Exhibit 99.3
PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY
Unaudited Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2014 and 2013
PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY
Unaudited Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2014 and 2013
Table of Contents
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Page(s) |
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Unaudited Condensed Consolidated Financial Statements: |
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Balance Sheet |
1 |
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Statements of Operations |
2 |
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Statement of Stockholders’ Equity |
3 |
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Statements of Cash Flows |
4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5–6 |
PLACEMARK HOLDINGS, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Balance Sheet
September 30, 2014
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Assets | ||||
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Current assets: |
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Cash and cash equivalents |
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$ |
8,419,281 |
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Accounts receivable |
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2,232,953 |
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Prepaid expenses and other current assets |
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983,842 |
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Deferred income taxes |
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255,400 |
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Total current assets |
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11,891,476 |
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Equipment and leasehold improvements, net |
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1,542,181 |
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Deferred Income Taxes |
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4,394,600 |
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Deposits |
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20,336 |
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Total assets |
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$ |
17,848,593 |
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Liabilities and Stockholders’s Equity | ||||
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Current portion of deferred rent |
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Accounts payable |
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$ |
91,939 |
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Accrued liabilities |
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2,500,556 |
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Deferred revenue |
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14,437 |
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Current portion of deferred rent |
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3,861 |
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Total current liabilities |
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2,610,793 |
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Deferred rent, net of current portion |
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396,221 |
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Commitment and contingencies (Notes 7 and 8) |
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Stockholders’ equity: |
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Preferred stock, Convertible Series B-2 |
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383,187 |
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Preferred stock, Convertible Series B-1 |
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11,596,350 |
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Preferred stock, Convertible Series A |
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28,358,149 |
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Common stock |
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23,879 |
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Treasury stock, at cost |
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(227,046 |
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Additional paid-in capital |
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32,372,171 |
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Accumulated deficit |
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(57,665,111 |
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Total stockholders’ equity |
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14,841,579 |
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Total liabilities and stockholders’ equity |
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$ |
17,848,593 |
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See accompanying notes to unaudited condensed consolidated financial statements.
PLACEMARK HOLDINGS, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Operations
Nine months ended September 30, 2014 and 2013
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2014 |
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2013 |
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Net advisory fee revenue |
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$ |
17,177,013 |
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$ |
12,745,693 |
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Other client fees |
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238,909 |
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206,315 |
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Total revenue |
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17,415,922 |
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12,952,008 |
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Operating expenses: |
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General and administrative expenses |
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16,362,392 |
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12,322,717 |
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Depreciation and amortization |
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476,768 |
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171,545 |
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Share based compensation costs |
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22,723 |
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27,140 |
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Total operating expenses |
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16,861,883 |
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12,521,402 |
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Income from operations |
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554,039 |
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430,606 |
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Other expense |
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(916 |
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(335 |
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Income before income taxes |
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553,123 |
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430,271 |
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Income tax benefit |
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(1,700 |
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(24,167 |
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Net income |
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$ |
551,423 |
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$ |
406,104 |
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See accompanying notes to unaudited condensed consolidated financial statements.
PLACEMARK HOLDINGS, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Statement of Stockholders’ Equity
Nine months ended September 30, 2014
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Additional |
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Preferred Stock |
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Common Stock |
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Paid-in |
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Treasury |
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Accumulated |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Stock |
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Deficit |
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Total |
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Balance at December 31, 2013 |
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66,590,698 |
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37,751,793 |
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23,809,103 |
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23,809 |
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34,934,687 |
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(227,046 |
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(58,216,534 |
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14,266,709 |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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69,749 |
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70 |
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653 |
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— |
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— |
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722 |
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Share based compensation expense |
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— |
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— |
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— |
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— |
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22,723 |
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— |
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— |
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22,723 |
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Accretion of Series A preferred stock to redemption value |
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— |
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1,907,806 |
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— |
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— |
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(1,907,806 |
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— |
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— |
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— |
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Accretion of Series B-1 preferred stock to redemption value |
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— |
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656,396 |
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— |
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— |
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(656,396 |
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— |
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— |
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— |
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Accretion of Series B-2 preferred stock to redemption value |
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— |
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21,690 |
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— |
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— |
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(21,690 |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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551,423 |
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551,423 |
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Balance at September 30, 2014 |
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66,590,698 |
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$ |
40,337,685 |
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23,878,852 |
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$ |
23,879 |
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$ |
32,372,171 |
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$ |
(227,046 |
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$ |
(57,665,111 |
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$ |
14,841,578 |
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See accompanying notes to unaudited condensed consolidated financial statements.
PLACEMARK HOLDINGS, INC. AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2014 and 2013
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2014 |
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2013 |
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Cash flows from operating activities: |
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Net income |
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$ |
551,423 |
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$ |
406,104 |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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476,768 |
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171,545 |
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Share based compensation expense |
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22,723 |
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27,140 |
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Changes in assets and liabilities: |
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Accounts receivable |
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(184,814 |
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76,117 |
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Prepaid expenses and other current assets |
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(355,080 |
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(53,890 |
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Deposits |
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256,790 |
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— |
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Accounts payable |
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(379,559 |
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(145,361 |
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Accrued liabilities |
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612,467 |
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1,012,012 |
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Deferred rent |
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229,566 |
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(82,735 |
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Deferred revenue |
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11,547 |
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(24,998 |
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Net cash provided by operating activities |
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1,241,831 |
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1,385,934 |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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(487,284 |
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(680,992 |
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Net cash used in investing activities |
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(487,284 |
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(680,992 |
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Cash flows from financing activities: |
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Payments on note payable |
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(34,631 |
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(19,141 |
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Payments on capital lease |
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(1,790 |
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(1,790 |
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Exercise of stock options |
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722 |
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476 |
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Net cash used in financing activities |
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(35,699 |
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(20,455 |
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Net change in cash and cash equivalents |
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718,849 |
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684,487 |
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Cash and cash equivalents: |
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Beginning of year |
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7,700,433 |
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6,323,583 |
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End of year |
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$ |
8,419,282 |
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$ |
7,008,070 |
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See note 6 for supplemental disclosure of cash flow activity.
See accompanying notes to unaudited condensed consolidated financial statements.
PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
Nine Months ended September 30, 2014 and 2013
(1) Nature of Business
Description of Business
Placemark Holdings, Inc. (PHI), a Delaware corporation, is a holding company for Placemark Investments, Inc. (PI) (together, the Company).
PI is a Registered Investment Advisor and investment management technology firm dedicated to delivering highly customized and tax optimized separate account solutions to financial advisors and their clients.
PI offers overlay portfolio management (OPM) solutions and services in the retail investment industry, providing critical investment management services in its Unified Managed Account (UMA) offering. UMAs are fee-based investment solutions that incorporate multiple investments such as managed accounts, mutual funds, and ETFs into a customized, individual client portfolio. In its role as an OPM, PI makes all trade decisions in client accounts, working with money managers, specified by clients/financial advisors, who contribute proprietary investment models. PI oversees activity across multiple investment products comingled in a single custodial account, coordinating cross investment opportunities to optimize client investment performance, risk mitigation, and/or tax minimization. The Company does not have title to the client accounts to which it oversees.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of PHI and PI. All intercompany accounts and transactions have been eliminated in consolidation.
(b) Basis of Presentation
The consolidated financial statements have been prepared on the accrual basis, in conformity with accounting principles generally accepted in the United States of America (GAAP).
The accompanying unaudited condensed consolidated financial statements of the Company as of September 30, 2014 and for the nine months ended September 30, 2014 and 2013 have not been audited by an independent accounting firm. These unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2013 and reflect all normal recurring adjustments, which are, in the opinion of management, necessary to present fairly the Company’s financial position as of September 30, 2014 and the results of operations, equity, and cash flows for the periods presented herein. The results of operations for the nine months ended September 30, 2014 and 2013 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2013.
(c) Cash and Equivalents
For financial reporting purposes, the Company considers all certificates of deposit, short-term investments, and debt instruments with original maturities of three months or less to be cash equivalents. Cash equivalents at September 30, 2014 totaled zero.
(Continued)
(d) Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense was $126,049 and $97,914 for the nine months ended September 30, 2014 and 2013, respectively. Advertising and marketing expenses include costs of advertising and public relations.
(3) Related-Party Transactions
During the nine months ended September 30, 2014 and 2013, the Company earned net revenue of $2,405,027 and $1,944,925, respectively, from clients represented by a program sponsor that is a subsidiary of a bank that owns approximately 16% of outstanding shares of the Company on an as converted, fully-diluted basis.
Related-party receivables are not material to the consolidated financial statements and are included in accounts receivable.
(4) Income Taxes
The Company’s effective income tax rate in 2013 and 2014 differed from the federal statutory rate of 34% due primarily to the utilization of net operating losses.
(5) Concentrations of Credit Risk
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
The Company received 65% and 70% of its 2014 and 2013 revenue, respectively, from customers represented by three program sponsors.
The Company collects fees from all but two program sponsors in advance of each quarterly billing period based on customer assets under management valued on the last business day of the prior quarter. The customers represented by the other two sponsor programs, one of which represented approximately 34% and 38% of 2014 and 2013 revenue, respectively, are billed in arrears resulting in an accounts receivable balance at the end of each billing period. As of September 30, 2014, 89% of the Company’s accounts receivable were from this one program sponsor.
(6) Supplemental Cash Flow Disclosure
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2014 |
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2013 |
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Cash paid during the period for interest |
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$ |
250 |
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$ |
250 |
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Cash paid during the period for income taxes |
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$ |
27,500 |
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$ |
42,988 |
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(7) Net Advisory Fees
The Company reports revenue net of contracted payments to money managers. Following is a summary of the gross advisory fees and contracted payments to money managers for the nine months ended September 30:
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2014 |
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2013 |
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Gross advisory fees |
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$ |
34,436,260 |
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23,332,808 |
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Contracted payments to money managers |
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17,259,247 |
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10,577,115 |
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Net revenue |
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$ |
17,177,013 |
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12,745,693 |
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(Continued)
(8) Subsequent Events
On June 30, 2014, the Company entered into a definitive agreement to be acquired by Envestnet, Inc., a publicly traded company, for $66 million in cash. The sale, which involved 100% of the Company’s capital stock closed on October 1, 2014.
(Continued)