Exhibit 99.1

 

Attributed Financial Information for Our Platform Common Stock and Tracking Stocks

 

Each of our tracking stocks are intended to reflect the separate performance of an associated brand contract. Our platform common stock is intended to reflect the separate performance of all of our assets and liabilities not attributed to our existing tracking stocks or any other tracking stock that we may create from time to time.

The following tables present our assets, liabilities, income, expenses and cash flows as of and for the year ended December 31, 2014. The tables further present our assets, liabilities, income, expenses and cash flows that are attributed to our platform common stock and our tracking stocks. The financial information should be read in conjunction with our Form 10-K.

Notwithstanding the following attribution of assets, liabilities, income, expenses and cash flows to our platform common stock and our tracking stocks, our tracking stock structure does not affect the ownership or the respective legal title to our assets or responsibility for our liabilities. Holders of our platform common stock and our tracking stocks are holders of our common stock and are subject to risks associated with an investment in our company and all of our businesses, assets and liabilities. The issuance of our platform common stock or tracking stocks does not affect the rights of our creditors.

 

FANTEX, INC.

ATTRIBUTED BALANCE SHEET INFORMATION

(Unaudited)

 

 

 

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FANTEX, INC.

ATTRIBUTED STATEMENT OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

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FANTEX, INC.

ATTRIBUTED STATEMENT OF CASH FLOWS INFORMATION

(Unaudited)

 

 

 

 

 

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NOTES TO ATTRIBUTED FINANCIAL INFORMATION

(Unaudited)

 

We have attributed the following assets and liabilities to the tracking stocks:

 

 

 

 

 

 

We will also attribute the following additional assets and liabilities to each tracking stock brand:

 

 

 

Covered Amounts

As described in “Item 1. Business—Management and Attribution Policies” in Form 10-K, income (and assets) and liabilities will generally be attributed to a tracking stock based on the income and liabilities of that tracking stock. However, if as a result of any debtor relief laws we do not receive any portion of our acquired brand income from a brand contract then we will nonetheless attribute income during any period to the corresponding tracking stock 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 debtor relief laws. 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 as an expense, as discussed above.

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Platform Unit

Our platform unit will initially have attributed to it all of our assets and liabilities that are not specifically attributed to our current tracking stocks or to any other tracking stocks  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. For example, we will attribute the 5% of our ABI under our existing brand contracts to the platform unit, and expect to attribute a similar amount for each of our future brand contracts.

We believe the attribution presented in the financial information above reasonably reflects our attribution policy to track the performance of our tracking stock brands. We cannot provide any guarantee that any tracking stock will in fact track the performance of the associated brand contract.

Management Discussion of Tracking Stocks

Tracking Stock Attributed Assets

The largest attributed asset for each of our tracking stocks is the brand contract associated with each tracking stock. We expect the brand contract to be the largest single attributed asset for each tracking stock for the foreseeable future. As the cash generated by each brand contract is remitted to us, we intend to return a portion of this cash to the stockholders of the tracking stock in the form of dividend payments. The remaining cash will be used to meet the working capital and attributed operating needs of the tracking stock and for potential future co-investment opportunities that may arise under the brand contract.

Fantex Series Vernon Davis

Initial Public Offering

We completed the initial public offering of the Fantex Series Vernon Davis on April 28, 2014 raising approximately $4.2 million from the sale of 421,100 shares. On May 5, 2014, we paid Vernon Davis $4.0 million to complete our purchase of the Vernon Davis Brand Contract. 

Attributed Acquired Brand Income and Expenses

During the year ended December 31, 2014, we attributed approximately $878,000 of acquired brand income to the tracking stock. Approximately $825,000 of this was cash earnings from Vernon Davis’ NFL player contract and approximately $53,000 represented cash earnings from endorsement contracts. We attributed expenses for management fees and direct costs totaling $98,157 to this tracking stock. Vernon Davis continues to perform under his NFL player  contract with the San Francisco 49ers and is entering the last year of his 6 year contract which expires after the 2015 NFL season. He also continues to generate income from short term and longer term endorsement contracts, appearance fees and business ventures from which we receive ABI. He currently has two endorsement contracts that are expected to generate approximately $36,000 in ABI in 2015. 

Change in Fair Value of Brand Contract

We account for the Vernon Davis Brand Contract at estimated fair market value, as more fully described in the notes to our financial statements in this Form 10-K. From May 5, 2014 to December 31, 2014 the Vernon Davis Brand Contract generated an attributed loss of $398,100.  Our valuation process relies significantly on the full year on-field statistical performance of the athlete as inputs into the valuation model. From that data, we generate a list of comparable players who we believe are of similar caliber to the athlete and who have entered into contracts in a similar era, and are or were at similar ages and stages in their career. The results of this process can be volatile in any given period and result in large changes in fair value of the brand contract, if the on-field statistical performance varies from our previous estimates.

Our valuation model for the Vernon Davis Brand Contract reduced his playing career from 14 years to 13 years. This was a result of Vernon Davis’ statistical performance in 2014 which was below the average of his comparable set of players in his prior valuation. The new comparable set of players used in the fair value

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determination decreased his career length by one year causing a $277,292 attributed loss. As a result of the career length decrease, our model now estimates that Vernon Davis will enter into a 3 year $23.6 million contract at the end of the 2015 season, a decrease from the 4 year $33.4 million contract previously assumed in the valuation. This change resulted in a  $229,429 attributed loss.  Based on the above results and reviewing Vernon Davis’s current endorsement contracts and making estimates of his future endorsement potential we decreased our estimates of his future endorsement earnings which produced a $417,715 attributed loss. Below is a summary of the attributed valuation from the brand contract’s consummation on May 2, 2014.

 

 

The table below shows the change in fair value of the Vernon Davis brand contract by Category A, Category B, and Category C, based on the quantitative and qualitative factors described in Item 7 “— Critical Accounting Policies— Fair Value of Financial Instruments” located in this Form 10-K, from the consummation of the brand contract on May 2, 2014 through December 31, 2014.

 

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Dividends

On August 18, 2014 the Company paid a previously declared cash dividend per share of $0.70 on Fantex Series Vernon Davis. On November 26, 2014,  the Company paid a previously declared cash dividend per share of $0.30 on Fantex Series Vernon Davis.

 

Fantex Series EJ Manuel

Initial Public Offering

We completed the initial public offering of the Fantex Series EJ Manuel on July 21, 2014 raising approximately $5.2 million from the sale of 523,700 shares. On July 25, 2014, we paid EJ Manuel $4.975 million to complete our purchase of the EJ Manuel Brand.

Attributed Acquired Brand Income and Expenses

During the period from July 25, 2014 to December 31, 2014 we attributed approximately $83,000 of acquired brand income to the tracking stock. Approximately $68,000 of this was cash earnings from EJ Manuel’s

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NFL player contract and approximately $15,000 represented cash earnings from endorsement contracts. We attributed expenses for management fees and direct costs totaling $9,167 to this tracking stock. 

Change in Fair Value of Brand Contract

We account for the EJ Manuel Brand Contract at estimated fair market value, as more fully described in the notes to our financial statements in this Form 10-K. From July 25, 2014 to December 31, 2014 the EJ Manuel Brand Contract generated an attributed loss of  $2,181,112.  Our valuation process relies significantly on the full year on-field statistical performance of the athlete as inputs into the valuation model. From that data, we generate a list of comparable players who we believe are of similar caliber to the athlete and who have entered into contracts in a similar era, and are or were at similar ages and stages in their career. The results of this process can be volatile in any given period and result in large changes in fair value of the brand contract, if the on-field statistical performance varies from our previous estimates.

Our valuation model for the EJ Manuel Brand Contract reduced his playing career from 10 years to 9 years. This was a result of EJ Manuel’s statistical performance in 2014 which was below the average of the comparable set of players in his prior valuation.  The loss of his starting position as quarterback after 4 games in 2014 was a significant factor in the career length decrease and the lower contract values as our model compares full season statistics to determine the most comparable players.  

The new comparable set of players used in the fair value determination decreased his career length by one year causing a $199,361 attributed loss. As a result of the career length decrease, our model now estimates that EJ Manuel will enter into a 3 year $24.3 million contract at the end of the 2015 season, a decrease from the 3 year $40.6 million contract previously assumed in the valuation. We also estimate that EJ Manuel will enter into a subsequent 2 year $8.2 million contract versus the previous estimate of 3 years $39.7 million. These comparable contract changes resulted in a  $1,926,562 attributed loss.  Based on the above results and reviewing EJ Manuel’s current endorsement contracts and making estimates of his future endorsement potential we decreased our estimates of his future endorsement earnings which produced a $652,474 attributed loss. Below is a summary of the attributed valuation from the brand contract’s consummation on July 25, 2014.

 

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The table below shows the change in fair value of the EJ Manuel brand contract by Category A, Category B, and Category C, based on the quantitative and qualitative factors described in Item 7 “— Critical Accounting Policies— Fair Value of Financial Instruments” located in this Form 10-K, from the consummation of the brand contract on July 25, 2014 through December 31, 2014.

 

 

Fantex Series Mohamed Sanu 

Initial Public Offering

We completed the initial public offering of the Fantex Series Mohamed Sanu on November 3, 2014 raising approximately $1.6 million from the sale of 164,300 shares. On November 3, 2014, we paid Mohamed Sanu $1.56 million to complete our purchase of the Mohamed Sanu Brand Contract.

Attributed Acquired Brand Income and Expenses

During the period from November 3, 2014 to December 31, 2014 we attributed approximately $36,267 of acquired brand income to the tracking stock. All of this was cash earnings from Mohamed Sanu’s NFL player contract. We attributed no cash from endorsement earnings in 2014.  We attributed expenses for management fees and direct costs totaling $3,989 to this tracking stock. 

Change in Fair Value of Brand Contract

We account for the Mohamed Sanu Brand Contract at estimated fair market value, as more fully described in the notes to our financial statements in this Form 10-K. From November 3, 2014 to December 31, 2014 the Mohamed Sanu Brand Contract generated an attributed gain of  $ 458,887.  Our valuation process relies significantly on the full year on-field statistical performance of the athlete as inputs into the valuation model. From that data, we generate a list of comparable players who we believe are of similar caliber to the athlete and who have entered into contracts in a similar era, and are or were at similar ages and stages in their career. The results of this process can be volatile in any given period and result in large changes in fair value of the brand contract, if the on-field statistical performance varies from our previous estimates.

Our valuation model for the Mohamed Sanu Brand Contract kept his playing career at 9 years and thus there was no gain or loss related to this valuation model input. Mohamed Sanu played in all 16 NFL games for the Cincinnati Bengal in 2014 and improved his statistics from the prior year.  This improved the set of comparable players that was used to estimate his future NFL contracts. As a result our model now estimates that Mohamed Sanu will enter into a 4 year $26.0 million contract at the end of the 2015 season, an increase from the 4 year $23.1 million contract previously assumed in the valuation. We also estimate that Mohamed Sanu will enter into a subsequent 1 year,  $4.0 million contract versus the previous estimate of 1 year,  $3.0 million. These comparable contract changes resulted in a  $146,183 attributed gain.  In addition, under Article 7, Section 4 — Proven Performance Escalator of the current NFL Collective Bargaining Agreement, a player drafted in the 3rd through 7th rounds is eligible for an increase in their 4th year base salary if they qualify. Mohamed Sanu qualified and his base

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salary in 2015 will increase to $1.542 million, resulting in an additional $113,357 attributed gain. Below is a summary of the attributed valuation from the brand contract’s consummation on November 3, 2014.

 

 

 

 

 

 

 

The table below shows the change in fair value of the Mohamed Sanu brand contract by Category A, Category B, and Category C, based on the quantitative and qualitative factors described in Item 7 “— Critical Accounting Policies— Fair Value of Financial Instruments” located in this Form 10-K, from the consummation of the brand contract on November 3, 2014 through December 31, 2014.

 

 

 

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