Attached files
Exhibit
99.2
PayMode®,
a product line of Bank of America Corporation
Financial
Statements
December 31,
2008
PayMode®,
a product line of Bank of America Corporation
Index
December 31,
2008
| Page(s) | |
| Report of Independent Registered Public Accounting Firm | 1 |
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Consolidated Financial
Statements
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Statements
of Assets Sold
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2
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Statement
of Revenue and Direct Expenses
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3
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Notes
to Financial Statements
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4-7
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Report
of Independent Registered Public Accounting Firm
To the
Board of Directors and Shareholder of
Bank of
America National Association:
We
conducted our audit in accordance with the auditing standards generally accepted
in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Statement
of Assets Sold and Statement of Revenue and Direct Expenses are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement of Assets Sold and
Statement of Revenue and Direct Expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Statement of
Assets Sold and Statement of Revenue and Direct Expenses. We believe
that our audit provides a reasonable basis for our opinion.
The
accompanying Statement of Assets Sold and Statement of Revenue and Direct
Expenses were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in the
Current Report on Form 8-K/A of Bottomline Technologies (de), Inc.) as described
in Note 2 and are not intended to be a complete presentation of the financial
position or results of operations of PayMode®, a product line of the
Corporation
In our
opinion, the Statement of Assets Sold and Statement of Revenue and Direct
Expenses referred to above present fairly, in all material respects, the assets
sold at December 31, 2008 and revenue and direct expenses for the year ended
December 31, 2008 as described in Note 2 in conformity with accounting
principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers
November
13, 2009
1
PayMode®,
a product line of Bank of America Corporation
Statements
of Assets Sold
December 31,
2008
| (in thousands of dollars) |
2008
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|||
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Assets
Sold:
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||||
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Prepaid
expenses
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$ | 36 | ||
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Property
and equipment
|
746 | |||
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Software
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23 | |||
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Total assets sold
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$ | 805 | ||
The
accompanying notes are an integral part of these financial
statements.
2
PayMode®,
a product line of Bank of America Corporation
Statement
of Revenue and Direct Expenses
December
31, 2008
| (in thousands of dollars) |
2008
|
|||
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Revenue:
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||||
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Interest Income
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$ | 6,160 | ||
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Fee revenue
|
5,669 | |||
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Total revenue
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11,829 | |||
| Direct Expenses: | ||||
| Cost of revenue | 8,053 | |||
| Selling, general and administrative | 911 | |||
| Total direct expenses | 8,964 | |||
|
Revenue less direct
expenses
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$ | 2,865 | ||
The
accompanying notes are an integral part of these financial
statements.
3
PayMode®,
a product line of Bank of America Corporation
Notes
to Financial Statements
December 31,
2008
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1.
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Description
of Business
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PayMode®
is a product line within the Treasury Services business of Bank of America
Corporation (the "Corporation"). Specifically, PayMode® is an
internet based payment system that enables the initiation, processing and
transmission of electronic payments and remittance information between
disbursing companies, which are the Corporation's clients, and their vendors,
suppliers and service providers. The Corporation’s clients utilize
PayMode® for their payables automation with those clients' suppliers receiving
electronic payments and comprehensive remittance data. PayMode®
currently only provides services to the Corporation’s
customers. PayMode®’s services enhance its customer's operational
efficiency in the accounts payable and corporate treasury functions, including
payment processes and controls.
On August
5, 2009, Bottomline Technologies (de), Inc. ("Bottomline") entered into an Asset
Purchase Agreement (the "Agreement") with Bank of America, N.A. (a wholly owned
indirect subsidiary of the Corporation) to purchase substantially all the assets
and related operations of the PayMode® product line, and assume certain
liabilities. Under the terms of the Agreement, Bottomline became the
owner of PayMode® and the Corporation received consideration consisting of $17
million in cash and a warrant to purchase 1,000,000 shares of common stock of
Bottomline. The transaction was consummated on September 14,
2009.
Purchased
assets included prepaid assets, software, property and equipment, intellectual
property, the vendor network and other intangible assets. Liabilities
assumed were limited to obligations arising under the permits transferred,
contracts assigned and accrued but unused vacation time of employees hired by
Bottomline. Based on the nature of these liabilities, as well as, the
Corporation's vacation policies, no book value has been assigned to the assumed
liabilities.
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2.
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Basis
of Presentation
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PayMode®
is a product line within the Treasury Services business of the
Corporation. Historically, separate financial statements have not
been prepared for PayMode®. The accompanying Statement of Assets Sold
as of December 31, 2008 and the Statement of Revenue and Direct Expenses for the
year ended December 31, 2008 (the "Statements") have been prepared for the
purpose of complying with Rule 3-05 of Regulation S-X of the Securities and
Exchange Commission. The Statements have been prepared in lieu of
complete audited financial statements as the Corporation does not believe that
such US GAAP financial statements can be prepared without arduous efforts and
undue costs. During the reporting period, PayMode® has not been
required to produce stand-alone financial statements under the Corporation or
operate as a stand-alone entity. The Corporation also has not
historically pushed down corporate level expenses to PayMode® and cannot provide
such allocations without undue cost and effort. Corporate level
expenses include expenses such as services provided by senior management, human
resources, legal and finance departments. The Statements were
prepared using the Corporation’s accounting policies.
The
accompanying Statement of Revenue and Direct Expenses includes fee revenue and
interest revenue allocated through the Corporation's intercompany funds transfer
pricing process and the direct expenses of PayMode®. Indirect
expenses such as interest and income taxes, certain management expenses and
shared administrative expenses have been excluded from the accompanying
Statement of Revenue and Direct Expenses, as it is not practical to isolate and
allocate such expenses to PayMode®. The accompanying Statement of
Assets Sold has been derived from the accounting records of the
Corporation. These financial statements are not intended to be a
complete representation of the financial position or results of PayMode® as a
4
PayMode®,
a product line of Bank of America Corporation
Notes
to Financial Statements
December 31,
2008
stand-alone
going concern, nor are they indicative of the results to be expected from future
operations of PayMode®. Management believes that the assumptions
underlying the Statements are reasonable and appropriate under the
circumstances.
The
accompanying Statement of Assets Sold reflects the assets sold and the
liabilities assumed by Bottomline pursuant to the Agreement. Any
other assets and liabilities have been excluded from the Statement of Assets
Sold as these items will be retained by the Corporation.
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3.
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Summary
of Significant Accounting Policies
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Use
of estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ
from those estimates. As discussed in Note 1, these financial
statements include allocations and estimates that are not necessarily indicative
of the costs and expenses that would have resulted if PayMode® had been operated
as a separate entity or of the future results of PayMode®.
Property
and equipment
Property
and equipment are stated at cost less accumulated depreciation and consists of
the specific assets identified in the Agreement as being sold to Bottomline in
conjunction with the sale of PayMode®. Depreciation is recognized
using the straight-line method over the estimated useful lives of the assets,
which ranges from 3 to 5 years and is recorded within the Statement of Revenue
and Direct Expenses. Maintenance and repairs are expensed as
incurred, while improvements that extend the useful life of the related asset
are capitalized and depreciated over the remaining life of the related
asset.
Revenue
recognition
Interest
income represents income allocated through the Corporation's intercompany fund
transfer pricing process whereby PayMode® is compensated for deposits placed
with the Corporation. As part of its transaction processing, PayMode®
may hold cash balances, which are invested overnight with the
Corporation. The rate of interest paid to PayMode® by the Corporation
is based upon the aforementioned funds transfer pricing methodology and does not
necessarily reflect a market rate of interest. The Corporation
maintains all debt and notes payable on a consolidated basis to fund and manage
operations; accordingly, debt and related interest expense were not allocated to
PayMode®.
Fee
revenue is mostly driven by fees charged to customers, based on the number of
transactions processed on the customer's behalf. In addition to the
aforementioned transaction based fees, PayMode® also bills its customers for
implementation and monthly maintenance services. These fees are
recognized in the period services have been provided, significant obligations
have been performed, and collection is reasonably assured.
Direct
expenses
Direct
expenses are classified as either, Cost of Revenue or Selling, General and
Administrative based on the underlying activity. Direct expenses that
were allocated to these expense categories include Personnel Expense, Occupancy
Expense and Direct Processing Expense.
5
PayMode®,
a product line of Bank of America Corporation
Notes
to Financial Statements
December 31,
2008
Personnel
expense
The
Corporation has certain qualified retirement and defined contribution plans
covering full-time, salaried employees and certain part-time
employees. Expenses under these plans are accrued each
year. The costs are charged to current operations and, for defined
benefit plans, consist of several components of net pension cost based on
various actuarial assumptions regarding future expectations under the
plans. Total employee benefits costs were approximately $912 thousand
for the year ended December 31, 2008.
Certain
employees of the Corporation participate in a management compensation plan which
provides incentive awards based on the extent to which performance objectives
and profit goals are met. Incentive expenses under the plan were
approximately $171 thousand for the year ended December 31, 2008.
Occupancy
expense
Occupancy
expense consists of rent expense on the operating lease directly related to
PayMode®, as well as, an allocation of depreciation expense related to the
equipment utilized within the premises from the Corporation based up the square
footage of the premises and a deprecation rate determined by the
Corporation.
Direct
processing expense
The
Corporation provides business-to-business payment processing services to
customers. Direct processing expense consists of software and
hardware maintenance and development costs, amortization, and various fees
relating to these activities. These activities are performed by a
centralized technology unit and have been allocated to PayMode® based on
usage.
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4.
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Property
and Equipment
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Property
and equipment consists of the following at December 31, 2008 (in thousands of
dollars):
[Missing Graphic Reference]
Depreciation
expense was $477 thousand for the year ended December 31, 2008 and is recorded
in the Statement of Revenue and Direct Expenses.
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5.
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Commitment
and Contingencies
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The
Corporation has entered into operating leases for premises related to
PayMode®. Future minimum rental payments under these leases are $231
thousand for 2009, $233 thousand for 2010, $233 thousand for 2011, $233 thousand
for 2012 and 1,416 thousand thereafter. Rental expense was $230
thousand for the year ended December 31, 2008 and is included in Occupancy
Expense in the Statement of Revenue and Direct Expenses.
In
addition, Bottomline assumed the liabilities of PayMode® as it relates to
permits transferred and contracts assigned to Bottomline arising subsequent to
the reporting date.
6
PayMode®,
a product line of Bank of America Corporation
Notes
to Financial Statements
December 31,
2008
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6.
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Related
Parties
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PayMode®
has significant transactions with the Corporation and its'
affiliates. During the year ended December 31, 2008, Fee Revenue
recognized based upon transactions processed for the Corporation or its'
affiliates was approximately $566 thousand. The entirety of the
interest income allocated to PayMode® is earned based upon interest rates
determined by the Corporation.
PayMode®
also benefits from discounts and pricing negotiated with suppliers and vendors
by the Corporation.
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