rules and regulations that impact the business and financial communities generally, including changes to the laws governing taxation, electronic commerce, privacy and data protection. Failure to comply with new rules and regulations, including in particular, rules and regulations that may arise pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, could subject FBS to regulatory actions or litigation and it could have a material adverse effect on FBS's business, results of operations, cash flows or financial condition. In addition, new rules and regulations could result in limitations on the lines of business FBS conducts, modifications to its business practices, increased capital requirements or additional costs.

FBS is subject to various regulatory ownership requirements, which, if not complied with, could result in the restriction of the ongoing conduct of its business.

        The business activities that FBS may conduct are limited by various regulatory agencies. FBS's membership agreement with FINRA may be amended by application to include additional business activities. This application process is time-consuming and may not be successful. As a result, FBS may be prevented from entering new potentially profitable businesses in a timely manner, or at all. FBS is subject to various regulatory capital requirements, which, if not complied with, could result in the restriction of the ongoing conduct, growth, or even liquidation of parts of its business.

80


Table of Contents


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA

        This prospectus includes forward-looking statements. We may, in some cases, use terms such as "believes," "estimates," "anticipates," "expects," "plans," "intends," "may," "could," "might," "will," "should," "approximately" or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our expectations regarding future ABI under our brand contracts with Vernon Davis, EJ Manuel and Arian Foster, including longevity of each of their careers and an ability to enter into additional included contracts, our expectation that we will enter into other brand contracts, our ability to conduct additional offerings of new tracking stocks or otherwise finance the purchase of additional ABI, our ability to build a portfolio of brands, our ability to contribute to the contract party's efforts to build brand value, our ability to consummate the offerings of Fantex Series EJ Manuel and Fantex Series Arian Foster, our attribution policies with respect to our series of common stock, our results of operations, cash needs, spending of the net proceeds from this offering, financial condition, liquidity, prospects, growth and strategies, and the trends that may affect us or the contract parties.

        By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the field in which we operate, may differ materially from the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the field in which we operate are consistent with the forward-looking statements contained in this prospectus, they may not be predictive of results or developments in future periods.

        Any forward-looking statements that we make in this prospectus speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

        You should also read carefully the factors described in the "Risk Factors" section of this prospectus and elsewhere to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act, do not protect any forward-looking statements that we make in connection with this offering.

        We obtained data in this prospectus regarding the NFL and athletes in the NFL from our own internal estimates and research as well as from general publications, surveys and studies conducted by third parties. While we believe that the information is reliable, we have not independently verified the data from third-party sources. While we believe our internal company research is reliable and the market definitions we use are appropriate, neither such research nor these definitions have been verified by any independent source.

81


Table of Contents


USE OF PROCEEDS

        We expect that our net proceeds from the sale of the shares of common stock in this offering will be approximately $4,000,450, assuming the sale of 421,100 shares of Fantex Series Vernon Davis in this offering at an initial public offering price of $10.00 per share (in each case the amounts set forth on the front cover of this prospectus), after deducting underwriting discounts payable by us. See "Underwriting (Conflicts of Interest)" for additional detail regarding the underwriting discounts. Offering expenses, estimated to be $514,090, will be paid by our parent and are not included in the calculation of net proceeds.

        On April 3, 2013, we received an equity contribution of $2.0 million from our parent to provide working capital to finance our operating expenses. As consideration for the ABI under our brand contract with Vernon Davis we have agreed to pay him a one-time cash amount of $4.0 million contingent upon our ability to obtain financing. We will use all of our net proceeds from the offering of our Fantex Series Vernon Davis, together with existing cash and cash equivalents if necessary, to fund the payment of this purchase price to Vernon Davis pursuant to our brand contract with him.

        The following table represents the expected use of the proceeds of the sale of the shares of Fantex Series Vernon Davis in this offering:

 
  Amount of
Proceeds
  Percentage
of Total
Proceeds
 

Expected use of the proceeds from this offering

             

Payment of the underwriting discount

  $ 210,550     5.00 %

Payment of the brand contract purchase price to Vernon Davis

    4,000,000     94.99 %

General working capital for our operations

    450     0.01 %
           

Total proceeds expected from this offering

  $ 4,211,000     100 %
           

        One of the principal purposes of this offering is to obtain capital to finance the payment of the purchase price for the ABI pursuant to the Vernon Davis brand contract. We intend to use the net proceeds from this offering and our existing cash and cash equivalents, together with interest thereon but after payment of the purchase price under the Vernon Davis brand contract, for general working capital to fund our operations. Although it is difficult to predict future liquidity requirements, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months.

        We are actively pursuing the acquisition of additional brands, and any brand contracts that we enter into in the future with other contract parties are expected to be contingent upon obtaining financing to fund the acquisition of the minority interest in the respective brands. We intend to finance the acquisition of additional brands through the issuance of additional tracking stocks linked to the value of such brands, rather than through use of any of our existing cash and cash equivalents.

        Pending use of our cash and cash equivalents for our operations, we intend to invest the net proceeds of this offering and our existing cash and cash equivalents after payment of the purchase price to Vernon Davis under the brand contract in a variety of capital preservation investments, including short-term, interest-bearing investment grade securities, money market accounts, certificates of deposit and direct or guaranteed obligations of the U.S. government.

82


Table of Contents


DIVIDEND POLICY

        Our board of directors is permitted, but not required, to declare and pay dividends on our platform common stock or any of our tracking stocks (including our Fantex Series Vernon Davis) in an amount up to the "available dividend amount" for the applicable series, to the extent permitted by the Delaware General Corporation Law.

        The available dividend amount for any tracking stock is as of any date an amount equal to the lesser of (a) total assets of our company legally available for the payment of dividends under Delaware law and (b) an amount equal to:

    the excess of the total assets attributed to the tracking stock brand over the total liabilities attributed to the tracking stock brand, less the par value of the outstanding shares of such tracking stock; or

    if there is no such excess, the attributable income of the tracking stock brand for the fiscal year in which the dividend is being declared and/or the preceding fiscal year.

        For example, if the attributed assets for a tracking stock brand as of a date of determination consisted of cash in the amount of $100,000, and the attributed liabilities for a tracking stock brand as of that same date were in the aggregate $50,000, then the available dividend amount for that tracking stock at that time would be approximately $50,000. If in the prior example the attributed liabilities were greater than the attributable assets, then instead the available dividend amount would be based on the total income attributable to that tracking stock for the current fiscal year and/or the prior fiscal year. For example, if attributable income in the prior year were $50,000, then the available dividend amount would be $50,000. We will provide unaudited attributed financial information as an exhibit to our periodic reports that we file pursuant to the Exchange Act. The unaudited attributed financial information will show the attribution of our assets, liabilities, revenue, expenses and cash flows to each of our tracking stocks and our platform common stock, and our available dividend amount as of any period may be determined based on such attributed financial information.

        The available dividend amount for our platform common stock is as of any date an amount equal to the amount of our total assets legally available for the payment of dividends under Delaware law, less the aggregate amount of the "available dividend amount" for all of our then outstanding tracking stocks.

        To date, we have never declared or paid any cash dividends on our capital stock. Following this offering, we intend to pay cash dividends from time to time out of available cash for each tracking stock, including Fantex Series Vernon Davis, equal to an amount in excess of 20% of the "available dividend amount" for such series. Because of the seasonal nature of the brand income underlying our tracking stocks, the dividends for a tracking stock would be expected to coincide with the seasonal receipt of cash pursuant to the underlying brand contract. For example, because of the timing of the football season, to the extent we declare dividends on the Fantex Series Vernon Davis, these dividends are likely to be declared in the first or second fiscal quarters, following the end of the NFL season, and they will not coincide with the third and fourth fiscal quarters during the NFL season. We do not intend to declare dividends on our platform common stock for the foreseeable future.

        Certain dividends paid may be considered a return of capital for U.S. federal income tax purposes. Please see "Material U.S. Federal Income Tax Considerations—Dividends and Distributions" for a detailed description of the tax treatment of the dividends and other distributions of cash or property to holders of the Fantex Series Vernon Davis.

        Our board of directors has discretion to declare a dividend on any series of common stock without declaring a dividend on any other series of our common stock. In general, our board of directors does

83


Table of Contents

not expect to declare dividends on any series of common stock in an amount greater than the attributed cash on hand for such series.

        If we sell all or substantially all of the assets of a tracking stock brand (but not in connection with a sale of our company), our board of directors will pay a dividend to holders of our the related tracking stock, redeem shares of the related tracking stock, convert the outstanding shares of the related tracking stock into our platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock or some combination of the foregoing.

        Our board of directors may change its dividend policy at any time and from time to time, and we may retain some or all available funds and future income to support our operations and finance the growth and development of our business as well as, in some circumstances, invest some of the available funds to further enhance a brand or acquire additional ABI in a brand if we believe that those would be more productive uses of some or all of the available funds. However, our board of directors will not in any event change the definition of "available dividend amount" for any series of our common stock or declare dividends on any series of our common stock in excess of the "available dividend amount" for that series.

84


Table of Contents


CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2013 on:

    an actual basis; and;

    a pro forma, as adjusted basis after further giving effect to an increase in authorized shares and designation for tracking stock and the sale of 421,100 shares of Fantex Series Vernon Davis offered in this offering at an initial public offering price of $10.00 per share (in each case based on assumed amounts set forth on the front cover of this prospectus), after deducting underwriting discounts payable by us, and assuming the offering for Fantex Series Arian Foster has not been consummated. Offering expenses, estimated to be $514,090, will be paid by our parent and are not included in the calculation of cash and cash equivalents.

        The information in this table is illustrative only and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with the information contained in "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as the financial statements and the notes thereto included elsewhere in this prospectus:

 
  December 31, 2013  
 
  Actual   Pro forma,
As adjusted
 

Cash and cash equivalents

  $ 466,833   $ 4,467,283  
           

Stockholders' equity:

             

Common stock, $0.0001 par value; 100,000,000 shares authorized, actual; 1,500,000,000 shares authorized, pro forma, as adjusted:

             

Platform Common Stock; 100,000,000 shares designated, issued and outstanding, actual and pro forma, as adjusted

    10,000     10,000  

Fantex Series Vernon Davis; 0 shares designated, issued and outstanding, actual; 421,100 shares designated, issued and outstanding, pro forma, as adjusted

        42  

Additional Paid in Capital

    5,388,192     9,388,600  

Accumulated Losses

    (4,625,318 )   (4,625,318 )
           

Total Stockholders' Equity

    772,874     4,773,324  
           

Total Capitalization

  $ 772,874   $ 4,773,324  
           

        The number of shares of our common stock to be outstanding immediately following this offering set forth above is based on 100,000,000 shares of our common stock outstanding as of December 31, 2013, giving effect to the 1,000,000-for-1 stock split of our common stock effective as of November 1, 2013 and zero shares of Fantex Series Vernon Davis or any other tracking stocks outstanding as of December 31, 2013.

85


Table of Contents


DILUTION

        If you purchase shares of our Fantex Series Vernon Davis in this offering, your interest, on an as converted to platform common stock basis, will be diluted to the extent of the difference between the initial public offering price per share of our Fantex Series Vernon Davis and the pro forma as adjusted net tangible book value per share of our common stock, assuming conversion of the Fantex Series Vernon Davis into platform common stock, immediately after this offering.

        Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of outstanding common stock, assuming conversion of the Fantex Series Vernon Davis into platform common stock. Our historical net tangible book value (deficit) as of December 31, 2013 was $772,874, or $0.0077 per share.

        Our pro forma, as adjusted, net tangible book value (deficit) as of December 31, 2013 was $4,773,324, or $0.0272 per share of common stock, assuming conversion of the Fantex Series Vernon Davis into platform common stock, after giving effect to the following:

    sale by us of 421,100 shares of Fantex Series Vernon Davis in this offering at an initial public offering price of $10.00 per share (in each case based on assumed amounts set forth on the front cover of this prospectus), after deducting underwriting discounts payable by us (or $0.0560 per share, on an as converted to platform common stock basis); and

    the payment by us of the $4.0 million purchase price to Vernon Davis for the ABI under our brand contract with him.

        The pro forma, as adjusted, net tangible book value (deficit) set forth above represents an immediate increase in net tangible book value of $0.0195 per share to our existing holders of platform common stock, assuming conversion of the Fantex Series Vernon Davis into platform common stock, and an immediate dilution in net tangible book value of approximately $0.0287 per share to new investors purchasing shares of Fantex Series Vernon Davis in this offering, on an as converted to platform common stock basis. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share

        $ 10.00  

Assumed initial public offering price per share, on an as converted to platform common stock basis

          0.0560  

Pro forma net tangible book value (deficit) per share as of December 31, 2013

  $ 0.0077        

Increase in pro forma net tangible book value (deficit) per share attributable to new investors

    0.0195        
             

Pro forma as adjusted net tangible book value per share after this offering

          0.0272  

Dilution per share to investors in this offering

          0.0287  
             

Dilution per share to investors in this offering, prior to conversion

        $ 5.13  
             

        The foregoing calculations are based on 100 million shares of platform common stock outstanding as of December 31, 2013, reflecting the reclassification of all outstanding shares of our common stock into shares of our platform common stock upon the 1,000,000-for-1 stock split effected on November 1, 2013. In addition, for purposes of determining the conversion ratio of a share of Fantex Series Vernon Davis into platform common stock, we calculated the fair value of a share of platform common stock by dividing an assumed fair value of our platform unit by the number of shares of our platform common stock outstanding as of December 31, 2013 as set forth above. The fair value of the platform unit was assumed to be $5.60 million based upon the capital contributions to the company from the parent plus the imputed value of the 5% of the ABI that we will attribute to the platform unit.

86


Table of Contents

        We expect that we will need to raise additional capital to fund additional brand acquisitions, we may in the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. We may also choose to raise additional capital due to market conditions or other strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

87


Table of Contents


MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled "Risk Factors" included elsewhere in this prospectus.

Overview

        We are a brand acquisition, marketing and brand development company whose focus is on acquiring minority interests in the income associated with the brands of professional athletes, entertainers and other high-profile individuals and assisting such individuals in enhancing the reach and value of the brands we acquire. The business operates in a single segment and our focus is on three core areas:

    evaluating, targeting and accessing individuals and brands with the potential to generate significant income associated with these brands, or brand income;

    acquiring minority interests in such brand income; and

    assisting our acquired brands in increasing their value via technology and through leveraging our marketing, advertising and strategic partnering expertise.

        We were incorporated in Delaware on September 14, 2012 as a wholly-owned subsidiary of Fantex Holdings, our parent. Fantex Holdings was incorporated in Delaware on April 9, 2012. We are currently a development-stage entity and have to date relied on our parent to conduct our operations through its employees. Following the consummation of our first public offering we intend to operate under a management agreement with our parent, who will provide us with management and administrative services, including providing and compensating our executive management and other personnel as well as services relating to information technology support, brand management and other support, operations, facilities, human resources, tax planning and administration, accounting, treasury and insurance. We will begin to assume management and administrative tasks at such time in the future as the actual cost of these services is less than our service fee to Fantex Holdings, which we do not anticipate will occur until we begin to generate significant cash flows from multiple brand contracts. However, if our parent is unable to perform any of the services that they are required to perform under the management agreement, due to financial difficulty or otherwise, then we may be forced to assume management and administrative tasks, and incur additional expenses, sooner than we anticipate. Until such time, we will continue to rely on our parent to conduct our operations in accordance with the management agreement.

Results of Operations

Period from September 14, 2012 (inception) to December 31, 2012 and year ended December 31, 2013

        We have little operational history and are not currently generating revenues. We, therefore, have no results of operations for the year ended December 31, 2012 and 2013. All of our costs to date have been allocated to us from our parent, which has identified all activities and costs related to our operations. Expenses such as personnel and facility costs were primarily allocated based on the estimated number of full time equivalent (FTE) employees working on activities associated with us. All personnel costs were allocated based on an estimated percentage of time spent on our activities. Facility costs were allocated based on the FTE associated with us as a percentage of all employees of our parent. All other costs were specifically identified and charged to us as deemed appropriate. All

88


Table of Contents

estimates are deemed to be reasonable and reflect, in the best judgment of our management, the costs associated with our activities.

        The most significant costs incurred by us or our parent to date were professional services. Our parent incurred, and allocated to us, $798,231 in professional services expenses in the period from inception to December 31, 2012 and $2,305,020 for the year ended December 31, 2013. This increase in expense from 2012 to 2013 was due primarily to a longer operating period of 12 months in 2013 versus three and a half months in 2012 and reflected a $550,000 increase in legal and audit fees, $850,000 in increased marketing and public relations costs in connection with the initial public offering of Fantex Series Arian Foster as well as an increase of $125,000 in expenses related to pursuing potential contract parties, which increase was partially offset by lower costs relating to legal and regulatory structuring in 2013 as compared to 2012, including significant costs associated with commencement of operations. We have dedicated significant resources to commencing operations, including but not limited to company formation, brand research, compliance with various legal and regulatory requirements, and pursuing brand contract acquisition. We believe that some of these costs are primarily associated with the start-up phase of the company and may decrease as our operations mature. However, we will incur additional professional services expenses as a result of becoming a public company and expanding the business, particularly with respect to entering into additional brand contracts and as a result of future financings, which expenses may offset any such decrease in initial start-up costs. As a result, we anticipate overall increased professional services expenses in the future to support our operations.

        We currently have no employees, but are being supported by personnel employed by our parent. We were allocated personnel and related benefits expenses of $98,174 for the period from inception through December 31, 2012, and $875,718 for the year ended December 31, 2013. Our parent continues to dedicate more personnel to the brand contract acquisition, legal and branding efforts resulting in a total of nine FTEs as of December 31, 2013.

        Three stockholders of our parent serve as our officers, including as our chief executive officer and the chief financial officer. Although these individuals purchased founders stock in Fantex Holdings upon formation of our parent or received grants of options in our parent, prior to June 1, 2013 they had received no compensation for their services from either us or our parent. Prior to June 1, 2013, the allocation of expenses from our parent for personnel does not include imputed costs for these officers, but does include other costs incurred by our parent for those officers, such as travel, benefits and facilities expenses. Our parent began to pay cash compensation to our officers on June 1, 2013, and a portion of personnel costs allocated to us from our parent based on an estimated percentage of their time spent on our activities for the year ended December 31, 2013 was $217,860. If our parent had incurred personnel costs for these three officers, and allocated costs to us based on an estimated percentage of their time spent on our activities, such allocated costs to us from our parent would have been approximately $170,000 for the period from inception through December 31, 2012.

        We have also devoted resources to target, access and negotiate for the acquisition of brands that meet our criteria, including travel and related expenditures of $121,507, for the period from inception through December 31, 2012 and $289,131 for the year ended December 31, 2013. We believe that as we expand our operations these costs will continue to increase.

        We share our parent's real estate facility located in San Francisco, California, and we are allocated expenses from our parent equal to a portion of the facility expenses in an amount of $45,111 for the period from inception through December 31, 2012 and $92,296 for the year ended December 31, 2013. As we grow in head count, our share of the facilities expense may increase, however the rate at which our facility expense increases will depend on the head count growth at both our parent and at FBS, our parent's wholly-owned subsidiary who also shares the same facility.

        On February 28, 2013, we entered into a brand contract with Arian Foster, a running back for the Houston Texans of the NFL and his affiliated professional services company, The Ugly Duck, LLC and

89


Table of Contents

amended and restated such brand contract on each of May 24, 2013 and August 21, 2013. The brand contract assigns to us 20% of the gross monies or other consideration (including rights to make investments) that Arian Foster receives from and after February 28, 2013, subject to specified exceptions and net of certain specified expenses, as a result of Arian Foster's activities in the NFL and related fields (including activities in a non-NFL football league), such as broadcasting and coaching. Our contract with Arian Foster is contingent upon obtaining financing to fund the acquisition of this brand income. Our brand contract with Arian Foster is more fully described in the section entitled "Business—Other Brand Contracts—Arian Foster Brand Contract," in the footnotes of the audited financial statements and the Statements of Cash Receipts from Included Contracts Subject to the Brand Agreement between Fantex, Inc. and Arian Foster and his affiliate The Ugly Duck, LLC dated February 28, 2013, which we refer to as the Statement of Cash Receipts from Included Contracts for Arian Foster, included elsewhere in this prospectus.

        On October 30, 2013, we entered into a brand contract with Vernon Davis, a tight end for the San Francisco 49ers of the NFL and his affiliated professional services company, The Duke Marketing LLC. The brand contract assigns to us 10% of the gross monies or other consideration (including rights to make investments) that Vernon Davis receives from and after October 30, 2013, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes) as a result of his activities in football and related fields (including NFL and non-NFL activities), such as broadcasting and coaching. Our contract with Vernon Davis is contingent upon obtaining financing to fund the acquisition of this brand income. Our brand contract with Vernon Davis is more fully described in the section entitled "Business—Vernon Davis Brand—Vernon Davis Brand Contract," in the footnotes of the audited financial statements and the Statements of Cash Receipts from Included Contracts Subject to the Brand Agreement between Fantex, Inc. and Vernon Davis and his affiliate The Duke Marketing, LLC dated October 30, 2013, which we refer to as the Statement of Cash Receipts from Included Contracts for Vernon Davis, included elsewhere in this prospectus.

        On February 14, 2014, we entered into a brand contract with EJ Manuel, a quarterback for the Buffalo Bills of the NFL and his affiliated professional services company, Kire Enterprises LLC. The brand contract assigns to us 10% of the gross monies or other consideration (including rights to make investments) that EJ Manuel receives from and after February 14, 2014, subject to specified exceptions and net of certain related expenses (such as legal fees, travel expenses and self-employment taxes) as a result of his activities in football and related fields (including NFL and non-NFL activities), such as broadcasting and coaching. Our contract with EJ Manuel is contingent upon obtaining financing to fund the acquisition of this brand income. Our brand contract with EJ Manuel is more fully described in the section entitled "Business—EJ Manuel Brand—EJ Manuel Brand Contract," in the footnotes of the audited financial statements and the Statements of Cash Receipts from Included Contracts Subject to the Brand Agreement between Fantex, Inc. and EJ Manuel and his affiliate Kire Enterprises LLC dated February 14, 2014, which we refer to as the Statement of Cash Receipts from Included Contracts for EJ Manuel, or collectively with the Statement of Cash Receipts from Included Contracts for Vernon Davis and the Statement of Cash Receipts from Included Contracts for Arian Foster, as the Statements of Cash Receipts from Included Contracts, included elsewhere in this prospectus.

        As the operations of Fantex mature, we expect to continue to incur expenses of the type and nature described above. In addition, following the consummation of our first public offering, we expect to incur service fees pursuant to our management agreement with our parent. We also expect to build internal staff and begin to incur expenses on our own behalf to administer our brand contracts, including supporting cash collection and ensuring all sources of brand income subject to our agreement are identified, potential disclosures are identified and brought to management's attention and that our contract rights are enforced.

        We also expect to incur marketing and promotion expenses anticipated to be approximately $50,000 per tracking stock brand per year, with such amount expected to decrease as we scale.

90


Table of Contents

However, we will incur this cost indirectly (as part of the service fee) while such services are provided by our parent pursuant to the management agreement. We will begin to incur these costs directly as we grow our internal marketing infrastructure. See "Management and Attribution Policies" for a discussion about how these expenses will be attributed to our tracking stock brands.

Liquidity and Capital Resources

        To date, we have relied exclusively on our parent for liquidity and capital resources. Our parent contributed capital in the amount of $1.1 million from inception through December 31, 2012 $4.3 million for the year ended December 31, 2013. The contributed capital includes indirect expenses paid by our parent on our behalf, as well as an equity cash contribution of $2.0 million on April 3, 2013 to provide additional working capital to finance our operating expenses. Starting with the quarter ended September 30, 2013, we began reimbursing our parent for certain costs directly associated with operating our business. These costs include personnel and related costs for employees wholly dedicated to the Company, legal and other professional services directly related to the Company's operations as well as any travel expenses incurred by wholly dedicated employees. For the year ended December 31, 2013, the Company has reimbursed the parent approximately $1.6 million of direct costs of operations. Prior to the consummation of our first public offering and effectiveness of the management agreement discussed below, our parent has and intends to continue to fund our operations through direct cash contributions and non-cash contributions.

        We are not committed to any capital expenditures and certain agreements, such as rental commitments, are in the name of our parent. We expect, however, that our operations (excluding upfront payments under future brand contracts) will continue to consume substantial amounts of cash as we aggressively build our platform of brands and our internal marketing, compliance and other administrative functions. Following the consummation of our first public offering we will operate under a management agreement with our parent, pursuant to which our parent will provide us with certain management and administrative services, including providing and compensating our executive management and other personnel, as well as services relating to information technology support, brand management and other support operations, facilities, human resources, tax planning and administration, accounting, treasury and insurance. We will pay our parent a fee equal to 5% of the amount of gross cash received by us, if any, for such services under the management agreement.

        We will begin to assume management and administrative tasks at such time in the future as the actual cost of these services is less than our service fee to Fantex Holdings, which we do not anticipate would occur until we begin to generate significant cash flows from multiple brand contracts. However, if our parent is unable to perform any of the services that they are required to perform under the management agreement, due to financial difficulty or otherwise, then we may be forced to assume management and administrative tasks, and incur additional expenses, sooner than we anticipate. Until such time, we will continue to rely on our parent to conduct our operations in accordance with the management agreement. We are dependent on the continued support of our parent; at this time our parent intends to continue to fund operations for at least the next 12 months. Our parent has no obligation to continue to finance our operations except as required under our management agreement with them.

        We believe the net proceeds from this offering together with existing cash and cash equivalents and interest thereon will be sufficient to fund our projected operating expenses for the next 12 months. However, if our operating and other expenses are higher than we expect or our cash receipts from brand contracts are lower than we expect then we may also need to raise additional funds sooner.

        In addition, any brand contracts that we enter into in the future with other contract parties will require us to make substantial upfront payments to acquire the ABI under such brand contracts. We do not, and following this offering we do not expect to have, the necessary funds that we would need to

91


Table of Contents

make any of these upfront payments under future brand contracts. Therefore, we expect that our future brand contracts for the foreseeable future will be contingent upon obtaining financing to fund the acquisition of the ABI in the respective brands, and we intend to finance these acquisitions through the issuance of additional tracking stocks linked to the value of such brands.

        Until we begin receiving a sufficient amount of cash from our brand contracts, if ever, we expect to finance future cash needs through public or private equity or debt offerings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may not be able to continue to acquire additional ABI in other brands and we may have to significantly delay, scale back or discontinue our operations. If we raise additional funds through the issuance of additional debt or equity securities it could result in dilution to our existing stockholders, and/or fixed payment obligations that could reduce our ability to pay dividends or otherwise fund our other operations. Furthermore, these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license brands without consent and other operating restrictions that could adversely impact our ability to conduct our business.

        In addition, cash received under our brand contracts may be subject to seasonal variation. For example, the salary under NFL contracts is usually paid out in even installments during the course of the NFL season, or as a signing bonus according to varying schedules. The NFL season occurs primarily in the third and fourth quarters of each calendar year and therefore, we expect that there will be seasonal fluctuations in our attributed income.

Critical Accounting Policies

        Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. On an ongoing basis, management will evaluate these estimates, including those related to accounts receivable, fair values of financial instruments, income taxes, and contingent liabilities, among others. Estimates will be based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from these estimates.

        The critical accounting policies requiring estimates, assumptions and judgments that we believe have the most significant impact on our financial statements are described below.

Income Taxes

        Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

        Deferred tax assets are recorded to the extent management believes these assets will more likely than not be realized. In making such a determination, all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations is considered. In the event it is determined that

92


Table of Contents

we would be able to realize deferred tax assets in the future, an adjustment to the deferred tax asset valuation allowance would be made, which would reduce the provision for income taxes.

        Uncertain tax positions are recorded on the basis of a two-step process whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority would be recognized.

Fair Value Option

        The contracts with the contract parties represent a right to receive certain cash flows from the contract parties, and therefore, the brand contracts meet the definition of a financial asset under GAAP. As financial assets, the brand contracts are precluded from being accounted for as intangible assets. We have elected to account for the brand contracts at fair value, with changes recognized in the statement of operations. We believe measurement of the brand contracts at fair value provides the most meaningful information to users of our financial statements, because the value of the brand contracts may increase or decrease over time based on future events. We believe that the change in fair value through net income or loss provides a better indicator of the performance of the brand contracts for a given year, enhances transparency, and is more in line with how we manage the risks of the brand contracts.

Fair Value of Financial Instruments

        Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments' complexity for disclosure purposes. Assets and liabilities in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined under GAAP, are directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, and are as follows:

    Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets generally included in this category are mutual funds.

    Level 2—Inputs are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability.

    Level 3—Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The types of assets and liabilities generally included in this category are our brand contracts.

        A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value.

93


Table of Contents

        The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is traded on an active exchange or in the secondary market, and the current market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by our management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our management's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset. The variability of the observable inputs affected by the factors described above may cause transfers between Levels 1, 2, and/or 3, which our management recognizes at the end of the reporting period.

        Depending on the relative liquidity in the markets for certain assets, our management may classify assets as Level 3 if they determine that observable quoted prices, obtained directly or indirectly, are not available. The valuation models used for the assets and liabilities that are valued using Level 3 of the fair value hierarchy are described below.

    Valuation Process

        The valuation process involved in Level 3 measurements for assets and liabilities would be completed on no less than a quarterly basis and is designed to subject the valuation of Level 3 investments, including our brand contracts, to an appropriate level of consistency, oversight and review.

        Our internal investment professionals, which include employees of both Fantex and our parent, Fantex Holdings, are responsible for estimating fair value based on various factors including:

    current playing contract including: amounts, duration, incentive provisions, guaranteed portions, if any, termination and other important terms;

    current endorsement contracts, if any, including: amounts, duration, contract terms;

    age and health (including injuries) of the individual associated with the brand, duration of career to date and prospects for additional future contracts, both playing and endorsement;

    our estimate of potential future playing and endorsement contracts, including duration and value;

    position and data specific to that position focused on estimating longevity of career;

    reported contract value increases or decreases for other comparable players (by position and status they hold among their peers (e.g. All Pro, MVP, franchise player and the like)) in order to estimate future contract values; and

    risk free cost of capital.

        In addition, we consider a number of qualitative factors to develop estimates used in our models, including:

    the stated aspirations and goals of the contract party;

    certain intangibles of the contract party, including media relationships, communication ability, "likeability," demand as a product endorser, personal drive and ambition;

94


Table of Contents

    social footprint (for example, number of Twitter followers);

    the market in which the contract party performs and how that may impact the number and amount of endorsement opportunities;

    the reach of the brand of the contract party;

    value of TV contracts and the rate of growth in those contracts; and

    attendance trends in the contract party's primary field of performance.

        We consider all of these factors to estimate brand income for use in a discounted cash flow model. These estimates include amounts based on existing contracts as well as our estimates of amounts to be received for anticipated future contracts. With respect to existing contracts we consider that certain amounts are reasonably assured of realization, but that most earnings from existing contracts depend on continued satisfactory performance. To determine the amount of the purchase price of a brand contract and a fair current value we apply discount rates to our estimates of earnings.

        In general, we apply lower discount rates to amounts associated with existing contracts, particularly portions of those contracts that have a higher degree of certainty of payment, and higher discount rates to amounts associated with future potential earnings under existing contracts and to potential earnings under anticipated future contracts. Further, discount rates rise over time to reflect that uncertainty increases over time.

        The investment professionals, which include employees of both Fantex and our parent, Fantex Holdings, will document their considerations of this data and it is then reviewed by a valuation committee consisting of management of our parent, Fantex Holdings, and our officers, including our chief executive officer and chief financial officer. We then utilize the approved valuation as a basis to negotiate the purchase price of a brand contract. We will follow the same process on no less than a quarterly basis to estimate the fair value of the brand contracts that are then in effect.

        If our estimates of brand income are too high and/or the discount rates we use in our calculations too low then our valuation of a brand contract may be too high.

    Brand Contracts, at Estimated Fair Value

        The negotiated value of our brand contracts, including those brand contracts discussed below and brand contracts with any future contract parties, have been and will continue to be based on a discounted cash flow model using the procedures described above.

        In our analysis we generally consider three categories of potential brand income:

    Category A—Potential brand income related to the portions of existing contracts that have a higher degree of certainty of payment, such as brand income that is very near-term or that is guaranteed under existing included contracts.

    Category B—Potential brand income related to the portions of existing contracts that have a lesser degree of certainty of payment, such as brand income that is payable pursuant to existing included contracts but that depends on longer-term continued satisfactory performance of the contract party.

    Category C—Potential brand income related to anticipated future contracts, such as future endorsements, playing contracts and/or additional brand income generated from coaching, broadcasting or the like.

95


Table of Contents

    Discount Rates

        In determining the discount rates to use, we consider numerous factors such as, for example, yield on CCC-rated bonds and discount rates of companies that we believe have similar attributes to ours. For example, like us, some biotechnology companies have a very small capitalization, are heavily reliant on the revenues of only a few products and in many cases, dependent on a single product, and at the time of their initial public offering, their main, if not their only product candidate, was still in development and future revenues were uncertain and may never be realized.

        For each of our current brand contracts, we based discount rates on our observations that (1) as of March 2014, yields on CCC-rated bonds have been trading at approximately 8.5% according to market research and (2) based on our internal research and discussions with industry participants, we determined that as of February 2014, the average weighted average cost of capital for a sample set of 36 then publicly-traded biotechnology companies was 11.1%.

        In addition, in determining the appropriate discount rates to use, we also consider the specific risk profile of the contract party.

    Career Length

        Our career length analysis varies based on the number of years the contract party has performed in his or her primary career, such as the NFL. To the extent the contract party has sufficient playing experience and statistical data points to build an econometric model that can more accurately predict career length, we intend to use the econometric model taking into account each of the following factors determined to be statistically significant in predicting career length:

    Statistical Production.  Our research has indicated that higher statistical production leads to longer career length. In particular, we measure statistical production through a weighted combination of factors that are relevant to a specific playing position.

    Ability to play positions other than the position listed on the team roster.  Our research indicates that players with the ability to play more than one position have a longer average career length.

    Durability.  Our research indicates that more durable players have a longer career length. We measure durability based on a percentage of regular season games played during the total seasons completed as of the date of the analysis.

    Super Bowl Participation.  Our research indicates that players participating in at least one Super Bowl have greater expected career length.

    Draft Position.  Our research indicates that the higher the draft position, the longer the career length.

    Early Career Injuries.  Our research indicates that severe injuries, determined by number of games missed (half a season) or placed on injured reserve, in a player's first through third seasons resulted in shorter career lengths.

        We have determined that players with an active playing career of four complete seasons or more have sufficient playing experience and statistical data points that are useful in building a meaningful econometric model. The respective weight assigned to each of these factors in our econometric model is dependent on the playing position of the particular contract party.

        For players with shorter careers at the time they enter into the brand contract with us, including for EJ Manuel, we intend to use analytical models that predict that player's career length based on factors relevant to that specific contract party, as determined on a case by case basis.

96


Table of Contents

        In addition, in determining career length, we only consider players that have retired from their playing careers in order to more completely assess potential career lengths of contract parties. We believe that including players who are still active in their professional sport would artificially bias the projected career length downwards given that such a data set would include players who have just begun their careers and may continue to play for several years longer.

    Player Contract Values

        As further described in detail below under "—EJ Manuel Brand Contract, at Estimated Fair Value—EJ Manuel Estimated Brand Income," "—Vernon Davis Brand Contract, at Estimated Fair Value—Vernon Davis Estimated Brand Income" and "—Arian Foster Brand Contract, at Estimated Fair Value—Arian Foster Estimated Brand Income" in estimating the value of the future player contracts for our contract parties, we review the contracts for players in the professional sport, retired or active, who are of similar caliber to the contract party and have entered into contracts in a similar era, and who are or were at similar ages and stages in their career at which the contract party is expected to enter into additional player contracts. The values of such contracts are adjusted for inflation to better predict the contract values of future player contracts for our contract parties.

    Vernon Davis Brand Contract, at Estimated Fair Value

            Vernon Davis Estimated Brand Income

        On October 30, 2013, we entered into a brand contract with Vernon Davis and his affiliated company, The Duke Marketing LLC. The table below shows our estimates, based on the quantitative and qualitative factors described above, of Category A, Category B and Category C brand income for Vernon Davis as a percentage of our estimate of aggregate lifetime brand income, on a gross basis before we applied any discount rates, and on a net basis after we applied our discount rates, as well as the discount rates that we applied to each of these categories in our estimate of brand value:

 
  Estimated Lifetime Brand
Income
  % of Estimated Total
Lifetime Brand Income
   
 
 
  Gross amount,
before
applying any
discount rate(1)
  Net amount,
after
applying
discount
rates
  Gross amount,
before
applying any
discount rate
  Net amount,
after
applying
discount
rates
  Weighted-
Average
Discount Rate
 

Category A(2)

  $ 3,462,900   $ 3,425,002     5.7 %   8.7 %   4.5 %

NFL Contract (2013)(3)

    3,414,588     3,377,219     5.6 %   8.6 %   4.5 %

Endorsements (2013)

    48,312     47,783     0.1 %   0.1 %   4.5 %

Category B

  $ 10,663,000   $ 9,050,526     17.4 %   23.1 %   10.0 %

NFL Contract (2014 and beyond)

    10,250,000     8,699,318     16.7 %   22.2 %   10.0 %

Endorsements (2014 and beyond)

    413,000     351,208     0.7 %   0.9 %   10.0 %

Category C

  $ 47,133,026   $ 26,782,368     76.9 %   68.2 %   12.8 %

Projected Player Contract

    33,344,338     19,348,544     54.4 %   49.3 %   13.2 %

Projected Endorsements

    8,288,689     6,047,439     13.5 %   15.4 %   9.7 %

Projected Post-Career

    5,500,000     1,386,385     9.0 %   3.5 %   15.0 %
                       

Total

  $ 61,258,926   $ 39,257,896     100 %   100 %   11.4 %
                       

(1)
All amounts presented are gross payments due to Vernon Davis prior to any exclusion for expenses such as legal fees, travel expenses or self-employment taxes, which are otherwise excluded from brand income. Potential post-season compensation has not been included in the estimation of lifetime brand income in any of Category A, Category B or Category C.

(2)
All amounts included in Category A are from and after October 30, 2013.

(3)
The amounts payable to Vernon Davis under his NFL player contract in 2013 were not guaranteed at the time we entered into the brand contract with Vernon Davis, but were earned in full as of the end of the 2013 NFL season.
    Category A—Examples of Category A income that we included in the model for Vernon Davis are his contractual salary for the 2013 NFL playing season and amounts under existing

97


Table of Contents

      endorsements through the 2013 NFL playing season, in each case from and after October 30, 2013.

    Category B—Examples of Category B income that we included in the model for Vernon Davis are the portions of Vernon Davis's current NFL player contract and contracted salary and bonus for seasons 2014 and beyond.

    Category C—Examples of Category C income that we included in the model for Vernon Davis are:

    Projected Future NFL Contract—Potential brand income related to anticipated future NFL playing contracts, following the expiration of Vernon Davis's current NFL player contract.

    Projected Endorsements—Potential brand income related to anticipated future endorsement contracts during Vernon Davis's NFL playing career. An example of this would include a potential future endorsement contract with a significant new sponsor.

    Projected Post-Career—Potential brand income related to anticipated future contracts, such as future endorsements, and/or additional brand income generated from coaching, broadcasting or the like following Vernon Davis's NFL playing career. An example of this would include a potential future contract to be a sports broadcaster.

        The most significant assumptions in our determination of fair value for Vernon Davis's brand contract include:

    discount rates for each of Category A, Category B and Category C as set forth above;

    that Vernon Davis would have an NFL career length of at least 14 years; and

    that during this time he would play out his existing NFL player contract and enter into at least one additional multi-year NFL player contract for at least $33 million, and that he will be able over the same period and beyond to enter into and maintain endorsement contracts (or earn other brand income) that compensate him in amounts that are significantly in excess of compensation that he has had historically from these sources.

    Vernon Davis Discount Rates

        In determining the expected brand income for Vernon Davis, we used discount rates ranging from 4.5% to 15.0%, which we believe adequately address the uncertainty inherent in our estimates.

    Vernon Davis Career Length

        To determine the expected career length for Vernon Davis our investment professionals used a proprietary econometric model. The data set for the model used for Vernon Davis consisted of all tight ends who were drafted in rounds one through seven between 1990 and 2010, who played at least one NFL season and were no longer playing at the start of the 2013 NFL season. According to www.pro-football-reference.com, there were a total of 212 tight ends in this data set, and the average career length for this group was approximately 5.5 years. Using statistical analysis our investment professionals determined that there were six factors that were the most statistically relevant to a deviation from the average career length of an NFL tight end. These factors are listed below:

    Statistical Production.  Our research has indicated that the relevant statistical measures for a tight end's production are receptions per game, yards per reception and touchdowns per game. Vernon Davis's statistical production based on a weighted combination of these factors was significantly above the average. In fact, this a majority of the increase in estimated career length for Vernon Davis over the average tight end in our model comes from this factor.

98


Table of Contents

    Ability to play positions other than tight end.  Vernon Davis was determined to play only in one position, and thus this factor did not result in any increase in estimated career length for Vernon Davis in our model.

    Durability.  Vernon Davis was significantly more durable than average, and thus this factor results in an increase in estimated career length for Vernon Davis over the average tight end in our model.

    Super Bowl Participation.  Vernon Davis participated in at least one Super Bowl, and thus this factor results in an increase in estimated career length for Vernon Davis over the average tight end in our model.

    Draft Position.  Vernon Davis was drafted sixth overall and thus, this factor results in an increase in estimated career length for Vernon Davis over the average tight end in our model.

    Early Career Injuries.  Vernon Davis did not suffer any severe injuries in his earlier seasons and thus, this factor results in an increase in estimated career length for Vernon Davis over the average tight end in our model.

        Applying our proprietary econometric model for tight end career length and inputting the values applicable for Vernon Davis for these six factors, we estimated that Vernon Davis's career length would be approximately 13.4 years. This number was adjusted to produce a total career length for Vernon Davis of 14 years because we do not believe players of Mr. Davis' caliber are generally cut from the roster in the middle of a season. In addition, we believe that Vernon Davis has a strong desire to, and will attempt to, stay in the NFL for as long as he can perform in the game, especially given his vocal desire to be an NFL Hall of Fame player. Accordingly, we believe he would be likely to continue to play in the NFL for the length of time that our model estimates he would continue to play.

    Vernon Davis Projected Contract Value

        Vernon Davis is currently in his eighth season in the NFL and has a current NFL player contract that expires following his tenth season in the NFL. In determining that Vernon Davis would play out his existing NFL player contract and enter into at least one additional multi-year NFL player contract, we assumed he would have a career length of 14 years.

        In determining that Vernon Davis's future NFL player contract would be worth at least $33 million, we reviewed contracts entered into by tight ends within ten years of when Vernon Davis is expected to enter into his next NFL player contract and who we believed were comparable both in terms of caliber (at least one Pro Bowl and averaged at least 600 receiving yards per season during their NFL careers), age and stage of their career (played at least eight seasons in the NFL). Only three tight ends met this criteria. According to Spotrac.com, a division of MG3 WebWorks, the contract data for this comparable group is as follows:

Tight End
  Age at
execution of
new contract
  Calendar Year
and Season in
which the new
contract was
executed
  Length of
the contract
  Total
Compensation
under the contract
  Average Annual
Compensation
under the
Contract(1)
  Inflation-adjusted
Compensation
amounts to Year
2016(2)

Tony Gonzalez

  31 years old   2007; prior to Season 11   5 years   $31.25 million   $6.25 million   $8.52 million

Antonio Gates

  30 years old   2010; prior to Season 8   6 years   $39.8 million   $6.63 million   $8.15 million

Jeremy Shockey(3)

  30 years old   2011; prior to Season 10   1 year   $3.81 million   $3.81 million   $4.53 million

(1)
Average amounts include total base salaries and signing bonuses contracted for at the time of entering into the NFL player contract.

(2)
Compensation was adjusted for inflation from the year in which the players entered into the NFL player contract to the year 2016 based on an annual inflation rate of 3.5%. The inflation rate used was determined based upon the year-to-year growth from 2000 to 2009 of NFL tight end earnings of players in their tenth season and forward.

99


Table of Contents

(3)
While Jeremy Shockey did at times in his career match the caliber of Vernon Davis, we do not believe that he had retained that caliber by the latter part of his career at comparable stages with Vernon Davis's career, or by the time he entered into his tenth season contract in 2011, as evidenced in part by a decline in his player performance and his being offered a one year contract. Thus we did not consider Jeremy Shockey's tenth season contract in evaluating the expected value for Vernon Davis's next NFL player contract.

        In determining that Vernon Davis would enter into and maintain endorsement contracts (or earn other brand income) that compensate him in amounts that are slightly in excess of compensation that he has had historically from these sources and that he would be entitled to other post-career income in the aggregate of $5.5 million over his lifetime, we considered the following factors:

    we believe that endorsement income for players in skill positions increases for those who demonstrate a sustained and consistently high level of success and achievement at their position. Vernon Davis is currently in the midst of a period of high achievement as a tight end in the NFL and has just begun to engage in marketing his brand, and thus we believe he is a good candidate to realize a higher level of endorsement income;

    we believe that being a member of a team with a consistently high level of achievement in the post season in a major market, including, in the recent years, sending five 49ers to the Pro Bowl in 2009, appearing in the NFC Championship in 2011 and playing in the Super Bowl in the 2012 season will aid in boosting visibility; and

    we believe that, based principally on a review of the post-career earnings of certain retired NFL players who have used their playing career as a platform to build a post-career brand in broadcasting or media (separate from the comparable set of 212 tight ends discussed on page 98) and available data on such post-career earnings for these athletes, Vernon Davis has the potential for generating other post-career brand income of at least $5.5 million in the aggregate, such as through broadcasting (as evidenced by his regular appearances on talk shows and/or sports television programs), royalties, and/or other non-endorsement sources. We believe the attributes relevant to a successful post-career, in broadcasting for example, are dependent on factors that are not necessarily tied to a particular playing position, such as game intelligence, status and visibility in the NFL, being a Pro Bowl player, as well as on screen presence and the ability to connect and communicate with consumers and the public.

        If any of our assumptions are incorrect then our estimate of the fair value of Vernon Davis's brand contract may be too high.

    EJ Manuel Brand Contract, at Estimated Fair Value

            EJ Manuel Estimated Brand Income

        On February 14, 2014, we entered into a brand contract with EJ Manuel and his affiliated company, Kire Enterprises LLC. The table below shows our estimates, based on the quantitative and qualitative factors described above, of Category A, Category B and Category C brand income for EJ Manuel as a percentage of our estimate of aggregate lifetime brand income, on a gross basis before we

100


Table of Contents

applied any discount rates, and on a net basis after we applied our discount rates, as well as the discount rates that we applied to each of these categories in our estimate of brand value:

 
  Estimated Lifetime Brand
Income
  % of Estimated Total
Lifetime Brand Income
   
 
 
  Gross amount,
before
applying any
discount rate(1)
  Net amount,
after
applying
discount
rates
  Gross amount,
before
applying any
discount rate
  Net amount,
after
applying
discount
rates
  Weighted-
Average
Discount
Rate
 

Category A(2)

  $ 3,723,264   $ 3,375,163     3.5 %   6.8 %   4.7 %

Current NFL Contract (2014 - 2016)(3)

  $ 3,638,264   $ 3,301,250     3.5 %   6.7 %   4.5 %

Endorsements (2014)

  $ 85,000   $ 73,913     0.1 %   0.1 %   15.0 %

Category B

  $ 195,000   $ 134,455     0.2 %   0.3 %   15.0 %

NFL Contract (None)

  $ 0   $ 0     0.0 %   0.0 %    

Endorsements (2015 and beyond)

  $ 195,000   $ 134,455     0.2 %   0.3 %   15.0 %

Category C

  $ 101,276,268   $ 46,101,726     96.3 %   92.9 %   15.0 %

Projected Player Contracts

  $ 80,306,268   $ 36,167,290     76.3 %   72.9 %   14.7 %

Projected Endorsements

  $ 19,220,000   $ 9,715,512     18.3 %   19.6 %   15.8 %

Projected Post-Career

  $ 1,750,000   $ 218,924     1.7 %   0.4 %   20.0 %
                       

Total

  $ 104,337,622   $ 49,750,464     100 %   100 %   14.6 %
                       

(1)
All amounts presented are gross payments due to EJ Manuel prior to any exclusion for expenses such as legal fees, travel expenses or self-employment taxes, which are otherwise excluded from brand income. Potential post-season compensation has not been included in the estimation of lifetime brand income in any of Category A, Category B or Category C.

(2)
All amounts included in Category A are from and after February 14, 2014.

(3)
The amounts payable to EJ Manuel under his NFL player contract from 2014 - 2016 are guaranteed.
    Category A—Examples of Category A income that we included in the model for EJ Manuel are his contractual salary for the 2014 - 2016 NFL playing seasons and amounts under existing endorsements through the 2014 NFL playing season, in each case from and after February 14, 2014.

    Category B—Examples of Category B income that we included in the model for EJ Manuel are the portions of EJ Manuel's current endorsement contracts for seasons 2015 and beyond.

    Category C—Examples of Category C income that we included in the model for EJ Manuel are:

    Projected Future NFL Contract—Potential brand income related to anticipated future NFL playing contracts, following the expiration of EJ Manuel's current NFL player contract.

    Projected Endorsements—Potential brand income related to anticipated future endorsement contracts during EJ Manuel's NFL playing career. An example of this would include a potential future endorsement contract with a significant new sponsor.

    Projected Post-Career—Potential brand income related to anticipated future contracts, such as future endorsements, and/or additional brand income generated from coaching, broadcasting or the like following EJ Manuel's NFL playing career.

        The most significant assumptions in our determination of fair value for EJ Manuel's brand contract include:

    discount rates for each of Category A, Category B and Category C as set forth above;

    that EJ Manuel would have an NFL career length of at least 10 years; and

    that during this time he would play out his existing NFL player contract and enter into two additional multi-year NFL player contracts for at least $80.31 million in total and that he will be able over the same period and beyond to enter into and maintain endorsement contracts (or

101


Table of Contents

      earn other brand income) that compensate him in amounts that are significantly in excess of compensation that he has had historically from these sources.

            EJ Manuel Discount Rates

        In determining the expected brand income for EJ Manuel, we used discount rates ranging from 4.5% to 20.0%, which are slightly higher than those we have used with respect to the valuation of other brand contracts. We considered this appropriate in order to address the higher degree of uncertainty inherent in our estimates of projected future contracts primarily because EJ Manuel has only played one season in the NFL and also because he currently plays for the Buffalo Bills, a team that has not had great success recently.

            EJ Manuel Career Length

        EJ Manuel has been a quarterback in the NFL for less than four years. Therefore, we did not use an econometric model in determining his expected career length. Instead our investment professionals reviewed a data set consisting of all quarterbacks who qualified for the NFL passing title in their rookie season between 1980 and 2012 (i.e. attempted 14 passes per team game over the regular season). According to www.pro-football-reference.com, there were a total of 52 quarterbacks in this data set, of which 28 were retired at the end of the 2013 NFL season. Based on the average career length of these

102


Table of Contents

28 quarterbacks, we determined that EJ Manuel would have an estimated career length of 10.32 years, which we rounded down to 10 years for the purposes of our valuation.

Quarterback
  Career
Length
 

Troy Aikman

    12  

Tony Banks

    10  

Charlie Batch

    15  

Drew Bledsoe

    14  

Kyle Boller

    9  

David Carr

    11  

Chris Chandler

    17  

Kerry Collins

    17  

Tim Couch

    5  

John Elway

    16  

Jeff George

    14  

Joey Harrington

    7  

Chad Hutchinson

    3  

Bernie Kosar

    12  

Ryan Leaf

    4  

Byron Leftwich

    10  

Neil Lomax

    8  

Dan Marino

    17  

Jim McMahon

    15  

Cade McNown

    2  

Rick Mirer

    12  

Mike Pagel

    12  

Jake Plummer

    10  

Patrick Ramsey

    9  

Heath Shuler

    5  

Jack Trudeau

    10  

Chris Weinke

    7  

David Woodley

    6  
       

Average

    10.32  
       

            EJ Manuel Projected Contract Value

        In determining that EJ Manuel would play out his existing NFL player contract and enter into two additional multi-year NFL player contracts, we assumed that he would have a career length of 10 years, as discussed above. In determining the estimated value of EJ Manuel's potential future NFL player contracts, we started with a data set consisting of all 52 quarterbacks who qualified for the NFL passing title in their rookie season between 1980 and 2012 (i.e. attempted 14 passes per team game over the regular season). We then limited this data set to quarterbacks who signed one or more post-rookie

103


Table of Contents

NFL player contracts in 1999 or thereafter. The following table lists the quarterbacks that met this criteria at the time we entered into the brand contract EJ Manuel:


Quarterbacks:

Charlie Batch   Byron Leftwich
Drew Bledsoe   Matt Leinart
Kyle Boller   Peyton Manning
David Carr   Kyle Orton
Kerry Collins   Ben Roethlisberger
Trent Edwards   Matt Ryan
Joe Flacco   Mark Sanchez
Josh Freeman   Matthew Stafford
Bruce Gradkowski   Vince Young
Joey Harrington    

                    EJ Manuel's Second NFL Player Contract

        EJ Manuel has completed one season in the NFL and has a current NFL player contract that expires following his fourth season in the NFL. However, the Bills have the option to extend this NFL player contract through EJ Manuel's fifth season. We have assumed that the Bills would enter into negotiations with EJ Manuel for another multi-year contract after the fourth season in order to mitigate the risk of EJ Manuel becoming an unrestricted free agent, or having to declare him a franchise player, after the completion of his fifth season. Any NFL team can designate a single player as its franchise player and therefore restrict the player from entering free agency. In return, the team must pay the player a premium salary of at least the average of the top five players in the league at his position, or 120% of his previous year's salary, whichever is greater. Therefore, we estimated that EJ Manuel would enter into a second NFL player contract prior to the 2017 season, his fifth NFL season.

        In estimating the value of the this potential second NFL player contract, we reviewed the contracts for the quarterbacks in the above described data set who have entered into NFL player contracts between their fourth and sixth NFL seasons, resulting in a set of 17 players who have entered into a total of 22 contracts. Based on a mathematical model taking into account statistical production (a combination of yards per play (rushing and passing), touchdowns per play (rushing and passing), turnovers per play (interceptions and fumbles) and completion percentage), playing time (total number of plays in the regular season where the quarterback attempted to pass or run the ball) and draft position, we assigned to each of these quarterbacks a relative weighting with the most comparable quarterbacks to EJ Manuel (based on the above criteria) receiving a higher weighting. We then calculated the weighted average length and weighted average annual value of the contracts signed by

104


Table of Contents

these quarterbacks after adjusting for estimated inflation in quarterback contract values over time. According to Spotrac.com, a division of MG3 WebWorks, the contract data is as follows:

Quarterback
  Calendar Year and
Season in which the
new contract was
executed
  Contract
Length
  Total
Compensation
under the
contract
  Average
Annual
Compensation
under the
Contract
  Inflation
Adjusted
Average
Annual
Compensation
amounts to
Year 2017(1)
  Weights
applied
to
Contract
Length
and
Contract
Amounts
  Weight-
Adjusted
Contract
Length
  Weighted
Inflation
Adjusted
Average
Annual
Compensation
under the
contract
 

Matthew Stafford

  2013; prior to season 5     3   $ 53,000,000   $ 17,666,667   $ 25,922,263     9.80 %   0.29   $ 2,539,088  

Matt Leinart

  2010; prior to season 5     1   $ 630,000   $ 630,000   $ 1,232,388     4.43 %   0.04   $ 54,554  

Matt Leinart

  2011; prior to season 6     2   $ 5,500,000   $ 2,750,000   $ 4,887,763     4.43 %   0.09   $ 216,365  

Joe Flacco

  2013; prior to season 6     6   $ 120,600,000   $ 20,100,000   $ 29,492,688     8.07 %   0.48   $ 2,381,062  

Joey Harrington

  2006; prior to season 5     3   $ 7,500,000   $ 2,500,000   $ 7,175,718     7.59 %   0.23   $ 544,342  

Trent Edwards

  2012; prior to season 6     2   $ 1,415,000   $ 707,500   $ 1,142,548     7.41 %   0.15   $ 84,715  

Mark Sanchez

  2012; prior to season 4     3   $ 40,475,000   $ 13,491,667   $ 21,787,805     6.05 %   0.18   $ 1,318,754  

Kyle Boller

  2008; prior to season 6     1   $ 4,500,000   $ 4,500,000   $ 10,662,983     5.73 %   0.06   $ 611,249  

Kyle Orton

  2008; prior to season 4     2   $ 3,520,000   $ 1,760,000   $ 4,170,411     2.78 %   0.06   $ 115,843  

Kyle Orton

  2010; prior to season 6     2   $ 11,621,000   $ 5,810,500   $ 11,366,337     2.78 %   0.06   $ 315,727  

Kerry Collins

  1999; prior to season 5     4   $ 16,900,000   $ 4,225,000   $ 23,722,425     4.95 %   0.20   $ 1,174,034  

Byron Leftwich

  2007; prior to season 5     1   $ 2,073,529   $ 2,073,529   $ 5,407,616     2.47 %   0.02   $ 133,336  

Byron Leftwich

  2008; prior to season 6     1   $ 645,000   $ 645,000   $ 1,528,361     2.47 %   0.02   $ 37,685  

Vince Young

  2011; prior to season 6     1   $ 4,000,000   $ 4,000,000   $ 7,109,474     4.58 %   0.05   $ 325,698  

Matt Ryan

  2013; prior to season 6     5   $ 103,750,000   $ 20,750,000   $ 30,446,432     4.57 %   0.23   $ 1,390,106  

Charlie Batch

  2002; prior to season 5     1   $ 525,000   $ 525,000   $ 2,211,072     2.27 %   0.02   $ 50,268  

Charlie Batch

  2003; prior to season 6     2   $ 2,000,000   $ 1,000,000   $ 3,826,609     2.27 %   0.05   $ 86,996  

Josh Freeman

  2013; prior to season 5     1   $ 2,833,334   $ 2,833,334   $ 4,157,345     4.54 %   0.05   $ 188,842  

Bruce Gradkowski

  2010; prior to season 5     1   $ 1,684,000   $ 1,684,000   $ 3,294,194     2.23 %   0.02   $ 73,315  

Bruce Gradkowski

  2011; prior to season 6     2   $ 4,000,000   $ 2,000,000   $ 3,554,737     2.23 %   0.04   $ 79,114  

Ben Roethlisberger

  2008; prior to season 5     6   $ 87,986,500   $ 14,664,417   $ 34,748,093     4.25 %   0.26   $ 1,477,680  

David Carr

  2007; prior to season 6     2   $ 6,200,000   $ 3,100,000   $ 8,084,580     4.12 %   0.08   $ 332,828  
                                   

Averages

  n/a     2.36   $ 21,879,926   $ 5,791,664   $ 11,178,720     100.00 %   2.68   $ 13,531,600  
                                   

(1)
Compensation was adjusted for inflation from the year in which the players entered into a NFL player contract to the year 2017 based on an annual inflation rate of 10.060%. The inflation rate used was calculated using a weighted average year-to-year growth of earnings from 2000 to 2009 of Pro Bowl and non-Pro Bowl quarterbacks between their fifth season and seventh season in the NFL.

        The weighted average contract length was 2.68 years which we rounded up to 3 years. We estimated that EJ Manuel will receive a 3 year contract in 2017 with a total value of $40.59 million.

105


Table of Contents

                    EJ Manuel's Third NFL Player Contract

        We estimated that EJ Manuel would enter into his third NFL player contract prior to the 2020 season, his eighth NFL season. In estimating the value of the contract, we reviewed the contracts for quarterbacks in the above described data set have entered into NFL player contracts between their seventh and ninth NFL seasons, resulting in a set of 11 players who have entered into a total of 18 contracts. Based on a mathematical model taking into account statistical production (a combination of yards per play (rushing and passing), touchdowns per play (rushing and passing), turnovers per play (interceptions and fumbles) and completion percentage), playing time (total number of plays in the regular season where the quarterback attempted to pass or run the ball) and draft position, we assigned to each of these quarterbacks a relative weighting with the most comparable quarterbacks to EJ Manuel (based on the above criteria) receiving a higher weighting. We then calculated the weighted average length and weighted average annual value of the contracts signed by these quarterbacks after adjusting for estimated inflation in quarterback contract values over time. According to Spotrac.com, a division of MG3 WebWorks, the contract data is as follows:

Quarterback
  Calendar Year and
Season in which the
new contract was
executed
  Contract
Length
  Total
Compensation
under the
contract
  Average
Annual
Compensation
under the
Contract
  Inflation
Adjusted
Average
Annual
Compensation
amounts
to Year
2020(1)
  Weights
applied to
Contract
Length
and
Contract
Amounts
  Weight-
Adjusted
Contract
Length
  Weighted
Inflation
Adjusted
Average Annual
Compensation
under the
contract
 

Matt Leinart

  2012; prior to season 7   1   $ 700,000   $ 700,000   $ 1,413,080     14.34 % 0.14   $ 202,566  

Joey Harrington

  2009; prior to season 8   1   $ 795,000   $ 795,000   $ 2,088,510     12.28 % 0.12   $ 256,529  

Drew Bledsoe

  2001; prior to season 9   10   $ 103,000,000   $ 10,300,000   $ 54,622,980     11.40 % 1.14   $ 6,228,646  

Kyle Boller

  2009; prior to season 7   1   $ 1,250,000   $ 1,250,000   $ 3,283,821     3.09 % 0.03   $ 101,599  

Kyle Boller

  2010; prior to season 8   1   $ 1,000,000   $ 1,000,000   $ 2,406,223     3.09 % 0.03   $ 74,447  

Kyle Boller

  2011; prior to season 9   1   $ 1,250,000   $ 1,250,000   $ 2,754,941     3.09 % 0.03   $ 85,236  

Kyle Orton

  2012; prior to season 8   3   $ 10,500,000   $ 3,500,000   $ 7,065,400     9.00 % 0.27   $ 635,553  

Byron Leftwich

  2009; prior to season 7   2   $ 7,500,000   $ 3,750,000   $ 9,851,463     3.99 % 0.08   $ 393,312  

Byron Leftwich

  2011; prior to season 9   1   $ 1,750,000   $ 1,750,000   $ 3,856,917     3.99 % 0.04   $ 153,984  

Vince Young

  2012; prior to season 7   1   $ 1,987,500   $ 1,987,500   $ 4,012,138     3.71 % 0.04   $ 148,805  

Vince Young

  2013; prior to season 8   1   $ 715,000   $ 715,000   $ 1,322,030     3.71 % 0.04   $ 49,032  

Charlie Batch

  2005; prior to season 8   1   $ 565,000   $ 565,000   $ 2,108,882     3.68 % 0.04   $ 77,630  

Charlie Batch

  2006; prior to season 9   3   $ 4,220,000   $ 1,406,667   $ 4,809,074     3.68 % 0.11   $ 177,027  

Bruce Gradkowski

  2013; prior to season 8   3   $ 4,950,000   $ 1,650,000   $ 3,050,837     7.21 % 0.22   $ 219,880  

Peyton Manning

  2004; prior to season 7   7   $ 99,200,000   $ 14,171,429   $ 57,749,873     7.06 % 0.49   $ 4,079,519  

David Carr

  2008; prior to season 7   1   $ 1,000,000   $ 1,000,000   $ 2,868,158     2.22 % 0.02   $ 63,729  

David Carr

  2009; prior to season 8   1   $ 2,100,000   $ 2,100,000   $ 5,516,819     2.22 % 0.02   $ 122,581  

David Carr

  2010; prior to season 9   2   $ 6,250,000   $ 3,125,000   $ 7,519,447     2.22 % 0.04   $ 167,078  
                                   

Weighted Averages

      2.28   $ 13,818,472   $ 2,834,200   $ 9,794,477     100.00 % 2.91   $ 13,237,156  

(1)
Compensation was adjusted for inflation from the year in which the players entered into a NFL player contract to the year 2020 based on an annual inflation rate of 9.221%. The inflation rate used was calculated using a weighted average year-to-year growth of earnings from 2000 to 2009 of Pro Bowl and non-Pro Bowl quarterbacks between their eighth season and tenth season in the NFL.

        The weighted average contract length was 2.91 years which we rounded up to 3 years. We estimated that EJ Manuel will receive a 3 year contract in 2020 with a total value of $39.71 million.

                    EJ Manuel's Endorsements

        In determining that EJ Manuel would enter into and maintain endorsement contracts (or earn other brand income) that compensate him in amounts that are significantly in excess of compensation that he has had historically from these sources, we considered that endorsement income for players in skill positions increases for those who demonstrate a sustained and consistently high level of success and achievement at their position. In addition, we have considered that quarterbacks generally have greater endorsement potential than other skilled players in the NFL. We believe EJ Manuel can demonstrate high achievement as a quarterback in the NFL, and, therefore, we believe he is a good candidate to realize a higher level of endorsement income.

106


Table of Contents

        If any of our assumptions are incorrect then our estimate of the fair value of EJ Manuel's brand contract may be too high.

    Arian Foster Brand Contract, at Estimated Fair Value

            Arian Foster Estimated Brand Income

        On February 28, 2013, we entered into a brand contract with Arian Foster and his affiliated company, The Ugly Duck, LLC and amended and restated such contract on each of May 24, 2013 and August 21, 2013.

        The table below shows our estimates, based on the quantitative and qualitative factors described above, of Category A, Category B and Category C brand income for Arian Foster as a percentage of our estimate of aggregate lifetime brand income, on a gross basis before we applied any discount rates, and on a net basis after we applied our discount rates, as well as the discount rates that we applied to each of these categories in our estimate of brand value:

 
  Estimated Lifetime
Brand Income
  % of Estimated Total
Lifetime Brand Income
   
 
 
  Gross amount,
before
applying any
discount
rate(1)
  Net amount,
after
applying
discount
rates
  Gross amount,
before
applying any
discount
rate
  Net amount,
after
applying
discount
rates
  Weighted-
Average
Discount
Rate
 

Category A(2)

  $ 5,963,700   $ 5,787,022     5.7 %   11.1 %   3.1 %

NFL Contract (2013)(3)

  $ 5,750,000   $ 5,582,524     5.5 %   10.7 %   3.0 %

Endorsements (2013)

  $ 213,700   $ 204,498     0.2 %   0.4 %   4.5 %

Category B

  $ 19,900,000   $ 14,953,897     19.1 %   28.6 %   10.0 %

NFL Contract (2014 and beyond)

  $ 19,750,000   $ 14,829,930     19.0 %   28.4 %   10.0 %

Endorsements (2014 and beyond)

  $ 150,000   $ 123,967     0.1 %   0.2 %   10.0 %

Category C

  $ 78,110,804   $ 31,528,701     75.1 %   60.3 %   12.8 %

Projected Player Contract

  $ 31,074,504   $ 13,452,782     29.9 %   25.7 %   14.2 %

Projected Endorsements

  $ 18,136,300   $ 11,696,762     17.4 %   22.4 %   10.0 %

Projected Post-Career

  $ 28,900,000   $ 6,379,158     27.8 %   12.2 %   13.1 %
                       

Total

  $ 103,974,504   $ 52,269,620     100 %   100 %   11.72 %
                       

(1)
All amounts presented are gross payments due to Arian Foster prior to any exclusion for expenses such as legal fees, travel expenses or self-employment taxes, which are otherwise excluded from brand income. Potential post-season compensation has not been included in the estimation of lifetime brand income in any of Category A, Category B or Category C.

(2)
All amounts included in Category A are from and after February 28, 2013.

(3)
$3.25 million of NFL base salary payable to Arian Foster under his NFL player contract in 2013 was guaranteed at the time we entered into the brand contract with Arian Foster, but his entire $5.25 million base salary was earned in full as of the end of the 2013 NFL season.
    Category A—Examples of Category A income that we included in the model for Arian Foster are his contractual salary for the 2013 NFL playing season and amounts under existing endorsements through the 2013 NFL playing season, in each case from and after February 28, 2013.

    Category B—Examples of Category B income that we included in the model for Arian Foster are the portions of Arian Foster's current NFL player contract and contracted salary and bonus for seasons 2014 and beyond.

    Category C—Examples of Category C income that we included in the model for Arian Foster are:

    Projected Future NFL Contract—Potential brand income related to anticipated future NFL playing contracts, following the expiration of Arian Foster's current NFL player contract.

107


Table of Contents

      Projected Endorsements—Potential brand income related to anticipated future endorsement contracts during Arian Foster's NFL playing career. An example of this would include a potential future endorsement contract with a significant new sponsor.

      Projected Post-Career—Potential brand income related to anticipated future contracts, such as future endorsements, and/or additional brand income generated from coaching, broadcasting or the like following Arian Foster's NFL playing career. An example of this would include a potential future contract to be a sports broadcaster.

        The most significant assumptions in our determination of fair value for Arian Foster's brand contract include:

    discount rates for each of Category A, Category B and Category C as set forth above;

    that Arian Foster would have an NFL career length of at least 12 years; and

    that during this time he would play out his existing NFL player contract and enter into at least one additional multi-year NFL player contract on terms that are, on an average annualized basis, economically comparable to his existing NFL player contract, and that he will be able over the same period and beyond to enter into and maintain endorsement contracts (or earn other brand income) that compensate him in amounts that are significantly in excess of compensation that he has had historically from these sources.

            Arian Foster Discount Rates

        In determining the expected brand income for Arian Foster, we used discount rates ranging from 3.0% to 14.2%, which we believe adequately address the uncertainty inherent in our estimates.

            Arian Foster Career Length

        In our analysis of the estimated fair value of the brand contract with Arian Foster, we considered the average and median career durations for running backs we considered to be comparable to be in the range of 6-16 years, with an average and median of 10.5 years. We considered the career length of running backs in the modern era (which we defined as a running back who has retired from the NFL during the 15-year period between 1997 and 2011) who were the featured back on their team, selected to at least one Pro Bowl and rushed for at least 1,000 yards in at least three of their first four full seasons in which the running back played at least 13 games to be comparable for purposes of our analysis.

        In determining that Arian Foster would have a 12 year NFL playing career, we used a comparable group of running backs, whose average career-length was 10.5 years, but we used 12 years for Arian Foster's career-length, adding 1.5 years, or an additional 14%, due to characteristics of Arian Foster's career that we believe distinguish him from the comparable group. For example, we considered that in Arian Foster's first NFL season, he played in only six games, starting in only one and therefore, we believed it was appropriate to assume that Arian Foster would have one additional season beyond the average for the comparable group.

            Arian Foster Projected Contract Value

        In determining that Arian Foster would play out his existing NFL player contract and enter into at least one additional multi-year NFL player contract on terms that are, on an average annualized basis, economically comparable to his existing NFL player contract, in addition to assuming he would have a career of 12 years, we reviewed contracts entered into by players in the comparable group at approximately the same age as the age at which Arian Foster would be at the end of his current contract.

108


Table of Contents

        In determining that Arian Foster would enter into and maintain endorsement contracts (or earn other brand income) that compensate him in amounts that are significantly in excess of compensation that he has had historically from these sources, we considered the following factors:

    Arian Foster was an un-drafted free agent, and thus we believe his historical endorsement earnings in his first several seasons were significantly lower than his longer-term potential;

    we believe that endorsement income for players in skill positions increases for those who demonstrate a sustained and consistently high level of success and achievement at their position. Arian Foster is coming off three consecutive seasons of high achievement as a running back in the NFL and has not yet actively engaged in marketing his brand, and thus we believe he is a good candidate to begin to realize a higher level of endorsement income; and

    we believe that Arian Foster has potential for generating other brand income, such as through motion pictures and/or broadcasting, as evidenced by his recent appearance as himself on an episode of the television series Hawaii Five-O, and his recently landed role as a professional running back in Draft Day, a new film starring Kevin Costner.

        If any of our assumptions are incorrect then our estimate of the fair value of Arian Foster's brand contract may be too high.

Income (Loss) From Brand Contracts

        We recognize income from brand contracts when cash or other considerations are received by the contract party under included contracts, which is the point at which we earn the right to our proportionate share of amounts received by the contract party. Other considerations received by the contract party may include stock, automobiles, or other items of value. In the event other considerations are received by the contract party, we will recognize income from brand contracts equal to our proportionate share of the estimated fair value of the other considerations received, and will receive payment in either cash or such other considerations based on the contractual arrangement. Amounts due to us under the brand contract are either remitted directly from the source of such income or through payment by the contract party. The brand contract stipulates that income once we earn it is not subject to recapture by the contract party.

        For purposes of our financial statements and the notes thereto, cash received under the brand contract will either be recognized as a reduction of our carrying value (i.e., a reduction in the brand contract asset) or income (loss) from brand contracts. Whether cash receipts will be recognized as a reduction of carrying value or income (loss) from brand contracts will depend on the timing of such cash receipt. For example, if we expect to receive $1.0 million from a contract party on January 1, 20X5 after entering into the brand contract on January 1, 20X4 and based on our discount rate pay $0.9 million for such cash receipt the Company will recognize $0.1 million in income (loss) from brand contracts in the year ended December 31, 20X4. In this case, the entire $1.0 million received in January 20X5 will be recognized as a reduction of our carrying value. If on the other hand the $1.0 million cash is received in December 20X4 a portion will be recognized as income (loss) from brand contracts in the fourth quarter of the year ended December 31, 20X4.

        Additionally, the timing of changes in our estimates of future cash flows will impact whether cash receipts are recognized as a reduction of our carrying value or as income (loss) from brand contracts. If for example we increase our estimate of future cash flows and such increased cash flows are not received until a future period, such increase will be recognized as income (loss) from brand contracts and the majority of such future cash flow will be recognized as a reduction of carrying value of our investment. If on the other hand our expected cash flows increase and were not foreseen and therefore not expected until the period in which the cash is actually received the entire cash amount will be recognized as income (loss) from brand contracts.

109


Table of Contents

        Expected cash flows will be based on the included contracts the contract party has in place and the expectations of future contracts. As it becomes more likely that the contract party will collect contracted amounts the expected discount rate will decrease. A decrease in the discount rate will result in the receipt of cash primarily being allocated to reduction of carrying value of our investment. The discount rates are determined at the purchase date and are revised each period based on the performance of the tracking stock brand and the likelihood of collection of future contracted amounts.

        Income (loss) from brand contracts are based on an estimate of expected cash flows and the associated expected discount rate. Changes in fair value resulting from changes in the expected performance of the tracking stock brand or market factors are included in income (loss) from brand contracts in the statement of operations.

        We are entitled to certain information and audit rights pursuant to the brand contracts that enable us to adequately calculate and collect the ABI under the brand contract. In addition to such annual audit rights, we intend to create a contract administration and surveillance division to proactively monitor and administer our rights under the brand contracts. Following the execution of a brand contract, the contract administration and surveillance division shall prepare a schedule charting the timing and amounts of expected future payments associated with that certain counterparty's existing contracts that are subject to our brand contract, along with the term and the expected timing each contract would be expected to be renegotiated or renewed. The division will also be tasked with ensuring that all directives to pay Fantex directly have been executed and accepted by the parties making such payments. We will contact the contract party at renewal terms to determine whether the contracts will be renewed and take necessary steps to ensure that any new agreements are covered under the brand contract.

        The division will also be tasked with reviewing each brand contract quarterly and to contact each of our contract parties to determine if the parties entered into additional agreements or renegotiated existing agreements that may impact our ABI. To supplement these direct inquiries, this division will also monitor social and mainstream media on at least a weekly basis for information relevant to our brand contract or relationship with each of our contract parties, including trade rumors, reports of new endorsements or other agreements that may be subject to our brand contract with such contract parties, reports of renegotiation of existing agreements and reports of personal behavior that may be beneficial or detrimental to the tracking stock brand in general.

        In addition to the above, in the event that expected payments are not received on a timely basis (generally within five days of receipt of income by the contract party), we will attempt to contact the contract party and resolve any issues of nonpayment amicably. If our efforts are unsuccessful, any issues with contract payments will initially be escalated to senior management for resolution. Depending on the nature and materiality of the contract party's nonperformance, we may initiate legal action to recover any unpaid amounts under the brand contract. Significant or continuous nonpayment may be material and may trigger additional disclosure under the Securities Act as well as impair the fair value of the asset on our books.

Election to Opt Out of Transition Period

        Section 102(b)(1) of the JOBS Act exempts "emerging growth companies" from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standard.

        The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Fantex has elected to opt out of the extended transition period.

110


Table of Contents

Off-Balance Sheet Arrangements

        We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Qualitative and Quantitative Disclosures of Market Risk

        We did not have during the periods presented, and we do not currently have, any market risk sensitive instruments, as defined in the rules and regulations of the SEC.

Contractual Obligations

        Our principal contractual obligations are limited to our obligations under our management agreement with our parent and our brand contracts with Vernon Davis, EJ Manuel and Arian Foster. We are not committed to any future capital expenditures, including rental commitments, which are solely in the name of our parent. See "—Results of Operations" for additional information on the allocation of rent expenses from Fantex Holdings to us from inception to December 31, 2012 and for the year ended December 31, 2013.

Arian Foster Brand Contract

        We must pay $10.0 million to Arian Foster upon the consummation of the offering of Fantex Series Arian Foster. We will have no further financial obligation to Arian Foster under his brand contract once this payment has been made, other than certain indemnity obligations. We have evaluated the impact of these indemnities on our financial statements and determined that they are not material.

Vernon Davis Brand Contract

        We must pay $4.0 million to Vernon Davis upon the consummation of this offering. We will have no further financial obligation to Vernon Davis under the brand contract once this payment has been made, other than certain indemnity obligations. We have evaluated the impact of these indemnities on our financial statements and determined that they are not material.

EJ Manuel Brand Contract

        We must pay $4.98 million to EJ Manuel upon the consummation of the offering of Fantex Series EJ Manuel. We will have no further financial obligation to EJ Manuel under the brand contract once this payment has been made, other than certain indemnity obligations. We have evaluated the impact of these indemnities on our financial statements and determined that they are not material.

Management Agreement

        We have entered into a management agreement with our parent that will become effective upon the consummation of our first public offering. Pursuant to the management agreement, our parent will provide us with management and administrative services, including providing and compensating our executive management and other personnel, as well as services relating to information technology support, brand management and support operations, facilities, human resources, tax planning and administration, accounting, treasury and insurance. We have agreed to pay our parent 5% of the amount of the gross cash received by us, if any, pursuant to our brand contracts during any quarterly period as remuneration for the services provided. The amount of gross cash received used to calculate this 5% fee will include any portion allocated to reduction of carrying value but shall not take into account the changes in fair value of the brand contracts. As such, the service fee under the management agreement will be determined based on the total amount of cash received under the

111


Table of Contents

brand contracts in a given quarterly period prior to any adjustments for fair value and without regard to the expected cash receipts in such quarter as reflected in the financial statements for that quarter. We may evaluate the service fee from time to time to assess the continued appropriateness of the percentage of our cash receipts upon which the service fee is calculated, in light of the services being provided by our parent at the time and the cost of those services.

        The agreement will have an initial term through December 31, 2014, and will automatically renew for successive one-year terms each December 31 unless either party provides written notice of its intent not to renew at least three months prior to such renewal. We may also terminate any specific service and/or the agreement, without penalty, with 30 days prior written notice to Fantex Holdings. Fantex Holdings may terminate any specific service and/or the agreement with 180 days prior written notice to us, but if we, using our commercially reasonable efforts, are unable to either perform the services ourselves or enter into a reasonable arrangement with a third party to perform the services that we are unable perform ourselves, then Fantex Holdings will continue to perform such services for an additional period of 180 days.

        The agreement contains certain provisions requiring us to indemnify our parent with respect to all losses or damages arising from acts not constituting bad faith, willful misconduct, or gross negligence. We have evaluated the impact of these indemnities on our financial statements and determined that they are remote.

112


Table of Contents


MANAGEMENT AND ATTRIBUTION POLICIES

        We have established policies for purposes of managing and attributing our assets and liabilities between and among our platform unit and various other business units that we intend to establish from time to time.

        As a general principle, we expect that all material matters in which holders of any series of our common stock may have divergent interests (including our platform common stock and any tracking stocks that we may issue from time to time) will be generally resolved in a manner that is in the best interests of our company and all of our stockholders after giving fair consideration to the interests of the holders of each series of our common stock, as well as such other or different factors considered relevant by our board of directors (or any committee of our board of directors authorized for this purpose, including the conflicts committee of our board of directors).

Policies Subject to Change Without Stockholder Approval

        Set forth below are the management and attribution policies that will be effective upon the consummation of this offering. Our board of directors may, without stockholder approval, modify, change, rescind or create exceptions to these policies, or adopt additional policies. Such actions could have different effects on holders of each different series of our common stock and could include operational and financial decisions that could favor the platform common stock over a tracking stock, or one tracking stock over another. Our board of directors will make any such decision in accordance with its good faith business judgment that such decision is in the best interests of our company and the best interests of all of our stockholders as a whole. In certain circumstances, decisions of our board of directors may also be subject to the approval of the conflicts committee.

        Any such modifications, changes, rescissions, exceptions or additional policies will be binding and conclusive unless otherwise determined by our board of directors. We will notify our stockholders of any material modification, change or exception made to these policies, any rescission of these policies and the adoption of any material additions to these policies through the filing of a Current Report on Form 8-K within four business days after the modification, change, exception or addition is made. However, we will not notify our stockholders of any modification, change, exception, rescission or addition to these policies if we determine that it is not material to the holders of any series of our common stock, in each case with such holders taken together as a whole.

Attribution

        We currently have one business unit, which is our platform unit. We intend to establish additional business units from time to time concurrently with the issuance of one or more new tracking stocks intended to track and reflect the economic performance of such business unit. We will attribute assets and liabilities to such business units in accordance with the policies below. By attributing assets and liabilities to a business unit we mean that we will designate such assets and liabilities for the account of that business unit on our internal financial accounts, and prepare our unaudited attributed financial information in accordance with such attributions.

Vernon Davis Brand

        Upon the consummation of this offering we will establish a new tracking unit that we refer to as the Vernon Davis Brand. We will initially attribute the following assets and liabilities to the Vernon Davis Brand:

    95% of our acquired brand income, or ABI, that we acquire under our Vernon Davis brand contract;

113


Table of Contents

    any and all of our liabilities, costs and expenses incurred after this offering that are directly attributable to the Vernon Davis Brand, such as our direct costs arising out of our promotion of the Vernon Davis Brand or arising out of or related to the maintenance and enforcement of the Vernon Davis brand contract, provided, however, that we will not attribute any of the expenses or costs related to this offering (other than underwriting commissions and expenses) or incurred by us or our parent prior to the consummation of this offering, including our efforts to build our business model and enter into our brand contract with Vernon Davis, to our Fantex Series Vernon Davis;

    a pro rata share of our general liabilities, costs and expenses not directly attributable to any specific tracking stock (calculated based on attributable income), but excluding any non-cash expenses that are allocated from our parent to us. Attributable expenses would include, for example, a pro rata portion of the service fee we pay to our parent pursuant to the management agreement (5% of our cash receipts, which would be equal to 5% of our ABI under the Vernon Davis brand contract so long as there are no other tracking stocks outstanding). Expenses that would not be attributed would include expenses incurred by our parent, including any expenses incurred in providing services to us under the management agreement, to the extent in excess of our service fee to them;

    as income, any covered amounts, as described below, for the Vernon Davis brand contract; and

    as an expense, the pro rata share of any covered amounts, as described below, relating to any tracking stock brand (including the pro rata share of any covered amounts for the Vernon Davis Brand).

        We will also attribute the following additional assets and liabilities to the Vernon Davis Brand:

    all net income or net losses from the assets and liabilities that are included in the Vernon Davis Brand and all net proceeds from any disposition of any such assets, in each case, after deductions to reflect any dividends paid to holders of shares of Fantex Series Vernon Davis; and

    any acquisitions or investments made from assets that are included in the Vernon Davis Brand.

Other Tracking Stock Brands

        We intend to enter into additional brand contracts on an ongoing basis, and we intend to create a separate business unit in connection with each new brand contract. We will refer to each of these new business units in general as a tracking unit or a tracking stock brand, though each tracking stock brand will also be given a specific name at the time we create a new tracking stock brand. We have previously entered into a brand contract with:

Contract Party
  Effective Date of
Brand Contract
  Percent of Brand
Income
Payable to Us Under the
Brand Contract (ABI)
  Tracking Unit related to
the Brand Contract
  Tracking Stock
related to the
Tracking Stock Brand

EJ Manuel

  February 14, 2014     10 % EJ Manuel Brand   Fantex Series EJ Manuel

Arian Foster

  February 28, 2013     20 % Arian Foster Brand   Fantex Series Arian Foster

        We will attribute the following assets and liabilities to each tracking stock brand:

    a fixed percentage of our ABI from the brand contract associated with a tracking stock brand, which we expect generally (though not necessarily) will be 95% for each of our brand contracts;

    any and all of our liabilities, costs and expenses that are directly attributable to such tracking stock brand, such as our direct costs arising out of our promotion of the tracking stock brand or arising out of or related to the maintenance and enforcement of the related brand contract, provided, however, that, as is the case for our Fantex Series Vernon Davis, we will not attribute any of the expenses or costs related to the offering of our Fantex Series Arian Foster or Fantex

114


Table of Contents

      Series EJ Manuel (other than underwriting commissions and expenses) or incurred by us or our parent prior to the consummation of the offering of our Fantex Series Arian Foster or our Fantex Series EJ Manuel, including our efforts to build our business model and enter into our brand contract with Arian Foster and EJ Manuel, to our Fantex Series Arian Foster or our Fantex Series EJ Manuel;

    a pro rata share of our general liabilities, costs and expenses not directly attributable to any specific tracking stock (calculated based on attributable income), but excluding any non-cash expenses that are allocated from our parent to us. Attributable expenses would include, for example, a pro rata portion of the service fee we pay to our parent pursuant to the management agreement (5% of our cash receipts). Expenses that would not be attributed would include expenses incurred by our parent, including any expenses incurred in providing services to us under the management agreement, to the extent in excess of our service fee to them;

    as income, any covered amounts, as described below, for the brand contract associated with such tracking stock brand; and

    as an expense, the pro rata share of any covered amounts, as described below, relating to any tracking stock brand (including the pro rata share of any covered amounts for such tracking stock brand).

        We will also attribute the following additional assets and liabilities to a tracking stock brand:

    all net income or net losses from the assets and liabilities that are included in such tracking stock brand and all net proceeds from any disposition of any such assets, in each case, after deductions to reflect any dividends paid to holders of the tracking stock associated with such tracking stock brand; and

    any acquisitions or investments made from assets that are included in such tracking stock brand.

Platform Unit

        Our platform unit will initially have attributed to it all of our assets and liabilities that are not specifically attributed to our three current tracking stock brands or to any other tracking stock brands that we may establish from time to time. The assets attributed to the platform unit will thus include, for example, any portion of the ABI for any brand contract that is not specifically attributed to the associated tracking stock brand. For example, we will attribute the 5% of our ABI under our Vernon Davis brand contract, EJ Manuel brand contract and Arian Foster brand contract to the platform unit, and expect to attribute a similar amount for each of our future brand contracts.

Covered Amounts

        As described above, income (and assets) and liabilities will generally be attributed to a tracking stock brand based on the income and liabilities of that tracking stock brand. However, if as a result of any debtor relief laws we do not receive any portion of our ABI from a brand contract then we will nonetheless attribute income during any period to the corresponding tracking stock brand in an amount equal to the difference between any amounts we actually receive under that brand contract and the amounts to which we would otherwise have been entitled to receive but for the debtor relief law. We refer to such difference as a covered amount.

        In such a case, the covered amount will also be attributed as a general expense of Fantex, and we will attribute the pro rata share of any covered amounts to each tracking stock brand as an expense, as discussed above.

        For purposes of this policy, "debtor relief laws" means the U.S. Bankruptcy Code, as now and hereafter in effect, or any successor statute to the U.S. Bankruptcy Code, and all other liquidation,

115


Table of Contents

conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief statute, law, ordinance, rule or regulation of the United States, any state thereof or the District of Columbia, or other applicable jurisdictions from time to time in effect.

Fiduciary and Management Responsibilities, Conflicts Committee

        Because each of our business units will be part of a single company, our directors and officers will have the same fiduciary duties to stockholders of our company as a whole (and not to any individual business unit or the holders of any specific series of our common stock associated with any of our business units). Under Delaware law, a director or officer may be deemed to have satisfied his or her fiduciary duties to our company and its stockholders if that person is independent and disinterested with respect to the action taken, is adequately informed with respect to the action taken and acts in good faith taking into account the interests of all of our stockholders as a whole. Our board of directors and officers, in establishing and applying policies with regard to intra-company matters such as business transactions between our different business units and series of common stock, and attribution of assets, liabilities, debt, corporate overhead, taxes, interest, corporate opportunities and other matters, will consider various factors and information that could benefit or cause relative detriment to the stockholders of any individual series of our common stock and will seek to make determinations that are in our company's best interests and the best interests of our stockholders as a whole. If and when there are conflicting interests between our business units and consequently any holders of any series of our common stock, our directors will use good faith business judgment to resolve such conflicts, including if applicable in the judgment of our board of directors, through our conflicts committee.

        Our board of directors has established a conflicts committee that is responsible for reviewing all of our related party transactions in which our parent company, Fantex Holdings, is a party with an interest adverse to our interests or any outstanding tracking stock, including any decision to convert any of our outstanding tracking stock into our platform common stock following the two-year anniversary of the filing of a certificate of designation creating such tracking stock. Following the consummation of this offering Fantex Holdings will be the sole holder of shares of our platform common stock. Our board of directors has also determined that each member of the conflicts committee must (a) satisfy the audit committee independence requirements under the rules and regulations of the SEC that would be applicable to Fantex if our shares were listed on a national securities exchange such as Nasdaq, (b) not have been an employee or director of our parent company at any time in the three years prior to his or her appointment to the conflicts committee and (c) not have any material interest in Fantex or Fantex Holdings.

Dividend Policy

        Our board of directors is permitted, but not required, to declare and pay dividends on our platform common stock or any of our tracking stock in an amount up to the "available dividend amount" for the applicable series, to the extent permitted by the Delaware General Corporation Law.

        The available dividend amount for any tracking stock is as of any date an amount equal to the lesser of (a) total assets of our company legally available for the payment of dividends under Delaware law and (b) an amount equal to:

    the excess of the total assets attributed to the tracking stock brand over the total liabilities attributed to the tracking stock brand, less the par value of the outstanding shares of such tracking stock; or

    if there is no such excess, the attributable income of the tracking stock brand for the fiscal year in which the dividend is being declared and/or the preceding fiscal year.

116


Table of Contents

        The available dividend amount for our platform common stock is as of any date an amount equal to the amount of our total assets legally available for the payment of dividends under Delaware law, less the aggregate amount of the "available dividend amount" for all of our then outstanding tracking stocks.

        Following this offering, we intend to pay periodic cash dividends out of available cash for each tracking stock, if outstanding, equal to an amount in excess of 20% of the "available dividend amount" for each such tracking stock. Our board of directors has discretion to declare a dividend on any series of common stock without declaring a dividend on any other series of our common stock. In general, our board of directors does not expect to declare dividends on any series of common stock in an amount greater than the attributed cash on hand for such series.

        Our board of directors may change its dividend policy at any time and from time to time, and we may retain some or all available funds and future income to support our operations and finance the growth and development of our business. However, our board of directors will not in any event change the definition of "available dividend amount" for any series of our common stock or declare dividends on any series of our common stock in excess of the "available dividend amount" for that series.

Financing Activities

General

        We may from time to time invest surplus cash, issue and repay short-term and long-term debt and the issue and repurchase any outstanding tracking stocks. However, our board of directors will not in any event reallocate the "underlying assets" for any tracking stock, as such term is defined in the certificate of designation for that series.

        If we change the attribution of cash or other property from one tracking stock to another, we will account for such change as a short-term loan unless our board of directors determines that a given change in attribution should be accounted for as a long-term loan, an inter-series equity investment, as a reduction of an inter-series equity investment or as a transfer in exchange for cash or other assets. See "—Inter-Series Loans" and "—Inter-Series Investments" below.

        Our board of directors will make these determinations, either in specific instances or by setting applicable policies generally, in the exercise of its informed business judgment. Factors our board of directors may consider in making this determination include:

    the financing needs and objectives of the receiving tracking stock;

    the investment objectives of the transferring tracking stock;

    the current and projected capital structure of each tracking stock;

    the relative levels of internally generated funds of each tracking stock; and

    the availability, cost and time associated with alternative financing sources, prevailing interest rates and general economic conditions.

        Our board of directors will make all changes in the attribution of material assets from one series to the other on a fair value basis, as determined in good faith by the board of directors. For accounting purposes, all such assets will be deemed reattributed at their carryover basis. To the extent that this amount is different than the fair value of the inter-series loan or inter-series equity investment created in the transaction, this difference will be recorded as an adjustment to the series equity. No gain or loss will be recognized in the statement of operations information for the tracking stock due to the related party nature of such transactions.

117


Table of Contents

Inter-Series Loans

        If one tracking stock is deemed to lend to another, our board of directors will determine the terms of such loan, including the rate at which it will bear interest. Our board of directors will determine the terms of any inter-series loans, either in specific instances or by setting applicable policies generally, in the exercise of its informed business judgment. Factors our board of directors may consider in making this determination include:

    our company's needs;

    the use of proceeds of the receiving tracking stock;

    the capital expenditure plans of and the investment opportunities available to each tracking stock; and

    the availability, cost and time associated with alternative financing sources.

        If an inter-series loan is made, we intend to account for the loan based on its stated terms, and the resulting activity, such as interest amounts, will be recorded in the separate series financial results to be included in our financial statements but will be eliminated in preparing our financial statement balances.

Inter-Series Investments

        An inter-series investment is an equity investment that holders of one tracking stock may make in another tracking stock. Inter-series investments would be represented by the issuance of shares of the tracking stock into which an equity investment may be made.

Equity Issuance and Repurchases and Dividends

        We will reflect all financial effects of issuances and repurchases of shares relating to any single tracking stock in our own financial information. We will reflect financial effects of dividends or other distributions on, and purchases of, shares relating to each tracking stock in the unaudited attributed financial information.

Inter-Series Contracts

        The terms of all current and future material transactions, relationships and other matters between the platform unit and any tracking stock brand, including those as to which the holders of any tracking stock may have potentially divergent interests, will be determined in a manner considered by our board of directors to be in our company's best interests and the best interests of our stockholders as a whole. In certain circumstances, decisions of our board of directors may also be subject to the approval of our conflicts committee.

Review of Corporate Opportunities

        In cases where a material corporate opportunity may appropriately be viewed as one that could be pursued by holders of more than one tracking stock, our board of directors may, independently or at the request of management, review the attribution of that corporate opportunity to one of, or between, such tracking stocks. In accordance with Delaware law, our board of directors will make its determination with regard to the attribution of any such opportunity and the benefit of such opportunity in accordance with their good faith business judgment of our company's best interests and the best interests of our stockholders as a whole. In certain circumstances, decisions of our board of

118


Table of Contents

directors may also be subject to the approval of our conflicts committee. Among the factors that our board of directors may consider in making this attribution is:

    whether a particular corporate opportunity is principally related or complementary to the business focus or strategy of any particular tracking stock;

    whether one tracking stock brand will be better positioned to undertake the corporate opportunity than another tracking stock brand;

    existing contractual agreements and restrictions; and

    the financial resources and capital structure of each tracking stock.

Financial Statements and Other Financial Information

        We will present financial statements in accordance with GAAP, consistently applied. We will also provide unaudited attributed financial information as an exhibit to our periodic reports that we file pursuant to the Exchange Act. The unaudited attributed financial information will show the attribution of our assets, liabilities, revenue, income (loss) from brand contracts expenses and cash flows to each of the tracking stocks and our platform common stock, in accordance with the attribution policies set forth above. Unaudited attributed financial information will also include, if applicable, attributed portions of our debt, interest and taxes, in accordance with the attribution policies set forth above. We will make these attributions for the purpose of preparing such information; however, holders of our tracking stocks and our platform common stock will continue to be subject to all of the risks associated with an investment in our company and all of our company's businesses, assets and liabilities.

        In addition to the unaudited attributed financial information, at least until such time as we no longer have significant concentration among our tracking stock brands relative to our consolidated financials, we will include in our audited annual reports statements of cash receipts from included contracts with respect to each of our brand contracts.

Taxes

General Policies

        Taxes and tax benefits, payments that are required to be made by, or are entitled to be received by, us and certain tax-related losses will be attributed among the various tracking stock brands in accordance with the following tax sharing policies.

        These tax sharing policies may differ from the manner in which taxes and tax benefits of each tracking stock brand are reflected in our financial statements. For financial statement purposes, taxes and tax benefits attributable to each tracking stock brand generally will be accounted for in a manner similar to a stand-alone company basis in accordance with GAAP. Any differences between the tax sharing policies described below and the taxes and tax benefits of each of our business units reported in the financial statements will be reflected in the attributed net assets of the various tracking stock brands for financial statement purposes.

        In general, for purposes of these tax sharing policies, any tax item (including any tax item arising from a disposition) attributable to an asset, liability or other interest of a tracking stock brand will be attributed to that tracking stock brand. Tax items that are attributable to any tracking stock brand that are carried forward or back and used as a tax benefit in another tax year will be attributed to that tracking stock brand.

119


Table of Contents

Income Taxes

        To the extent that federal, state, local or foreign income taxes are determined on a basis that includes the assets, liabilities or other tax items of more than one tracking stock brand then income taxes and income tax benefits will be shared among the tracking stock brands based principally on the taxable income (or loss), tax credits and other tax items directly related to each tracking stock brand. Such attributions will reflect each tracking stock brand's contribution, whether positive or negative, to our taxable income (or loss), income tax liabilities and tax credit position. Consistent with the general policies described above, income tax benefits that cannot be used by a tracking stock brand generating such benefits, but can be used to reduce the taxable income of another tracking stock brand, will be credited to the tracking stock brand that generated such benefits, and a corresponding amount will be charged to the tracking stock brand utilizing such benefits. As a result, under this tax sharing policy, the amount of income taxes attributed to a tracking stock brand or the amount credited to a tracking stock brand for income tax benefits may not necessarily be the same as that which would have been payable or received by the tracking stock brand had that tracking stock brand filed separate income tax returns.

Non-Income Taxes and Non-Income Tax Benefits

        In any taxable period, if any non-income taxes or non-income tax benefits are determined on a basis that includes the assets, liabilities or other tax items of more than one tracking stock brand, then any such non-income taxes or non-income tax benefits will be attributed to each tracking stock brand based upon its contribution to our non-income tax liability (or benefit). Non-income tax benefits that cannot be used by a tracking stock brand generating such benefits, but can be used to reduce taxes of another tracking stock brand, will be credited to the tracking stock brand that generated such benefits, and a corresponding amount will be charged to the tracking stock brand utilizing such benefit.

        Any income or non-income taxes or tax benefits that are determined on a basis that includes only the assets, liabilities or other tax items of one tracking stock will be attributed to that tracking stock.

120


Table of Contents


BUSINESS

Fantex

Overview

        We are a brand acquisition, marketing and brand development company whose focus is on acquiring minority interests in the income associated with the brands of professional athletes, entertainers and other high-profile individuals and assisting such individuals in enhancing the reach and value of their respective brands. We intend to focus our business on three core areas:

    evaluating, targeting and accessing individuals and brands with the potential to generate significant income associated with these brands, or brand income;

    acquiring minority interests in such brand income; and

    assisting our acquired brands in increasing their value via technology and through leveraging our marketing, advertising and strategic partnering expertise.

        Our management team has significant marketing, operating and investment experience and what we believe are extensive industry contacts. Our team members have been directly involved with building E*Trade Financial Corporation, Siebel Systems, Inc., Yahoo!Finance and Yahoo!Sports.

        Fantex was incorporated on September 14, 2012 in Delaware and is headquartered in San Francisco, California. To date, our operations have consisted of evaluating, targeting and accessing brands and negotiating the acquisition of minority interests in those brands that meet our criteria.

        To date, we have entered into brand contracts with each of the following parties:

Contract Party
  Primary Career   Effective Date of
Brand Contract
  Percent of
Brand Income
Payable to Us
Under the
Brand
Contract (ABI)
  Purchase Price
for the
Acquisition of
ABI
  Termination Fee
Payable by Contract
Party (under
specified
circumstances
further defined
below)
 

EJ Manuel and his affiliated professional services company, Kire Enterprises LLC

  Quarterback for the Buffalo Bills   February 14, 2014     10 % $ 4.98 million   $ 5.24 million  

Vernon Davis and his affiliated professional services company, The Duke Marketing LLC

 

Tight end for the San Francisco Forty Niners

 

October 30, 2013

   
10

%

$

4.00 million
 
$

4.21 million
 

Arian Foster and his affiliated professional services company, The Ugly Duck, LLC

 

Running back for the Houston Texans

 

February 28, 2013

   
20

%

$

10.00 million
 
$

10.55 million
 

        Each of the foregoing contracts is contingent upon obtaining financing to fund the acquisition of the brand income under the brand contract.

        We intend to enter into additional brand contracts in the future and we are actively pursuing these brand contracts, although as of April 21, 2014 we have no current commitments to enter into another brand contract. Any brand contracts that we enter into in the future with other parties, who we refer to as contract parties, are also expected to be contingent upon obtaining financing to fund the acquisition of the interest in the brand income of the respective brands. We intend to finance the acquisition of additional brand income through the issuance of additional tracking stocks linked to the value of such brand income.

121


Table of Contents

Brand Evaluation

        Prior to entering into a brand contract, we conduct a detailed evaluation of the contract party and the brand to determine whether, in our opinion, they would be a suitable brand with the potential to generate significant brand income based on the criteria discussed below. We consider brand to be a distillation of a complex set of associations people make with respect to an individual, including performance, appearance, history and personal story, products or services they are associated with, public statements or positions on matters of public concern, how an individual acts or the image they project to the world. We seek brands that convey images and associations that we believe will be recognized and valued in the market place. Our evaluation activities include, but are not limited to:

    Reviewing mainstream and social media to understand the individual's relative standing in their field and how they are viewed by leading commentators and journalists as well as the public at large;

    Collecting and analyzing widely followed performance metrics as well as recognized honors or awards received by the individual. Examples might include: batting average, yards per carry, box office receipts, book sales, selection to All Pro or All Star teams, Grammy, Academy or Booker Awards, etc.;

    Reviewing all existing contracts underlying the brand contract to verify current and future income streams, including sources of guaranteed income, and income that are based on achievement of performance or other milestones and that may or may not be achieved based on continued performance in the field;

    Evaluating the character and reputation of the individual through our independent assessments, industry references and detailed background checks conducted by third parties;

    collecting financial and other information from each contract party to evaluate financial suitability and brand sustainability. Key areas of focus include: review of assets, liabilities, existing commitments, tax returns and credit reports and credit scores; and

    Assessing potential future cash receipts based on our estimate of the value of future contracts that could be included in brand income, considering factors such as:

    the age of the individual and the average length of a career in the individual's primary occupation, such as an athlete in the NFL;

    length of existing contracts and the potential for renewal or replacement of such contracts;

    potential for incremental endorsement and other cash flow generating activity, including a comparison against the value of comparable brands;

    the individual's aspirations and goals beyond a career in the individual's primary occupation; and

    our judgment regarding the individual's ongoing appeal and ability to develop as a media talent based upon a variety of intangibles including onscreen presence and ability to connect and communicate with consumers and the public.

        As part of our brand evaluation, we also examine the brand's current positioning and marketing footprint, including the reach, demographic, engagement level, and potential for growth. This evaluation provides a framework to develop further marketing strategies to aid us in our efforts to assist the contract party enhance the value of their brand.

122


Table of Contents

Brand Acquisition

        We believe we have extensive industry contacts among our board of directors, employees, consultants and advisors of our company and our affiliates, which we utilize to access individuals and brands that meet our criteria. Through our contacts we seek to establish working relationships with these brands and their key advisors to begin the process of educating them about our business and the benefits of a brand contract and a continuing relationship. We enter into an arm's-length negotiation primarily to finalize a purchase price, our percentage of ABI and the scope of brand income, including whether or not there would be any specific exclusions.

Enhancing Brand Value

    Increasing Brand Reach and Consumer Engagement

        We intend to build a portfolio of brands and enhance the value of our acquired brands via technology and data applications, as well as leveraging our marketing, advertising and strategic partnering expertise in collaboration with the contract parties. We believe that developing a diverse portfolio of global brands will enable us to increase brand reach across our portfolio and allow us to provide unique insights that contract parties may employ to increase consumer awareness of their brands and our brands more generally. We expect to leverage our data and expertise to assist and supplement our contract parties' efforts to extend the reach of their brands across multiple marketing mediums, including broadcast, print, digital, live events, and social. For example, each of our acquired brands would have a "brand manager" who would be responsible for monitoring the brand and brand activities and serving as a liaison to find opportunities for us to provide brand enhancing activities. We believe that, as a result of our combined efforts, there is an opportunity to increase consumer engagement with the acquired brands by optimizing message delivery, including driving engagement through the use of content developed by us or third parties.

        Typically a contract party's current marketing services focus primarily on endorsement transactions with sponsors that reinforce his brand as a professional athlete. Although this brings in short term cash flow, we do not believe these sponsorships aid in building a brand that can be sustained beyond a playing career. We intend to assist more broadly on brand building and brand marketing. Our focus will primarily be on leveraging the platform of being a professional athlete to create a brand that is perceived as more than simply a sportsman, with the goal of having the contract party's brand thrive beyond his playing career.

        Brand development is a long-term strategy of ours intended to create greater longevity in the marketplace for our brands. We seek to aid our brands in fostering positive brand associations in order to create a unique position in the marketplace that is independent of their primary occupation, such as an athlete in the NFL. We believe this will drive greater engagement with a connected audience and lead to greater longevity of the brands.

        We also believe that investors in a tracking stock linked to a brand are more likely to be consumer advocates for that brand because they would have an economic interest in the growth of the associated tracking stock brand. As a result, they may be more likely to follow and share brand information and be more active promoters of the associated brand than other fans or social network followers of the athlete. Aligning such incentives to help enhance the brand, we believe, will motivate additional sponsors to enter into agreements with the contract party in part because such additional sponsors would have a potentially more active group of followers that in turn make the athlete more valuable to potential endorsement partners. However, we have no history to demonstrate, and we can make no assurances, that our business model will be successful, or that any of our investors will act as consumer advocates or will be able to positively impact the endorsement potential of our contract parties.

123


Table of Contents

    Our Brand Platform

        We intend to create a brand platform that will leverage social media data and in turn allow our contract parties to grow and develop their audiences. Through social data and platform analytics, we believe we can better understand the contract parties' audiences, as well as cultivate engagement that supports the contract parties' multi-dimensional interests and post-career aspirations.

        The brand attributes of our contract parties when viewed solely as professional athletes are:

    professional sport;

    position played within that sport;

    performance achieved within that sport; and

    association with team(s) played for within that sport.

        However, we intend to create brands with attributes beyond those of a professional athlete. Our contract parties have interests, opinions, skills, and passions and use certain products and engage in activities outside of professional sports. These brand attributes might include:

    an interest in a certain type of music;

    opinions on relevant social issues;

    artistic abilities such as to paint, sing or act;

    wearing a certain style of clothing or jewelry;

    use of certain household products or services;

    an interest in travel; and

    work with a particular charity.

        Through our brand platform we intend to connect our contract parties via social media to mass, engaged audiences that are interested in our contract party not necessarily because he is a professional athlete, but because he has other brand attributes that are relevant to that target audience. We believe that our brand platform will be uniquely positioned to identify the specific attributes, demographics, and psychographics of target audiences that were previously unaffiliated with our contract parties. We believe we can utilize this information to drive more and more engagement within these existing mass audiences, as well as large undiscovered audiences. Our brand platform will allow our contract party to place very targeted messaging within his social media feeds to connect with these audiences. We believe the ability to serve such directed content to a specific target audience would be viewed as valuable by fans, investors in a tracking stock, existing sponsors, and potential advertisers. Further, the engagement of our contract parties with these mass audiences will support our long-term strategy to create longevity for our contract party brands beyond their playing careers.

        Our focus would include:

    assisting our brands in creating and developing a vision for their brand identity and attributes;

    identify opportunities for re-positioning and/or differentiation;

    monitoring the brand and brand activities to identify "brand moments" or events or circumstances that we believe present an opportunity to establish or reinforce elements of the brand;

    providing marketing strategies to accelerate brand growth and influence of the brand based on a "cross-pollination" technology to identify consumers that would potentially be interested in the brand;

124


Table of Contents

    identifying content developed by us or third parties that could be used to increase awareness of the brand;

    identifying topics and vocabulary that would allow the contract party to increase consumer engagement;

    identifying trends in consumers' interest in the brand and optimizing messaging consistent with these trends and brand identity;

    identifying and understanding, and where possible, influencing key social media thought-leaders;

    monitoring trends in similar brands that a contract party could leverage to increase the value of its brand;

    providing advice on workflow and scheduling of messages to better optimize staging and consumer exposure; and

    advising on search engine optimization for each brand to better enable discovery, searching, filtering and following by consumers and media outlets.

        We intend to measure the effectiveness of our strategies to enhance brand value where possible, and use those measurements to assess whether our efforts are successful. For example, we intend to measure changes in the social media reach of our brands by measuring the change in the number of followers our brands may have on Twitter and Facebook and other social media sites, as well as measure the demographics of those followers compared to the demographics that our brand vision may target. We also intend to measure the engagement level of these followers to determine brand enthusiasm. Ultimately our success will be measured by brand income, particularly from new sources, including income from sponsors unrelated to sports, and/or increased brand income from existing sources. As with other forms or marketing and advertising, however, our ability to precisely measure the impact of our efforts on brand value may be difficult to determine objectively.

    Monetization of the Brand

        In addition to our brand platform services intended to help optimize the reach of the brand and consumer engagement, we intend to provide advice to contract parties based both on our experience and through data analysis that would aid them in obtaining more attractive terms in their negotiations with future sponsors. We believe that building critical mass with a portfolio of brands will enable us to generate meaningful data based on our brands and our continual monitoring of the marketplace, including best practices with respect to consumer engagement and other critical drivers of brand value, as well as data on demographic metrics and other data relative to brands and their performance. In conjunction with the brand platform, we intend to provide an accessible report, in customizable and graphical format with data filter capabilities, highlighting the demographic metrics, reach, consumer engagement, strength and other critical drivers of brand value for sponsors based on our proprietary internal data. We are in the process of developing proprietary brand platform software to be used to produce such reports at such time as there would be meaningful data. We believe that this information and our marketing insights will assist our contract parties to more accurately evaluate their brand value in the marketplace and potentially increase future endorsement payments and brand longevity post career in the primary occupation, such as an athlete in the NFL.

125


Table of Contents

Our Brands

        To date we have entered into three brand contracts, created a tracking unit related to each of these brand contracts, which we refer to generally as "tracking stock brands," and created a tracking stock related to such tracking stock brands, with each of:

Contract Party
  Tracking Unit related to
the Brand Contract
  Tracking Stock related to
the Tracking Stock Brand
Vernon Davis   Vernon Davis Brand   Fantex Series Vernon Davis

EJ Manuel

 

EJ Manuel Brand

 

Fantex Series EJ Manuel

Arian Foster

 

Arian Foster Brand

 

Fantex Series Arian Foster

        This prospectus is prepared in connection with the offering of shares of Fantex Series Vernon Davis.

Overview of Professional Football, Honors and Awards

        The NFL is the premier professional football league in the United States and was founded on August 21, 1920. The NFL is comprised of 32 teams divided into two conferences, the National Football Conference, or NFC, and the American Football Conference, or AFC, which in turn each have four divisions. The regular season of the NFL consists of 16 games played on a weekly basis over 17 weeks (with one bye week for each team) roughly from September to December, with up to four post-season games. Football is a physically demanding sport, requiring strength, speed and power. In addition, because of the frequent tackling and other physical contact, football players are prone to injury. The age at which NFL players peak depends on many factors, including the player's position and the physical training of the player.

        The Associated Press annually publishes a list of the best player for each position, which it designates as the "All-Pro Team." Each year the All-Pro Team is selected by a national panel of media members, regardless of the conference in which the player competes. The First Team consists of the top one or two players at each position; the Second Team consists of the runners-up at each position. One player is selected at quarterback, fullback, tight end, center, punter, place kicker, and kick returner, while two players are selected at running back, wide receiver, offensive tackle, offensive guard, outside linebacker, inside/middle linebacker, defensive end, defensive tackle, cornerback, and safety. In the event of a unanimously selected quarterback, fullback, tight end, center, punter, place kicker, or kick returner, there will be no Second Team selection at that position. Additional designations, such as NFL "Most Valuable Player" are presented by various media outlets.

        Since the 1938 season, the NFL has held the Pro Bowl. NFL players are invited to attend the Pro Bowl based on votes cast by NFL coaches, NFL players and fans. The players for each position who receive the highest votes for their respective conferences are selected to play in the Pro Bowl. An invitation to play in the Pro Bowl is generally considered to be a significant honor.

Professional Football Compensation

    Overview

        Player compensation during the regular season is established by contract between the player and the NFL franchise under the CBA between the NFL and the National Football League Players' Association, or the NFLPA. On August 4, 2011, the NFL and NFLPA entered into the current CBA which will be effective until the 2020 season, subject to certain exceptions. NFL player contracts generally conform to the form player contract contained in the CBA, however individual modifications may be made.

126


Table of Contents

    Salary Cap

        The CBA establishes the maximum amount of compensation each club may pay to its players in a given season. This salary cap is calculated as a percentage of total league revenue. The current CBA provides that the salary cap may not exceed in the aggregate 48% of projected league revenues (excluding stadium credit) during the 2012-2014 seasons and 48.5% of projected league revenues (excluding stadium credit) during the 2015-2020 seasons, except that the salary cap may not be less than $142.5 million per team. The salary cap is divided equally among all 32 teams. The salary cap amount is reduced by retired player benefits, which were approximately $22.0 million in 2011. From 1994 to 2012 the NFL per team salary cap, after reduction for retired player benefits, rose from approximately $34.6 million to approximately $120.6 million, according to the NFL.

        Each team has discretion to allocate compensation among players, however, the CBA imposes a minimum salary that increases over time based on the number of seasons played and the player's roster status. Teams may offer signing bonuses to the player and certain amounts of "guaranteed money" that are paid to the player regardless of whether the player is on the club's active roster. For purposes of determining the salary cap, signing bonuses are prorated over the life of the contract. As a result, teams may sometimes offer a larger percentage of the overall compensation in the form of a signing bonus to allow for a higher upfront payment while mitigating the impact on the current season's salary cap. However, large signing bonuses will decrease the amount of money available under the salary cap in successive seasons. In addition, players may sometimes agree to renegotiate contracts in order to accommodate salary cap considerations.

    Additional Bonus Opportunities

        Each player is compensated for each post-season game in accordance with a schedule established in the CBA. In the years 2011 to 2020, an NFL Player would be entitled to receive additional compensation ranging between:

    $20,000 to $30,000 for playing on a wild-card team;

    $22,000 to $33,000 participating in a division playoff game;

    $40,000 to $59,000 for participating in a conference championship;

    $44,000 to $65,000 for participating in the Super Bowl; and

    $88,000 to $130,000 for winning the Super Bowl.

        The NFL compensates Pro Bowl players based on a schedule established in the CBA. Between the years 2011 and 2020, NFL players participating in the Pro Bowl are entitled to $25,000 to $37,000, with the players on the winning team receiving compensation ranging from $50,000 to $74,000. To the extent players are unable to participate in the Pro Bowl due to the timing of the Super Bowl, they are entitled to compensation equal to the midpoint between the payments due to the winning and losing teams. In addition to compensation received from the NFL, Pro Bowl players often receive bonuses from their endorsers as a result of being invited to play in the Pro Bowl. We do not believe that players selected to the Pro Bowl who are unable to play for reasons other than participation in the Super Bowl are entitled to Pro Bowl compensation.

    Endorsements

        We believe that NFL players, including All Pro or Pro Bowl caliber players, and baseball players generally receive a smaller percentage of their total compensation than other professional athletes from endorsement and appearance fees. Based on our internal market research we believe this is true for NFL players in part because they wear helmets and pads during games, and therefore are less recognizable, and they play on a large roster and in fewer games than other major professional sports

127


Table of Contents

in the United States. We believe the endorsement income that NFL players receive is determined by many factors including their position, the market in which the player performs, personal drive and ambition, personality, "likability," authenticity, consistency, "mediagenic" qualities, fan base and brand image.

        Quarterbacks are generally considered to be the most marketable NFL players and often garner the largest endorsement contracts, followed by other skilled-position players. Winning post-season championships and winning individual awards such as being named to the Pro Bowl or All-Pro Team, playoff wins and Super Bowl championships, can increase the earning potential of a professional football player. Earning most valuable player awards for stand out performances can also increase the earning potential of NFL players. Endorsement contracts typically have morality clauses and minimum playing requirements that allow the sponsor to terminate the sponsorship.

Our Tracking Units—Vernon Davis Brand, EJ Manuel Brand and Arian Foster Brand

        Each of our tracking stocks are intended to reflect the economic performance of the associated tracking stock brands, which initially consist of our business operations relating to the brand contract with the associated athlete, entertainer or high profile individual. We will initially attribute the following assets and liabilities to our initial brands:

    95% of our ABI under the associated brand contract;

    any and all of our liabilities, costs and expenses that are directly attributable to the associated tracking stock brand, such as our direct costs arising out of our promotion of the associated brand or arising out of or related to the maintenance and enforcement of the associated brand contract, provided, however, that we will not attribute any of the expenses or costs related to this offering (other than the underwriting discount) or incurred by us or our parent prior to the consummation of this offering, including our efforts to build our business model and enter into our brand contract with Vernon Davis, EJ Manuel or Arian Foster, to the associated tracking stock brand;

    a pro rata share of our general liabilities, costs and expenses not directly attributable to any specific tracking stock (calculated based on attributable income) but excluding any non-cash expenses that are allocated from our parent to us. Attributable expenses would include, for example, a pro rata portion of the service fee we pay to our parent pursuant to the management agreement. Expenses that would not be attributed would include expenses incurred by our parent, including any expenses incurred in providing services to us under the management agreement, to the extent in excess of our service fee to them;

    as income, any covered amounts, as described in "Management and Attribution Policies—Attribution—Covered Amounts," for the associated brand contract; and

    as an expense, the pro rata share of any covered amounts, as described in "Management and Attribution Policies—Attribution—Covered Amounts," relating to any tracking stock brand (including the pro rata share of any covered amounts for the associated tracking stock brand).

        Our Vernon Davis Brand, any of our other tracking stock brands, are not separate legal entities and cannot issue securities. Holders of shares of Fantex Series Vernon Davis will not have an ownership interest in our Vernon Davis Brand, or any of our affiliated entities. Rather, investors in our Fantex Series Vernon Davis will be our common stockholders. The issuance of the Fantex Series Vernon Davis will not result in the actual transfer of our assets or the creation of a separate legal entity. Vernon Davis and his affiliated persons are, and we expect they will continue to be, individuals and legal entities that are separate and independent from us, with separate ownership, management and operations.

128


Table of Contents

        As described above, income (and assets) will generally be attributed to our Fantex Series Vernon Davis based on the income of the Vernon Davis Brand. However, if we do not receive cash from one or more of our brand contracts to which we otherwise would have been entitled because of debtor relief laws, then the attributed income for the corresponding tracking stock will nonetheless be credited with the amount that we would otherwise have been entitled to receive. In such a case, the difference between such attributed amount and the actual income we receive from such brand contract will be attributed as a general expense of Fantex. As a result, each of our tracking stocks will share on a pro rata basis (calculated based on attributable income) the burden of any non-performing brand contracts, whether or not included in the assets attributed to such tracking stock, and the economic performance of our Fantex Series Vernon Davis will be dependent, in part, upon the aggregate financial performance of Fantex. Therefore, prior to purchasing our Fantex Series Vernon Davis, you should understand our aggregate operating performance and our aggregate assets and liabilities. Until such time as we acquire additional brands, the risk of bankruptcy of Vernon Davis will be borne solely by holders of our Fantex Series Vernon Davis. Furthermore, we intend to acquire additional minority interests in other brands in the future, so our operating performance will depend upon the soundness of our business plan and our ability to execute on that plan, including entering into additional brand contracts in the future.

        Given that the economic performance of each of our tracking stocks is dependent, in part, upon the aggregate financial performance of Fantex, the Fantex Series Vernon Davis could be affected by any of our current brand contracts or any additional brand contracts we may enter into. The risk profile of the shares of the Fantex Series Vernon Davis could likewise be materially and adversely impacted by the performance of our other tracking stock brands, including any additional brand contracts entered into or tracking stock brands created subsequent to your investment in the Fantex Series Vernon Davis.

        For a more detailed description of our tracking stocks and tracking stock brands, please see "Management and Attribution Policies."

Our Brand Contracts

        To date, we have entered into a brand contract with each of Vernon Davis, EJ Manuel and Arian Foster, whom we refer to individually as a contract party and together as contract parties, and we intend to enter into additional brand contracts on an ongoing basis. The brand contracts entitle us to receive a specified percentage of the contract party's brand income from and after the effective date of the brand contract. We refer to this percentage of brand income that we are entitled to under the brand contracts as our acquired brand income, or ABI. Brand income generally means gross monies or other considerations that the contract party receives generally as a result of the contract party's skills and brand, including salary and wages from being an NFL football player and activities generally in the sport of football (including NFL and non-NFL activities) and consists of other compensation from the contract party's assignment of rights in his persona, including use of his name, voice, likeness, image, signature, talents, live or taped performances, in connection with motion pictures, television and Internet programming, radio, music, literary, talent engagements, personal appearances, public appearances, records and recording, or publications; any use of his persona for purposes of advertising, merchandising, or trade, including sponsorships, endorsements and appearances, and any other assignment of rights in his persona, to generate income; and any other personal services performed by the contract party which are of the type typically performed by individuals in the field of football because of their status as a professional athlete or other professional within the field of football (including, without limitation, sports casting, coaching, participating in sports camps, acting as spokesperson).

        Brand income does not include:

    any cash receipts resulting from the contract party's investments in stocks or other equity, bonds, commodities, derivatives, debt or real estate, so long as (a) such stocks or other equity, bonds,

129


Table of Contents

      commodities, derivatives, debt investments and real estate are not received by him as compensation or consideration for activities (including licensing of rights) in the "field" as defined in his brand contract, (b) the contract party is not obligated to provide any services related to the "field" in connection with such investment and (c) the business or commercial venture related to such investment does not use the contract party's persona in its legal name or "dba," or in connection with its marketing, advertising or promotion,

    any income received from employment, services rendered or other activities not related to professional football and related fields,

    any reasonable reimbursement of incidental expenses actually incurred by the contract party, including without limitation, travel, lodging, per diem and other incidental expenses, or the value of any such items paid by a third party on the contract party's behalf,

    certain future pension and benefit payments under the CBA, except that income deferred pursuant to Article 26, Section 6 of such CBA shall not be deemed to be future pension payments and as such, shall be included in brand income; and

    merchandise, services or service plans or merchandise, service or service plan credit up to the lesser of $40,000 and 4% of all brand income during any applicable calendar year and as otherwise agreed by Fantex in its discretion; and

    any otherwise specifically excluded income under each brand contract.

        Each contract party will retain the remainder of his brand income (total brand income less the ABI), subject to other encumbrances that he may have with respect to such income (such as commissions payable to agents and other parties). However, pursuant to the brand contracts, each contract party has agreed that he will not encumber more than an additional 10% of his brand income from his NFL player contracts and 30% of his other brand income in any given year.

        As consideration for the ABI under the brand contract, we will pay the contract party a one-time cash amount of the purchase price negotiated under each brand contract (less 5% of the purchase price to be held in escrow until six months of consecutive payments due under the brand contract have been timely delivered to us) contingent upon our ability to obtain financing for the purchase price. We intend to finance the purchase price of each brand contract through the issuance of a tracking stock linked to the value of such brand. Our ABI under each brand contract is contingent upon our payment of this purchase price. We will have no further financial obligation to the contract parties under a brand contract once this payment has been made, other than the indemnities described below.

        In addition to the escrow holdback (which will be released after six consecutive months of timely payments of the ABI to us after the closing of the respective offerings), the brand contracts provide for certain express remedies (without limiting any other rights or remedies that we may have) in the event of late payments, including payment of interest at the then current prime rate plus 3% per year, compounded monthly, and public disclosure of such late payments (subject to notice and an opportunity to cure with respect to the first or second such late payment in any 12 month period).

        The brand contracts are intended to remain in effect indefinitely and, except as set forth below, may be terminated only upon mutual agreement of the contract party and us. If the contract party resigns from the NFL within two years of the date of this offering for any reason other than a "good reason," we may elect in our sole discretion to terminate the brand contract and the contract party will be required to pay us the amounts set forth under the heading "Termination Fee Payable by Contract Party" in the section entitled "—Fantex—Overview" (net of any amounts previously paid to us by him pursuant to the respective brand contract).

130


Table of Contents

        "Good reason" means resignation from the NFL for any of the following reasons:

    contract party suffers or sustains any injury, illness or medical condition that renders him incapable of performing in professional football; or

    contract party suffers or sustains a major injury and a qualified medical physician (depending on the nature of the major illness) advises him that as a result he would be putting his physical health at substantial risk (i.e., a risk that is substantially greater than simply by virtue of his participation in professional football) by continuing to engage in professional football.

        Each of the contract parties has made certain other covenants to us in the brand contract, including providing us with certain information and audit rights, and copies of all new material agreements, amendments or terminations. They have further agreed to comply with applicable laws and rules and standards or requirements of the league or other association or governing body, to which he is a member in connection with being an NFL football player.

        Following the closing of this offering with respect to the brand contract with Vernon Davis, or the consummation of the offerings of additional tracking stocks linked to the value of our other tracking stock brands, and pursuant to each brand contract, the contract party will provide irrevocable instructions to each payor of brand income (requiring them to pay the amounts owed to us directly) and such other documents as we reasonably request. To the extent that it is not commercially practical, without unreasonable burden to the contract party, for ABI to be delivered directly to us, or to the extent that any assignment of the ABI (or any portion thereof) is deemed invalid or not enforceable, then the contract party is required to make such payments to us as promptly as practical after receipt thereof (but not later than 15 days after receipt) including via automatic payments of installments from his bank accounts. We will not know whether there will be any challenges that could affect whether payments will be made directly by each payor or from the contract party as described in this paragraph until after the payors respond to the irrevocable payment instructions to be delivered by the contract party to such payors after the consummation of the respective offerings. To the extent that any assignment of such amounts (including wages) is effective under the relevant state law, we may seek to enforce our rights to receive such amounts directly from the payor.

        Each of the contract parties has agreed to indemnify us against damages that may result in connection with his breach of any covenants, representations or warranties in the brand contract with such contract party. We agreed to indemnify each contract party (and his heirs and assigns) against any third-party lawsuit arising from the contract party being a party to a brand contract with us, including claims relating to (a) any breach of our representations and warranties in the brand contract, (b) any violation of law by us and (c) our registration statement with respect to the related offering of tracking stock associated with such contract party, other than, in each case, those arising out of or relating to any breach of the brand contract by the contract party.

Brand Income

        Brand income, as defined above, from each of our contract parties is generally derived from such contract party's NFL player contracts and other included contracts described in further detail below. Due to the fact that payments under the NFL player contract, and some of the other included contracts, are usually made over the course of the regular NFL season period, we expect that our tracking stock brands will be subject to seasonal fluctuations in attributed income.

        The player contracts for each of the contract parties generally provide, except as otherwise indicated below, that payments are made in installments over the course of the applicable regular season period. Each of these payments would be considered brand income when received by the contract parties, and thus we would be entitled to our ABI from these amounts, when paid. To the extent any of our contract parties elects to defer receipt of his compensation under the NFL player

131


Table of Contents

contract, pursuant to Article 26, Section 6 of the CBA, for purposes of the brand contract, such deferred compensation will be deemed to have been received by such contract party on the due date provided in his NFL player contract, prior to any such deferral, and we will be entitled to our ABI from these amounts as of such due date.

        The player contracts further provide that if the contract party is injured or dies in the performance of his services under the player contract then the contract party will receive necessary medical and hospital care during the term of the player contract and will continue to receive his yearly salary during the season of injury or death only (including any guaranteed amounts).

        Unless otherwise stated in the player contract, the NFL teams may generally terminate the player contract at any time, in the sole judgment of the team, if the contract party's skill or performance has been unsatisfactory as compared with that of other players competing for positions on the team's roster, or if the contract party has engaged in personal conduct reasonably judged by the team to adversely affect or reflect on the team. In addition, during the period any salary cap is legally in effect, the player contract may be terminated if, in the team's opinion, the contract party is anticipated to make less of a contribution to the team's ability to compete on the playing field than another player or players whom the team intends to sign or attempts to sign, or another player or players who is or are already on the team's roster, and for whom the team needs room. The team may also terminate the player contract if the contract party fails to establish or maintain his excellent physical condition to the satisfaction of the team's physician, or make the required full and complete disclosure and good faith responses to the team's physician of any physical or mental condition known to him which might impair his performance under this contract and to respond fully and in good faith when questioned by the team's physician about such condition.

        In addition, the contract party's endorsement agreements and other included contracts may be terminated in the event of breach of contract by the contract party or if the contract party fails to play in the NFL, is charged with criminal behavior or engages in conduct that adversely reflects on the sponsor. For example, as a result of Vernon Davis tweeting about a competing product, a coconut water company recently terminated its contract with him as a spokesperson. In addition, certain endorsement contracts may be terminated due to changes to NFL rules preventing reasonable use of the endorsement product.

Vernon Davis Brand

Vernon Davis Brand Contract

        On October 30, 2013 we entered into a brand contract with Vernon Davis and The Duke Marketing LLC, a professional services company affiliated with Vernon Davis. This brand contract entitles us to receive 10% of Vernon Davis's brand income from and after October 30, 2013.

        In addition to the exclusions laid out above under "—Our Brand Contracts," brand income does not include the following specifically excluded income:

    any income of: (1) the Vernon Davis Foundation or (2) any other charitable foundation or organization as a result of personal services performed by Vernon Davis,

    any proceeds of the insurance policy purchased by Vernon Davis against the risk of injury or disability,

    income derived from his performance as a painter, sculptor or artist in any other fine or graphic arts medium, related of Gallery 85 or any other art gallery owned by him or from any school for the arts established in part by him, whether charitable or for profit, regardless of whether he participates or his persona is used to market or promote such school), and

132


Table of Contents

    any and all cash or other consideration, in any form whatsoever, received by Vernon Davis from the following entities (or their affiliates as agreed as of October 30, 2013): (1) Ike Shehadeh and Ike's Love & Sandwiches Franchising LLC and (2) Jamba Juice Company.

        As consideration for the ABI under the brand contract, we will pay Vernon Davis a one-time cash amount of $4.0 million (less $0.2 million to be held in escrow until six months of consecutive payments due under the brand contract have been timely delivered to us) contingent upon our ability to obtain financing for the purchase price. Our ABI under the brand contract is contingent upon our payment of the purchase price following the consummation of an offering of shares of our Fantex Series Vernon Davis. We will have no further financial obligation to Vernon Davis under the brand contract once this payment has been made, other than the indemnities described above.

Vernon Davis

        Vernon Davis is a tight end for the San Francisco 49ers, or the 49ers, in the NFL. He has been in the NFL since 2006. Vernon Davis attended the University of Maryland, where he was the starting tight end for his sophomore and junior seasons. Vernon Davis entered the NFL draft after his junior year and was selected in the first round, 6th overall, by the San Francisco 49ers. Vernon Davis was born on January 31, 1984 and is 30 years old as of April 21, 2014. He currently lives in San Jose, California.

        During the 2009 NFL season, Vernon Davis was selected to the Pro Bowl after posting career highs of 78 receptions, 965 yards, and 13 touchdown receptions. At the time, that number of touchdown receptions tied the NFL single season record for a tight end. According to statistics publically available at NFL.com, Vernon Davis's total receptions and receiving yards during each of the seven prior seasons he has played in the NFL are as follows:

NFL
Season
  Receptions   Receiving
Yards
 

2006

    20     265  

2007

    52     509  

2008

    31     358  

2009

    78     965  

2010

    56     914  

2011

    67     792  

2012

    41     548  

2013

    52     850  

        Our vision for a brand identity for Vernon Davis is to associate him as "transformational." Vernon Davis has had many inflection points throughout his life that serve as powerful examples of his ability to persevere and evolve through challenging circumstances. Vernon Davis has become a successful football player, team leader, student of the arts, philanthropist, and entrepreneur. As one of the first athletes to sign a brand contract with us, he is helping transform how athletes look to build and enhance their brands.

        As part of our due diligence of Vernon Davis we reviewed financial and other information from him to evaluate financial suitability and brand sustainability (including credit worthiness). Other than what has been disclosed elsewhere in this prospectus, we have not been made aware by Vernon Davis of any events or incidents (personal or otherwise) relating to Vernon Davis that we believe would materially negatively impact the Vernon Davis Brand going forward. Among other things we reviewed schedules of his assets and liabilities and existing commitments, tax returns and credit reports and credit scores. Based on our review we concluded that as of December 31, 2013 Vernon Davis is a sound credit risk with sufficient financial health and stability, with prudent and manageable levels of indebtedness and other liabilities, to make required payments to us under his brand contract, including if necessary the repayment to us of approximately $4.2 million if he retires from professional football

133


Table of Contents

within two years of the date of this offering for any reason other than a "good reason." For instance, as part of our due diligence, we were provided information that showed that Vernon Davis has substantial amounts of cash and liquid investments and limited debt, with an asset-to-debt ratio of approximately 4 to 1. In addition, as of December 31, 2013, Vernon Davis's current assets exceed his current liabilities by an amount at least equal to the anticipated ABI payments to us for the next 24 months. As a result, we have concluded that he is a sound credit risk. Other than the $0.2 million of the cash consideration to be held in escrow for six months, we have not required Vernon Davis to place any additional funds in an escrow account as security to cover the repayment of $4.2 million in the event he retires from professional football within two years following completion of the offering. In addition, we intend to monitor the creditworthiness and financial health and stability of Vernon Davis on a periodic basis in the future through the information and audit rights that we have under our brand contract with him.

Tight End Position

        A tight end in the NFL is often seen as a hybrid position with the characteristics and roles of both an offensive lineman and a wide receiver. Like offensive linemen, a tight end is usually lined up on the offensive line and is large enough to be an effective blocker. On the other hand, a tight end is an eligible receiver and must be skilled enough to warrant a defense's attention when running pass patterns. Because of the hybrid nature of the position, the tight end's role in any given offense depends on the tactical preferences and philosophy of the head coach and offensive coordinator. In some systems, the tight end will merely act as a sixth offensive lineman rarely going out for passes. Other systems utilize the tight end primarily as a receiver, frequently taking advantage of the tight end's size and speed to create mismatches in the defensive secondary. Many coaches will often have one tight end who specializes in blocking in running situations while utilizing a better pass catching tight end in obvious passing situations. Top tight ends in the NFL usually excel as both a blocker and receiver.

        The salary for an NFL football player is highly dependent upon his perceived ranking against other players in the position. All Pro or Pro Bowl caliber players generally receive significantly higher compensation than players that are less well known. Based on media reports, the average annual compensation of the five highest paid tight ends for the 2012 season was approximately $7.1 million. Vernon Davis is reported to have received the second highest annual compensation for tight ends in the 2013 season.

        NFL players in the tight end position are generally considered to reach their peak at approximately 26 years of age, and a sharp decline in performance is generally observed at approximately 30 years of age. Based on our analysis of data from publicly available sources, the average career length of an NFL tight end is approximately 5.5 years. Our analysis included the 212 NFL tight ends drafted in rounds one through seven between 1990 and 2010, who recorded at least one career NFL reception and were no longer playing at the start of the 2013 NFL season. Utilizing the methodology described under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies," we estimated Vernon Davis's expected career length to be 14 years.

Vernon Davis Brand Income

        The information below is a summary of contracts of Vernon Davis that are included in his brand income. We refer to these as included contracts.

134


Table of Contents

    Included Contracts Under the Brand Contract with Vernon Davis

        The table below lists the included contracts as of December 31, 2013:

Counterparty
  Type of contract   Product category

San Francisco Forty Niners, Limited

  NFL Player Contract   N/A

KGO-TV(1)

  Television   Sports Commentary

Krave Pure Foods, Inc. 

  Endorsement   Food

Hungry Fish Media, LLC (d/b/a NutraClick)

  Endorsement   Nutrition

New League Productions, Inc.(1)

  Television   TV Appearances

(1)
As of December 31, 2013 these contracts were fully performed and all payments due under such contracts were received by Vernon Davis. Income due under these contracts from and after October 30, 2013 is included in brand income.

        The following table shows historical information of cash receipts for included contracts for the years ended December 31, 2012 and 2013, and is derived from our audited statements of cash receipts from included contracts, included elsewhere in this prospectus.

 
  Year Ended
December 31,
 
 
  2012   2013  
 
  (in thousands)
 

Receipts from included contracts subject to the brand contract(1)

             

Contractual National Football League (NFL) player receipts(2)

  $ 5,751   $ 6,072  

Contractual NFL player signing bonus receipts

         

Contractual NFL post-season roster incentive receipts

    62     156  

Contractual NFL player performance incentives receipts

    600     601  
           

Total receipts from NFL player contract

    6,413     6,829  

Receipts from other included contracts

    227     382  

Total receipts from included contracts subject to the brand contract

  $ 6,640   $ 7,211  
           

(1)
Please see Notes 1 and 2 to the audited statements of cash receipts from included contracts for Vernon Davis for an explanation of the basis of presentation and summary of significant accounting policies used in presenting these amounts. Receipts shown are for historical periods and are not necessarily indicative of future expected receipts from current or future included contracts for any period.

(2)
NFL player contract amounts were paid in installments over the course of the applicable regular season period; therefore, a portion of the amounts payable for the 2011 and 2012 seasons were paid in 2012 and 2013, respectively.

        The following summaries include descriptions of contracted cash receipts for future years under the included contracts, assuming that the parties perform their obligations under the included contracts and none of the included contracts are amended, renegotiated or terminated prior to the expected termination date of the included contracts, as well as a summary of material terms of the included contracts. There can be no assurance that the parties will perform their obligations under the included contracts or that cash receipts with respect to the Vernon Davis Brand will equal or exceed the aggregate annual cash receipts described in the following summaries.

135


Table of Contents

    Vernon Davis NFL Player Contract—San Francisco Forty Niners (the 49ers)

        Vernon Davis has completed the fourth year of a six year player contract with the 49ers. The following table presents (i) contracted amounts under his NFL player contract and (ii) the portion of his compensation that represents Available Brand Income as of October 30, 2013, the date of his brand contract (amounts in thousands and unaudited):

 
  Playing Season    
 
 
  Total
(2010-2015)
 
 
  2010   2011   2012   2013   2014   2015  

NFL Player Salary(1)

  $ 3,874 (2) $ 4,708 (2) $ 5,751 (3) $ 6,072   $ 4,700   $ 4,350   $ 29,455  

Signing Bonus

  $ 6,500 (2) $ 3,500 (2)                 $ 10,000  

Roster Bonus(4)

      $ 400   $ 400   $ 400   $ 400   $ 400   $ 2,000  

Workout Bonus(5)

      $ 200   $ 200   $ 200   $ 200   $ 200   $ 1,000  

Total

  $ 10,374   $ 8,808   $ 6,351   $ 6,672   $ 5,300   $ 4,950   $ 42,455  

Available Brand Income Under the NFL Player Contract(6)

              $ 3,797 (7) $ 5,300   $ 4,950   $ 14,047  

(1)
All amounts are payable in equal weekly or bi-weekly installments over the course of the applicable regular season period, commencing with the first regular season game played by the 49ers in each season, reduced on a pro rata basis for any portion of a season that Vernon Davis is not on the active roster for the 49ers. Does not include payment of incidental expenses or reasonable reimbursement of incidental expenses incurred by the contract party, including travel, lodging, per diem and other incidental expenses, which amounts are not included in brand income.

(2)
Amounts guaranteed and fully earned.

(3)
$4,418,000 of 2012 NFL player salary is guaranteed. All amounts due in 2012 were earned.

(4)
During each of the 2011, 2012, 2013, 2014 and 2015 NFL Seasons, Vernon Davis has received and will receive a $25,000 "Roster Bonus" for every game in which he is a member of the 49ers 45-Man Active List. Vernon Davis earned the maximum Roster Bonus amount of $400,000 in 2011 and 2012 and $375,000 in 2013. Vernon Davis was listed as inactive on the 49ers regular season game on September 22, 2013, and therefore was only eligible to receive $375,000 in Roster Bonuses during the 2013 NFL Season.

(5)
During each of his 2011, 2012, 2013, 2014 and