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 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.
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(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
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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
--- ---
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
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LONG-TERM LIABILITIES 9,072 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;
7,774,639 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)
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) $ .10 $ (.01)
========== ========== ========== ==========
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES 7,754,377 7,561,814 7,737,171 7,136,995
========== ========== ========== ==========
See notes to financial statements.
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:
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
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
========
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 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: 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
5
3-MOS
SEP-30-1996
APR-01-1996
JUN-30-1996
217,637
0
2,062,308
0
212,901
2,566,566
1,148,771
1,047,286
3,113,638
951,510
9,072
0
0
7,774
0
3,113,638
2,116,524
2,116,524
730,498
954,086
0
0
7,662
424,278
22,676
401,602
0
0
0
401,602
.05
.05
