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 March 31, 1996 or
[_] 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 7,746,959 shares outstanding of the registrant's Common Stock as of
April 12, 1996.
PART I: FINANCIAL INFORMATION
MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, September 30,
1996 1995
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ASSETS
- ------
CURRENT ASSETS:
Cash $ 301,190 $ 103,895
Accounts receivable-net 1,895,858 1,619,886
Note receivable 0 158,335
Inventories 280,163 131,929
Prepaid expenses 50,785 52,777
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Total current assets 2,527,996 2,066,822
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PROPERTY AND EQUIPMENT-at cost 1,108,247 1,170,634
Less accumulated depreciation
and amortization 1,017,395 1,039,549
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Property and equipment-net 90,852 131,085
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PREPAID LICENSE AND
OTHER ASSETS 517,141 666,393
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TOTAL $ 3,135,989 $ 2,864,300
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Note payable - Bank $ 201,676 $ 0
Current portion of long-term liabilities 8,362 267,927
Amount payable under factoring agreement 0 195,545
Accounts payable 523,279 722,955
Accrued payroll and related taxes 230,312 163,789
Other accrued liabilities 471,611 114,803
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Total current liabilities 1,435,240 1,465,019
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LONG-TERM LIABILITIES 10,543 56,567
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COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value;
1,000,000 shares authorized;
none outstanding
Common stock - $.001 par value;
20,000,000 shares authorized;
7,732,959 issued and
outstanding, respectively 7,733 7,728
Additional paid-in capital 3,426,595 3,423,072
Accumulated deficit (1,744,122) (2,088,086)
----------- -----------
Total stockholders' equity 1,690,206 1,342,714
----------- -----------
TOTAL $ 3,135,989 $ 2,864,300
=========== ===========
MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
March 31, March 31,
1996 1995 1996 1995
---------- ---------- ----------- -----------
NET SALES $1,923,829 $1,435,852 $3,749,282 $3,328,273
COST OF GOODS SOLD 736,367 689,902 1,476,429 1,720,935
---------- ---------- ----------- -----------
GROSS MARGIN 1,187,462 745,950 2,272,853 1,607,338
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COSTS AND EXPENSES:
Selling and marketing 283,029 398,270 586,583 704,539
General and administrative 258,172 237,952 613,188 468,546
Research and development 319,482 286,997 587,245 575,863
Interest 33,476 20,652 81,707 39,280
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Total costs and expenses 894,159 943,871 1,868,723 1,788,228
---------- ---------- ----------- -----------
OPERATING INCOME (LOSS) 293,303 (197,921) 404,130 (180,890)
OTHER INCOME (Note D) 0 204,853 0 204,853
---------- ---------- ----------- -----------
INCOME (loss) BEFORE
INCOME TAXES 293,303 6,932 404,130 23,963
PROVISION FOR INCOME
TAXES 38,000 800 60,165 4,206
---------- ---------- ----------- -----------
NET INCOME $ 255,303 $ 6,132 $ 343,965 $ 19,757
========== ========== =========== ===========
EARNINGS
PER SHARE:
Common and Common
equivalent shares $ .03 $ .00 $ .04 $ .00
========== ========== =========== ===========
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES 7,952,297 7,029,079 7,898,307 7,019,981
========== ========== =========== ===========
See notes to financial statements.
MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended March 31,
1996 1995
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OPERATING ACTIVITIES:
Net income $ 343,965 $ 19,757
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 218,650 212,387
Gain on sale of TEMPEST (204,853)
Gain on sale of property and equipment (6,045)
Change in operating assets and liabilities
Income tax receivable 238,950
Increase (decrease) in accounts receivable (275,972) 172,067
Increase in inventory and prepaid expense (146,242) (180,193)
Increase (decrease) in accounts payable and
accrued expenses 223,655 (306,559)
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Cash provided by (used in) operating activities 364,056 (54,489)
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INVESTING ACTIVITIES:
Purchases of property and equipment (29,166) (10,118)
Proceeds from sale of property and equipment 6,045
Proceeds from sale of TEMPEST 50,000
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Cash provided by (used in) investing activities (29,166) 45,927
FINANCING ACTIVITIES:
Proceeds from bank debt 1,506,816 390,000
Repayment of debt (1,806,274) (483,764)
Proceeds from note receivable 158,335
Proceeds from exercise of stock options 3,528 26,060
Proceeds from sale of stock 153,896
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Net cash provided by financing activities (137,595) 86,192
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NET INCREASE IN CASH 197,295 77,630
CASH AT BEGINNING OF PERIOD 103,895 99,976
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CASH AT END OF PERIOD $ 301,190 $ 177,606
============ ===========
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 and six months ended March 31, 1996 and 1995 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:
March 31, 1996 September 30, 1995
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Raw materials $ 110,610 $ 36,929
Work in process 68,202 42,970
Finished goods 101,351 52,030
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Total $ 280,163 $ 131,929
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Inventories are recorded at the lower of cost (on the first-in, first-out
basis) or market.
C. Earning Per Share
Earnings per share amounts are computed based on the weighted average shares
outstanding during the periods which include any delutive stock options.
D. Sale of TEMPEST business
In the prior year, other income consisted of the gain on the sale of the
TEMPEST business, and was 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).
E. Sale of Common Stock
In the prior year, the Company undertook a private placement stock offering
during the reporting quarter. At March 31, 1995 an additional 470,333 shares of
common stock were issued, with an aggregate value of $357,625, before
subtracting associated costs of $24,529.
In conjunction with the aforementioned stock offering the Company issued an
additional 120,000 shares of common stock, with an aggregate value of $90,000,
on April 25, 1995.
MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Continued
F. Commitments
Effective May 1, 1995, the Company's lease for its San Diego facility was
terminated and its remaining obligations/commitments under such lease were
effectively assigned to another company.
A new non-cancelable San Diego facility lease was entered into in April
1995. Future annual minimum rental payments under this non-cancelable operating
lease are as follows:
Year ending September 30:
1996 $ 86,167
1997 97,965
1998 58,457
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Total $242,589
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES Sales for the second quarter of fiscal 1996 ended March 31, 1996,
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increased $488,000 compared with the same period of fiscal 1995. Sales for the
six months ended March 31, 1996 increased $421,000 or 12.65% compared with the
first six months of fiscal 1995. The backlog of new orders increased to
$2,284,000 compared to $1,979,000 at March 31, 1995.
COST OF GOODS SOLD Cost of goods sold as a percentage of sales for the
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three and six months ended March 31, 1996 were 38.3% and 39.4%, respectively. In
the prior year, cost of goods sold as a percentage of sales for the three and
six months ended March 31, 1995 were 48% and 51.7%, respectively. The prior
year's sales consisted of a mix of ADR and TEMPEST products. The current
year's sales consisted primarily of ADR products which produces a higher
yield in gross margins, therefore causing a reduction in cost of goods sold.
OPERATING EXPENSES (Excluding Interest) Operating expenses increased
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$38,000 or 2.2% for six months ended March 31, 1996, while operating expenses
decreased by $62,500 or 68.8% for the quarter ended March 31, 1996 as compared
to the same quarter in the prior year. The minimal changes reflects the
Company's continued efforts to control and minimize cost.
INTEREST Interest expense increased $13,000, or 62.1% and $42,000 or 108%
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for the three and six months ended March 31, 1996, compared with the same
periods a year earlier. The increase reflects borrowings charged with an
interest rate of 3% per month.
INCOME TAXES The charge for income taxes is approximately 13% of income
------------
before taxes.
OTHER INCOME Other income in the prior year consisted of the gain on the
------------
sale of the TEMPEST business, and was 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 The Company netted income of $255,000 and $344,000 for the three
----------
and six months ended March 31, 1996, respectively, compared with the net income
of $6,000 and $20,000 for the same periods a year earlier. The income increases
reflects the results of gross margins achieved with primarily ADR software
products sold as compared to low margin yields in TEMPEST products sold in the
prior years.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, stockholders' equity was $1,690,00, an increase of
$347,000 from September 30, 1995. The Company's working capital and current
ratio was $1,093,000 and 1.76 to 1 at March 31, 1996 compared to $602,000 and
1.41 to 1 at Sep tember 30, 1995, respectively.
At March 31, 1996, the total liabilities to equity ratio was 0.86 to 1
compared to 1.13 to 1 at September 30, 1995. As of March 31, 1996, the Company's
total liabilities were $76,000 less than September 30, 1995.
Components of working capital with significant changes during the six months
ended March 31, 1996 were: Accounts Receivable, Notes Receivable, Inventory, and
Other Accrued Liabilities. Compared to September 30, 1995, the components
changed as follows:
Accounts Receivable - Increased $276,000 due to the increase in sales.
Notes Receivable - Decreased $158,000 due to expiration and collection of the
note.
Inventory - Increased $148,000 due to the procurement of materials to support
shipments backlog.
Other Accrued Liabilities - Increased $357,000 primarily because of unearned
income on shipments billed for evaluation of products. Effective with the
third quarter of fiscal 1996, the Company will be shipping these evaluation
sales at no charge.
In August, 1995 the Company obtained a six month interim credit facility of
$650,000 with a financial institution while seeking conventional credit
facilities. 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. As of March 31, 1996, $34,000 of the line of credit was in use.
The Company believes it will have sufficient cash flow generated from 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 14, 1996.
Brought to vote were the election of Directors for the ensuing year.
With With 87.48% 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: Sales of TEMPEST Business
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: May 10, 1996 /s/ JOHN KESSLER
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John Kessler, President and
Chief Executive Officer
Date: May 10, 1996 /s/ GERALD I. FARMER
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Gerald I. Farmer, Executive Vice President
and Assistant Treasurer
5
3-MOS
SEP-30-1996
JAN-01-1995
MAR-31-1995
301,190
0
1,895,858
0
280,163
2,527,996
1,108,247
1,017,395
3,135,989
1,435,240
10,543
0
0
7,733
0
3,135,989
1,923,829
1,923,829
736,367
860,683
0
0
33,476
293,303
38,000
255,303
0
0
0
255,303
.03
.03
