SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 FORM 10-Q/A AMENDMENT NO. 1 (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, 1996 or [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 0-15235 Mitek Systems, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 87-0418827 - ------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10070 Carroll Canyon Road, San Diego, California 92131 -------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (619) 635-5900 -------------- - -------------------------------------------------------------------------------- (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 7,777,139 shares outstanding of the registrant's Common Stock as of July 17, 1996. PART I: FINANCIAL INFORMATION MITEK SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, September 30, 1996 1995 ------------- ------------- ASSETS - ------ CURRENT ASSETS: Cash $ 217,637 $ 103,895 Accounts receivable-net 2,062,308 1,619,886 Note receivable 0 158,335 Inventories 212,901 131,929 Prepaid expenses 73,720 52,777 ------------- ------------- Total current assets 2,566,566 2,066,822 ------------- ------------- PROPERTY AND EQUIPMENT-at cost 1,148,771 1,170,634 Less accumulated depreciation and amortization 1,047,286 1,039,549 ------------- ------------- Property and equipment-net 101,485 131,085 ------------- ------------- PREPAID LICENSE AND OTHER ASSETS 445,587 666,393 ------------- ------------- TOTAL $ 3,113,638 $ 2,864,300 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Note payable - Bank $ 107,374 $ 0 Current portion of long-term liabilities 8,649 267,927 Amount payable under factoring agreement 0 195,545 Accounts payable 369,764 722,955 Accrued payroll and related taxes 224,057 163,789 Other accrued liabilities 241,666 114,803 ------------- ------------- Total current liabilities 951,510 1,465,019 ------------- ------------- LONG-TERM LIABILITIES 9,072 56,567 ------------- ------------- 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; 7,774,639 issued and outstanding, respectively 7,774 7,728 Additional paid-in capital 3,487,802 3,423,072 Accumulated deficit (1,342,520) (2,088,086) ------------- ------------- Total stockholders' equity 2,153,056 1,342,714 ------------- ------------- TOTAL $ 3,113,638 $ 2,864,300 ============= ============= MITEK SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) See notes to financial statements.
THREE MONTHS ENDED NINE MONTHS ENDED June 30, June 30, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- NET SALES $2,116,524 $1,562,881 $5,865,806 $4,891,153 COST OF GOODS SOLD 730,498 700,111 2,206,927 2,421,045 ---------- ---------- ---------- ---------- GROSS MARGIN 1,386,026 862,770 3,658,879 2,470,108 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Selling and marketing 346,632 346,970 933,216 1,051,508 General and administrative 272,634 372,958 885,822 841,505 Research and development 334,820 230,485 922,064 806,348 Interest 7,662 9,357 89,369 48,637 ---------- ---------- ---------- ---------- Total costs and expenses 961,748 959,770 2,830,471 2,747,998 ---------- ---------- ---------- ---------- OPERATING INCOME (LOSS) 424,278 (97,000) 828,408 (277,890) OTHER INCOME (Note D) 0 0 0 204,853 ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 424,278 (97,000) 828,408 (73,037) ---------- ---------- ---------- ---------- PROVISION FOR INCOME TAXES 22,676 0 82,841 4,206 ---------- ---------- ---------- ---------- NET INCOME $ 401,602 $ (97,000) $ 745,567 $ (77,243) ========== ========== ========== ========== EARNINGS PER SHARE: Common and Common equivalent shares $ .05 $ (.01) $ .09 $ (.01) ========== ========== ========== ========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES 8,210,498 7,561,814 8,038,020 7,136,995 ========== ========== ========== ========== MITEK SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended June 30, 1996 1995 ----------- --------- OPERATING ACTIVITIES: Net income $ 745,567 $ (77,243) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 320,096 318,050 Gain on sale of TEMPEST (204,853) Gain on sale of property and equipment (6,045) Change in operating assets and liabilities Decrease in income tax receivable 238,950 Increase (decrease) in accounts receivable (442,422) 343,747 Increase in inventory and prepaid expense (101,915) (225,420) Decrease in accounts payable and accrued expenses (166,060) (611,152) ----------- --------- Cash provided by (used in) operating activities 355,266 (223,966) ----------- --------- INVESTING ACTIVITIES: Purchases of property and equipment (69,691) (35,082) Proceeds from sale of property and equipment 6,045 Proceeds from sale of TEMPEST 112,094 ----------- --------- Cash provided by (used in) investing activities (69,691) 83,057 ----------- --------- FINANCING ACTIVITIES: Proceeds from bank debt 1,796,816 390,000 Repayment of debt (2,191,760) (766,388) Proceeds from note receivable 158,335 Proceeds from exercise of stock options 64,776 45,422 Proceeds from sale of stock 475,699 ----------- --------- Net cash provided by (used in) financing activities (171,833) 144,733 ----------- --------- NET INCREASE IN CASH 113,742 3,824 CASH AT BEGINNING OF PERIOD 103,895 99,976 ----------- --------- CASH AT END OF PERIOD $ 217,637 $ 103,800 =========== ========= 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 nine months ended June 30, 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: 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.
June 30, 1996 September 30, 1995 ------------- ------------------ Raw materials $ 17,032 $ 36,929 Work in process 42,278 42,970 Finished goods 153,591 52,030 Total $212,901 $131,929 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 -------- Total $242,589 ======== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparison of Nine Months Ended June 30, 1996 and 1995 Net Sales. Net sales for the nine month period ended June 30, 1996 were $5,866,000, comprised solely of ADR sales, compared to $4,891,000, comprised of TEMPEST and ADR sales, for the same period in 1995, an increase of $975,000 or 19.9%. Net sales, comprised solely of ADR sales, for the nine month period ended June 30, 1996, were $5,866,000 compared to $3,393,000 for the prior year period, an increase of $2,473,000, or 72.9%. Gross Margin. Gross margin for the nine month period ended June 30, 1996 was $3,659,000 compared to $2,470,000 for the same period in 1995, an increase of $1,189,000, or 48.1%. The increase was primarily due to a change in the product mix. As a percentage of sales, gross margin increased from 50.5% of sales in the nine month period ended June 30, 1995 to 62.4% of sales in the same period in 1996. This increase is attributable to the Company's net sales being derived exclusively from its ADR products, which carry a substantially higher gross margin than the Company's TEMPEST business. Research and Development. Research and development expenses for the nine months ended June 30, 1996 were $922,000 compared to $806,000 for the same period in 1995, an increase of $116,000 or 14.4%. This increase is primarily due to the addition of staff to support faxshare development which did not exist in the same period for the prior year. As a percentage of net sales, research and development expenses decreased to 15.7% for the first nine months of fiscal 1996 compared to 16.5% for the first nine months of fiscal 1995. The decrease was primarily due to the increased net sales, as the actual dollar amount spent on research and development increased insignificantly but such increase was offset by an increase in net sales. Selling and marketing. Selling and marketing expenses for the nine months ended June 30, 1996 were $933,000 compared to $1,052,000 for the same period in 1995, a decrease of $119,000, or 11.3%. As a percentage of net sales, selling and marketing expenses decreased to 15.9% for the first nine months ended June 30, 1996 compared to 21.5% for the first nine months ended June 30, 1995. The decrease was primarily due to reduced advertising, promotion, and outside consulting costs. General and Administrative. General and administrative expenses for the nine months ended June 30, 1996 were $886,000 compared to $842,000 for the same period in 1995, an increase of $44,000, or 5.2%. As a percentage of net sales, general and administrative expenses decreased to 15.1% for the first nine months of fiscal 1996 compared to 17.2% for the first nine months of fiscal 1995. The decrease was primarily due to reduced consulting costs. Interest Expense. Interest expense for the nine months ended June 30, 1996 was $89,000 compared to $49,000 for the same period in 1995, an increase of $40,000, or 81.6%. The increase was primarily due to an increase in borrowing costs and to a lesser extent, an increase in average debt outstanding. Provision for Income Taxes. The provision for income taxes consists primarily of federal alternative minimum tax and state tax. The tax rate is substantially below the federal statutory rate due to the utilization of net operating loss carryovers for which no benefit has previously been taken. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, stockholders' equity was $2,153,000, an increase of $810,000 from September 30, 1995. The Company's working capital and current ratio was $1,615,000 and 2.70 to 1 at June 30, 1996 compared to $602,000 and 1.41 to 1 at September 30, 1995, respectively. At June 30, 1996, the total liabilities to equity ratio was 0.45 to 1 compared to 1.13 to 1 at September 30, 1995. As of June 30, 1996, the Company's total liabilities were $561,000 less than September 30, 1995. Components of working capital with significant changes during the nine months ended June 30, 1996 were: Accounts Receivable, Notes Receivable, Inventory, Accounts Payable and Factoring Payable. Compared to September 30, 1995, the components changed as follows: Accounts Receivable - Increased $442,000 primarily because of increase in sales, and longer payment cycle extended on a substantial order. Notes Receivable - Decreased $158,000 due to expiration and collection of the note. Inventory - Increased $81,000 due to the procurement of materials to support shipments backlog. Accounts Payable and Factoring Payable - Decreased by $549,000 because of payments made in the third quarter with cash generated from operations. 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 June 30, 1996, there was no outstanding balance on the line of credit. 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 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 BusinessSIGNATURES 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: July 30, 1996 By: /s/ JOHN KESSLER ------------------------------------------ John Kessler, President and Chief Executive Officer Date: July 30, 1996 By: /s/ GERALD I. FARMER ------------------------------------------ Gerald I. Farmer, Executive Vice President and Assistant Treasurer