Exhibit 99.2

 

PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY

 

Unaudited Condensed Consolidated Financial Statements

 

Six Months Ended June 30, 2014 and 2013

 



 

PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY

Unaudited Condensed Consolidated Financial Statements

Six Months Ended June 30, 2014 and 2013

 

Table of Contents

 

 

Page(s)

 

 

Unaudited Condensed Consolidated Financial Statements:

 

 

 

Balance Sheet

1

 

 

Statements of Operations

2

 

 

Statement of Stockholders’ Equity

3

 

 

Statements of Cash Flows

4

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

5–7

 



 

PLACEMARK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheet

(unaudited)

June 30, 2014

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

 

$

8,015,607

 

Accounts receivable

 

2,441,986

 

Prepaid expenses and other current assets

 

739,458

 

Deferred income taxes

 

255,400

 

Total current assets

 

11,452,451

 

Equipment and leasehold improvements, net

 

1,687,802

 

Deferred income taxes

 

4,394,600

 

Deposits

 

20,336

 

Total assets

 

$

17,555,189

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current portion of note payable

 

$

21,078

 

Accounts payable

 

547,875

 

Accrued liabilities

 

1,911,791

 

Deferred revenue

 

87,085

 

Current portion of deferred rent

 

 

Total current liabilities

 

2,567,829

 

Note payable, net of current portion

 

 

Deferred rent, net of current portion

 

348,136

 

 

 

348,136

 

Stockholders’ equity:

 

 

 

Preferred stock, Convertible Series B-2

 

375,838

 

Preferred stock, Convertible Series B-1

 

11,373,954

 

Preferred stock, Convertible Series A

 

27,711,760

 

Common stock

 

23,877

 

Treasury stock, at cost

 

(227,046

)

Additional paid-in capital

 

33,240,457

 

Accumulated deficit

 

(57,859,616

)

Total stockholders’ equity

 

14,639,224

 

Total liabilities and stockholders’ equity

 

$

17,555,189

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

1



 

PLACEMARK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(unaudited)

Six months ended June 30, 2014 and 2013

 

 

 

2014

 

2013

 

Net advisory fee revenue

 

$

11,118,421

 

8,237,464

 

Other client fees

 

156,399

 

128,333

 

Total revenue

 

11,274,820

 

8,365,797

 

Operating expenses:

 

 

 

 

 

General and administrative expenses

 

10,604,480

 

8,310,572

 

Depreciation and amortization

 

285,736

 

113,378

 

Share-based compensation costs

 

15,000

 

15,001

 

Total operating expenses

 

10,905,216

 

8,438,951

 

Income (loss) from operations

 

369,604

 

(73,154

)

Other expense

 

(188

)

(451

)

Income (loss) before income taxes

 

369,416

 

(73,605

)

Income taxes

 

(12,498

)

(21,500

)

Net income (loss)

 

$

356,918

 

(95,105

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

2



 

PLACEMARK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Stockholders’ Equity

(unaudited)

Six months ended June 30, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Preferred stock

 

Common stock

 

Treasury

 

paid-in

 

Accumulated

 

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

stock

 

capital

 

deficit

 

Total

 

Balance at December 31, 2013

 

66,590,698

 

$

37,751,793

 

23,809,103

 

$

23,809

 

(227,046

)

34,934,687

 

(58,216,534

)

14,266,709

 

Issuance of common stock upon exercise of stock options

 

 

 

67,958

 

68

 

 

529

 

 

597

 

Share-based compensation expense

 

 

 

 

 

 

15,000

 

 

15,000

 

Accretion of Series A preferred stock to redemption value

 

 

1,261,417

 

 

 

 

(1,261,417

)

 

 

Accretion of Series B-1 preferred stock to redemption value

 

 

434,001

 

 

 

 

(434,001

)

 

 

Accretion of Series B-2 preferred stock to redemption value

 

 

14,341

 

 

 

 

(14,341

)

 

 

Net income

 

 

 

 

 

 

 

356,918

 

356,918

 

Balance at June 30, 2014

 

66,590,698

 

$

39,461,552

 

23,877,061

 

$

23,877

 

(227,046

)

33,240,457

 

57,859,616

 

14,639,224

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3



 

PLACEMARK HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six months ended June 30, 2014 and 2013

 

 

 

2014

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

356,918

 

(95,105

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

285,735

 

113,378

 

Share-based compensation expense

 

15,000

 

15,001

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(393,847

)

273,478

 

Prepaid expenses and other current assets

 

144,702

 

259,328

 

Deposits

 

1,390

 

 

Accounts payable

 

76,377

 

(91,702

)

Accrued liabilities

 

22,811

 

599,336

 

Deferred rent

 

177,618

 

(90,715

)

Deferred revenue

 

84,195

 

(72,499

)

Net cash provided by operating activities

 

770,899

 

910,500

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

35,074

 

(554,894

)

Purchases of computer software projects in process

 

(476,946

)

 

Net cash used in investing activities

 

(441,872

)

(554,894

)

Cash flows from financing activities:

 

 

 

 

 

Payments on note payable

 

(13,551

)

(13,855

)

Payments on capital lease

 

(899

)

(895

)

Exercise of stock options

 

597

 

 

Net cash used in financing activities

 

(13,853

)

(14,750

)

Net change in cash and cash equivalents

 

315,174

 

340,856

 

Cash and cash equivalents:

 

 

 

 

 

Beginning of year

 

7,700,433

 

6,323,583

 

End of period

 

$

8,015,607

 

6,664,439

 

 

See note 6 for supplemental disclosure of cash flow activity.

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4



 

PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months ended June 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 June 30, 2014 and for the six months ended June 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 June 30, 2014 and the results of operations, equity, and cash flows for the periods presented herein. The results of operations for the six months ended June 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.

 

(Continued)

 

5



 

PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months ended June 30, 2014 and 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 June 30, 2014 totaled $1,032,042.

 

(d)                      Advertising Costs

 

The Company expenses advertising costs as incurred. Advertising expense was $89,668 and $70,257 for the six months ended June 30, 2014 and 2013, respectively. Advertising and marketing expenses include costs of advertising and public relations.

 

(3)                     Related-Party Transactions

 

During the six months ended June 30, 2014 and 2013, the Company earned net revenue of $1,558,765 and $1,274,718, 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 71% of its 2014 and 2013 revenue, respectively, from customers represented by three program sponsors.

 

(Continued)

 

6



 

PLACEMARK HOLDINGS, INC.
AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

Six Months ended June 30, 2014 and 2013

 

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 39 % 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 June 30, 2014, 82% of the Company’s accounts receivable were from this one program sponsor.

 

(6)                     Supplemental Cash Flow Disclosure

 

 

 

2014

 

2013

 

Cash paid during the period for interest

 

$

225

 

225

 

 

 

 

 

 

 

Cash paid during the period for income taxes

 

$

27,500

 

42,988

 

 

(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 six months ended June 30:

 

 

 

2014

 

2013

 

Gross advisory fees

 

$

22,193,156

 

14,776,056

 

Contracted payments to money managers

 

11,074,735

 

6,538,592

 

Net revenue

 

$

11,118,421

 

8,237,464

 

 

(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)

 

7