SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 1995 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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6225 Nancy Ridge Drive, San Diego, California 92121
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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 _
-
There were 7,727,959 shares outstanding of the registrant's Common Stock as
of August 10, 1995.
PART I: FINANCIAL INFORMATION
MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, September 30,
1995 1994
----------- -------------
ASSETS
------
CURRENT ASSETS:
Cash $ 103,800 $ 99,976
Accounts receivable 1,179,326 1,512,373
Note receivable 252,906 0
Income taxes receivable 0 238,950
Inventories 205,748 127,117
Prepaid expenses 73,789 72,534
----------- -----------
Total current assets 1,815,569 2,050,950
----------- -----------
PROPERTY AND EQUIPMENT-at cost: 1,152,458 2,634,279
Less accumulated depreciation
and amortization 1,001,627 2,425,595
----------- -----------
Property and equipment-net 150,831 208,684
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OTHER ASSETS 737,722 813,982
----------- -----------
TOTAL $ 2,704,122 $ 3,073,616
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Note payable - bank $ 97,000 $ 226,875
Current portion of long-term liabilities 280,865 335,662
Accounts payable 610,966 570,407
Accrued payroll and related taxes 116,966 202,914
Other accrued liabilities 148,911 562,092
----------- -----------
Total current liabilities 1,254,708 1,897,950
----------- -----------
LONG-TERM LIABILITIES 118,062 366,832
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value;
20,000,000 shares authorized;
7,724,182 and 6,913,013 issued and
outstanding, respectively 7,724 6,913
Additional paid-in capital 3,419,569 2,820,619
Accumulated deficit (2,095,941) (2,018,698)
----------- -----------
Total stockholders' equity 1,331,352 808,834
----------- -----------
TOTAL CONSOLIDATED $ 2,704,122 $ 3,073,616
=========== ===========
See notes to financial statements.
MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
NET SALES $1,562,881 $2,198,885 $4,891,153 $8,295,062
COST OF GOODS SOLD 700,111 1,364,974 2,421,045 5,413,394
---------- ---------- ---------- ----------
GROSS MARGIN 862,770 833,911 2,470,108 2,881,668
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Selling and marketing 346,970 383,559 1,051,508 1,036,164
General and administrative 372,958 154,696 841,505 752,728
Research and development 230,485 251,848 806,348 784,259
Interest 9,357 29,858 48,637 102,937
---------- ---------- ---------- ----------
Total costs and expenses 959,770 819,961 2,747,998 2,676,088
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (97,000) 13,950 (277,890) 205,580
OTHER INCOME (Note D) 0 0 204,853 0
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (97,000) 13,950 (73,037) 205,580
PROVISION FOR INCOME
TAXES 0 0 4,206 33,800
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (97,000) $ 13,950 $ (77,243) $ 171,780
========== ========== ========== ==========
EARNINGS (LOSS)
PER SHARE:
Common and Common
equivalent shares $ (.01) $ .00 $ (.01) $ .02
========== ========== ========== ==========
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES 7,561,814 6,875,087 7,136,995 6,875,087
========== ========== ========== ==========
See notes to consolidated financial statements.
MITEK SYSTEMS, INC.
===================
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
1995 1994
---- ----
OPERATING ACTIVITIES:
Cash received from customers $ 5,228,855 $ 8,368,542
Cash paid to suppliers and employees (5,641,167) (7,310,126)
Interest paid (49,804) (107,411)
Income taxes refunded (paid) 238,150 (33,800)
----------- -----------
Net cash provided by (used in) operating activities (223,966) 917,205
----------- -----------
INVESTING ACTIVITIES:
Net purchases of property and equipment (35,082) (58,401)
Proceeds from sale of property & equipment 6,045
Proceeds from sale of TEMPEST 112,094
----------- -----------
Net cash provided by (used in) investing activities 83,057 (58,401)
----------- -----------
FINANCING ACTIVITIES:
Borrowings under line of credit 390,000
Repayment of debt (766,388) (945,398)
Proceeds from exercise of stock options 45,422 6,195
Net proceeds from sales of stock 475,699
----------- -----------
Net cash provided by (used in)
financing activities 144,733 (939,203)
----------- -----------
NET INCREASE (DECREASE) IN CASH 3,824 (80,399)
CASH AT BEGINNING OF PERIOD 99,976 236,353
----------- -----------
CASH AT END OF PERIOD $ 103,800 $ 155,954
=========== ===========
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income (loss) $ (77,243) $ 171,780
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 318,050 598,949
Gain on sale of TEMPEST (204,853)
Gain on sale of property & equipment (6,045)
Changes in assets and liabilities:
Deferred rent (76,337) 40,345
Income tax receivable 238,950
Accounts receivable 343,747 73,480
Inventories, prepaid expenses and other assets (225,420) 257,870
Accounts payable and accrued expenses (534,815) (225,219)
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (223,966) $ 917,205
=========== ===========
See notes to consolidated financial statements.
MITEK SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
The accompanying unaudited consolidated 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 and nine months ended June 30, 1995 and 1994 are not
necessarily indicative of results which may be reported for any other interim
period or for the year as a whole.
The financial statements include the accounts of Mitek Systems, Inc. and
its wholly-owned subsidiary, Mitek Systems Canada, incorporated on June 21,
1995. All intercompany transactions and balances are eliminated in
consolidation.
B. Inventories
Inventories are summarized as follows:
June 30, 1995 September 30, 1994
------------- ------------------
Raw materials $ 123,377 $ 69,567
Work in process 9,459 0
Finished goods 72,912 57,550
-------------- --------------
Total $ 205,748 $ 127,117
============== ==============
Inventories are recorded at the lower of cost (on the first-in, first-out
basis) or market.
C. Earnings (Loss) Per Share
Earnings (loss) per share amounts are computed based on the weighted
average shares outstanding during the periods which include any dilutive stock
options.
D. Acquisition
On June 21, 1995, the company purchased substantially all of the assets and
assumed the liabilities of TRACS INTERNATIONAL, INC., a Calgary, Canada based
developer of local area network facsimile servers. The purchase price included
75,000 unregistered shares of the Company's common stock and a 5% royalty of
facsimile related sales for a maximum period of three years or a maximum amount
of $300,000. Additional issuances of the Company's common shares may occur,
contingent upon the exceeding of certain revenue targets during a six month
period following release from beta testing of a new product. This six month
period following is expected to begin October 1, 1995. The purchase resulted in
$136,250 of goodwill, to be amortized over 60 months. Sales and operational
results for the period ending June 30, 1995, were immaterial to the Company's
results.
E. Sale of TEMPEST business
Other income, consisting of the gain on the sale of the TEMPEST business,
is made up of the following components: Sale price ($350,000) offset by the
carrying cost of inventory sold ($132,000) and costs related to the transaction
($13,000).
MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Continued
F. Sale of Common Stock
The Company undertook a private placement stock offering during the second
quarter of 1995. At March 31, 1995 an additional 470,333 shares of common stock
were issued, with an aggregate value of $357,625, before subtracting associated
offering costs of $24,529.
In conjunction with the aforementioned stock offering the Company issued an
additional 196,667 shares of common stock, with an aggregate value of $147,500
during the quarter ending June 30, 1995.
G. Subsequent Event
In August 1995, the Company obtained a $40,000 working capital loan from
its majority shareholder.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This information should be read in conjunction with the consolidated financial
statements and the notes thereto included in Item 1 of this Quarterly Report and
the audited financial statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations for the year ended
September 30, 1994 contained in the Company's 1994 Annual Report to
Shareholders, which is incorporated by reference in the Company's Annual Report
on Form 10-K for the year ended September 30, 1994
SALES Sales for the third quarter of fiscal 1995 ended June 30, 1995,
-----
decreased $636,000 compared with the same period of fiscal 1994. Sales for the
nine months ended June 30, 1995 decreased $3,404,000 or 41% compared with the
first nine months of fiscal 1994. The sales decrease is the result of the
sale of the TEMPEST business segment in March 1995. The sales for the quarter
ended June 30, 1995, consisted only of Automated Document Recognition (ADR)
products and services whereas the sales for the same period at fiscal 1994
included TEMPEST and ADR products and services.
The ADR products sales for the quarter ended June 30, 1995, compared to the
same period of fiscal 1994 increased $394,000 or 27%. Sales of ADR products for
the nine months ended June 30, 1995, increased $19,000 or 1% compared with the
same period of fiscal 1994.
The backlog of ADR products and services at June 30, 1995, decreased to
$1,568,000 compared to $2,850,000 at June 30, 1994.
COST OF GOODS SOLD Cost of goods sold as a percentage of sales for the
------------------
three and nine months ended June 30, 1995, were 45% and 49.5%, respectively. In
the prior year, cost of goods sold as a percentage of sales for the three and
nine months ended June 30, 1994, were 62% and 65%, respectively. The decrease
is due to the absence of TEMPEST product sales in the third quarter of 1995, and
because ADR products and services yield a higher gross margin .
OPERATING EXPENSES (Excluding Interest) For the period ending June 30,
---------------------------------------
1995, operating expenses increased $160,000 and $126,000 for the three and nine
months respectively, over the same fiscal period of 1994. The increase for the
three month period was the result of facility moving expenses totaling $80,000,
while the prior period included a bad debt recovery of $90,000.
INTEREST Interest expense decreased $21,000, or 31% and $54,000 or 47%
--------
for the three and nine months ended June 30, 1995, compared with the same
periods a year earlier. The decrease is due to reduced borrowings and repayment
of notes payable.
OTHER INCOME Other income, consisting of the gain on the sale of the
------------
TEMPEST business, is made up of the following components: Sale price ($350,000)
offset by the carrying cost of inventory sold ($132,000) and costs related to
the transaction ($13,000).
NET INCOME (LOSS) As the result of the aforementioned reduction in sales
-----------------
offset by the sale of the TEMPEST product line, the company experienced a loss
for both the three and nine months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, stockholders' equity was $1,331,000, an increase of
$523,000 from September 30, 1994. The Company's working capital and current
ratio was $561,000 and 1.45 to 1 at June 30, 1995 compared to $153,000 and 1.08
to 1 at September 30, 1994, respectively.
At June 30, 1995, the total liabilities to equity ratio was 1.03 to 1 compared
to 2.8 to 1 at September 30, 1994. As of June 30, 1995, the Company's total
liabilities were $892,000 less than September 30, 1994.
Components of working capital with significant changes during the six months
ended June 30, 1995 were: Accounts Receivable, Inventory, and Other Accrued
Liabilities. Compared to September 30, 1994, the components changed as follows:
Accounts Receivable - Decreased $333,000 due to the decrease in sales and
prompt collections.
Note Receivable - Increased $253,000 in conjunction with the sale of the
TEMPEST business and reduced by subsequent payments.
Note Payable Bank - Decreased $130,000 due to payments made on the line of
credit.
Inventory - Increased $79,000 due to the procurement of materials to
support the introduction of new products and fulfillment of backlog.
Other Accrued Liabilities - Decreased $413,000 primarily because of the
decrease in unearned revenue and the write downs of deferred rents and
other reserves related to the sale of the TEMPEST business.
As of June 30, 1995, the Company had borrowings outstanding under a bank line of
credit, of which $97,000 was in use to support its working capital requirements.
On April 27, 1995, the bank informed the Company that it desired the Company
seek a new financing institution. The lender agreed to continue to provide
month-to-month financing on an interim basis, currently outstanding with such
bank, based upon the Company's financial results and progress in seeking a
refinance of the all debt currently outstanding with such bank. In August 1995,
the Company obtained a $40,000 working capital loan from its majority
shareholder..
Management believes that the available line-of credit, funds generated by
operations, existing cash, collection of outstanding note receivable, and other
methods of financing available to the Company are adequate to meet the Company's
near-term capital requirements.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None
b. Reports on Form 8-K: None
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: August 14, 1995 _________________________________________
John Kessler, President and
Chief Executive Officer
Date: August 14, 1995 _________________________________________
Gerald I. Farmer, Executive Vice President
and Assistant Treasurer
5
9-MOS
SEP-30-1995
OCT-01-1994
JUN-30-1995
103,800
0
1,432,232
0
205,748
1,815,569
1,152,458
1,001,627
2,704,122
1,254,708
118,062
7,724
0
0
0
2,704,122
4,891,153
4,891,153
2,421,045
2,699,361
(204,833)
0
48,637
(73,037)
4,206
(77,243)
0
0
0
(77,243)
.00
.00
