SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1996 or
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-15235
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MITEK SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 87-0418827
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10070 CARROLL CANYON ROAD, SAN DIEGO, CALIFORNIA 92131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 635-5900
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No .
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There were 10,075,874 shares outstanding of the registrant's Common
Stock as of January 31, 1997.
PART I: FINANCIAL INFORMATION
MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, September 30,
1996 1996
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ASSETS
CURRENT ASSETS:
Cash $ 4,099,227 $ 210,413
Accounts receivable-net 2,196,123 2,258,541
Inventories 198,355 278,206
Prepaid expenses 136,406 240,364
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Total current assets 6,630,111 2,987,524
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PROPERTY AND EQUIPMENT-at cost 1,100,605 1,049,678
Less accumulated depreciation
and amortization 932,449 902,790
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Property and equipment-net 168,156 146,888
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PREPAID LICENSE AND
OTHER ASSETS 553,212 628,030
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TOTAL $ 7,351,479 $ 3,762,442
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term liabilities $ 9,700 $ 9,190
Accounts payable 221,533 472,755
Accrued payroll and related taxes 164,239 302,037
Other accrued liabilities 183,683 319,973
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Total current liabilities 579,155 1,103,955
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LONG-TERM LIABILITIES 3,371 6,147
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COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value;
1,000,000 shares authorized;
no shares issued and outstanding
Common stock - $.001 par value;
20,000,000 shares authorized;
10,073,638 and 7,782,971 issued and
outstanding, respectively 10,073 7,783
Additional paid-in capital 7,905,117 3,503,634
Accumulated deficit (1,146,237) (859,077)
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Total stockholders' equity 6,768,953 2,652,340
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TOTAL $ 7,351,479 $ 3,762,442
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MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
December 31,
1996 1995
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NET SALES $ 1,100,932 $ 1,825,452
COST OF GOODS SOLD 400,993 740,061
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GROSS MARGIN 699,939 1,085,391
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COSTS AND EXPENSES:
Selling and marketing 425,611 303,554
General and administrative 302,915 355,016
Research and development 304,196 267,763
Interest - net (13,623) 48,231
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Total costs and expenses 1,019,099 974,564
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INCOME (LOSS) BEFORE
INCOME TAXES (319,160) 110,827
PROVISION (BENEFIT) FOR
INCOME TAXES (32,000) 22,165
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NET INCOME (LOSS) $ (287,160) $ 88,662
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EARNINGS (LOSS)
PER SHARE:
Common and Common
equivalent shares $ (.03) $ .01
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WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES 9,803,047 7,835,458
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See notes to financial statements.
MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended December 31,
1996 1995
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OPERATING ACTIVITIES:
Net income (loss) $ (287,160) $ 88,662
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 104,477 109,960
Change in operating assets and liabilities:
(Increase) in accounts receivable 62,418 (390,692)
Decrease in inventory and prepaid expense 183,809 6,523
Decrease in accounts payable and
accrued expenses (525,282) (50,572)
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Net cash used in operating activities (461,738) (236,119)
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INVESTING ACTIVITIES:
Purchases of property and equipment (50,927) (12,726)
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Net cash used in investing activities (50,927) (12,726)
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FINANCING ACTIVITIES:
Proceeds from borrowings 150,000 549,435
Repayment of notes payable and
long-term liabilities (152,294) (436,082)
Proceeds from note receivable 0 95,406
Proceeds from exercise of stock options,
warrants and secondary offering 4,403,773 177
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Net cash provided by financing activities 4,401,479 208,936
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NET INCREASE (DECREASE) IN CASH 3,888,814 (39,909)
CASH AT BEGINNING OF PERIOD 210,413 103,895
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CASH AT END OF PERIOD $ 4,099,227 $ 63,986
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MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
A. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnote disclosures that are otherwise required by
Regulation S-X and that will normally be made in the Company's Annual Report
on Form 10-K. The financial statements do, however, reflect all adjustments
(solely of a normal recurring nature) which are, in the opinion of
management, necessary for a fair statement of the results of the interim
periods presented.
Results for the three months ended December 31, 1996 are not necessarily
indicative of results which may be reported for any other interim period or
for the year as a whole.
B. Inventories
Inventories are summarized as follows:
December 31, 1996 September 30, 1996
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Raw materials $ 88,195 $ 55,366
Work in process 19,747
Finished goods 90,413 222,840
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Total $ 198,355 $ 278,206
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Inventories are recorded at the lower of cost (on the first-in,
first-out basis) or market.
C. Earnings Per Share
Earnings per share amounts are computed based on the weighted average
shares outstanding during the periods which include any delutive stock
options and warrants.
D. Sale of Common Stock
In the first quarter of fiscal year 1997, the Company undertook a
secondary public stock offering in which a total of 2,250,000 shares of
common stock were sold at $2.25 per share, providing the Company with net
proceeds of $4,352,590.
MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Continued
E. Commitments
The Company's offices and manufacturing facilities are leased under
non-cancellable operating leases. The primary facilities lease expires on
April 30, 1998, at which time the lease is renewable at current market rates.
Year ending September 30:
1997 $ 97,965
1998 58,457
1999 2,153
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Total $ 158,575
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison of Three Months Ended December 31, 1996 and 1995
NET SALES. Net sales for the three month period ended December 31,
1996 were $1,101,000 compared to $1,825,000 for the same period in 1995, a
decrease of $724,000 or 39.7%. The decrease is the result of order delays
certain customers experienced in finalizing contracts.
GROSS MARGIN. Gross margin for the three month period ended December
31, 1996 was $700,000 compared to $1,085,000 for the same period in 1995, a
decrease of $385,000, or 35.5%. The decrease relates to reductions in
revenues. As a percentage of sales, gross margin increased from 59.5% of
sales in the three month period ended December 31, 1995 to 63.6% of sales in
the same period in 1996. This increase is attributable to a change in sales
product mix.
RESEARCH AND DEVELOPMENT. Research and development expenses for the
three months ended December 31, 1996 were $304,000 compared to $268,000 for
the same period in 1995, an increase of $36,000 or 13.4%. This increase is
primarily due to reduction of time spent on revenue generating government
contract work, as well as additions to staff for new product development. As
a percentage of net sales, research and development expenses increased to
27.6% for the three months of fiscal 1996 compared to 14.7% for the three
months of fiscal 1995. The increase was primarily due to the decrease net
sales, as the actual dollar amount spent on research and development
increased insignificantly.
SELLING AND MARKETING. Selling and marketing expenses for the three
months ended December 31, 1996 were $426,000 compared to $304,000 for the
same period in 1995, an increase of $122,000, or 40.1%. As a percentage of
net sales, selling and marketing expenses increased to 38.7% for the three
months ended December 31, 1996 compared to 16.6% for the three months ended
December 31, 1995. The increase relates to additions to staff, opening of
two sales offices, as well as increased product promotion and advertising
campaigns.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for
the three months ended December 31, 1996 were $303,000 compared to $355,000
for the same period in 1995, a decrease of $52,000, or 14.6%. As a
percentage of net sales, general and administrative expenses increased to
27.5% for the first three months of fiscal 1997 compared to 19.5% for the
first three months of fiscal 1995. The increase was primarily due to
reduction in revenues, as costs relating to consulting and bad debt expenses
were significantly lower than in the same period in the prior period.
INTEREST EXPENSE (INCOME) Interest expense (income) for the three
months ended December 31, 1996 was $(14,000) compared to $48,000 for the same
period in 1995, a decrease of $62,000, or 129.2%. The decrease was due to
interest earned on cash raised in the secondary common stock public offering
as mentioned in item D. in the Notes to Financial Statements section.
PROVISION FOR INCOME TAXES. The provision for income tax benefit or
expense for federal and state income taxes is based on the estimated
effective tax rates applied to year to date loss or income before income tax
and projected utilization of tax credits from prior periods.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, stockholders' equity was $6,769,000, an increase
of $4,117,000 from September 30, 1996. The Company's working capital and
current ratio was $6,051,000 and 11.45 to 1 at December 31, 1996 compared to
$1,884,000 and 2.71 to 1 at September 30, 1996, respectively.
At December 31, 1996, the total liabilities to equity ratio was 0.086 to 1
compared to .419 to 1 at September 30, 1996. As of December 31, 1996, the
Company's total liabilities were $528,000 less than September 30, 1996.
Components of working capital with significant changes during the three
months ended December 31, 1996 were: Cash, Inventory and Accounts Payable.
Compared to September 30, 1996, the components changed as follows:
Cash - Increased $3,889,000 primarily because of proceeds received from the
secondary public common stock offering.
Inventory - Decreased $80,000 due to adequate inventory levels at Sept. 30,
1996 to support shipments in the first quarter.
Accounts Payable - Decreased by $251,000 because of payments made in the
first quarter with cash generated from financing activities combined with
reductions on procurement of inventory materials.
In March, 1996 the Company achieved a line of credit financing with a bank in
the amount of $400,000, with interest rate charges of 2.5% over prime lending
rates. This financing arrangement was renewed on February 3, 1997 and
expires February 3, 1998. As of December 31, 1996, there was no outstanding
balance on the line of credit.
The Company believes it will have sufficient cash flow generated from
financing activities, operations and existing credit facilities to meet its
operational needs in the coming year.
PART II - OTHER INFORMATION
Item 4. The annual meeting of stockholders was held on February 11, 1997.
Brought to vote were the election of Directors for the ensuing
year. With 91.20% of shares represented at the meeting, all
Directors from the prior year were re-elected. They
are: John M. Thornton, Chairman, John F. Kessler, Daniel E.
Steimle, James B. DeBello, Gerald I. Farmer and Sally B. Thornton.
Item 6. Exhibits and Reports on Form 8-K
a. The exhibits are on Form 8-K: None
b. Reports on Form 8-K: 1996 Stock Option Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MITEK SYSTEMS, INC.
(Registrant)
Date: February 12, 1997
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John Kessler, President and
Chief Executive Officer
Date: February 12, 1997
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Gerald I. Farmer, Executive Vice
President and Assistant Treasurer
5
3-MOS
SEP-30-1996
OCT-01-1996
DEC-31-1996
4,099,227
0
2,196,123
0
198,355
6,630,111
1,100,605
932,449
7,351,479
579,155
3,371
10,073
0
0
0
7,351,479
1,100,932
1,100,932
400,993
1,032,722
0
0
(13,623)
(319,160)
(32,000)
(287,160)
0
0
0
(287,160)
(.03)
(.03)
