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, 1997 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 _.
There were 10,087,373 shares outstanding of the registrant's Common Stock as
of May 8, 1997.
PART I: FINANCIAL INFORMATION
MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, September 30,
1997 1996
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ASSETS
CURRENT ASSETS:
Cash $3,490,905 $ 210,413
Accounts receivable-net 3,020,744 2,258,541
Inventories 219,873 278,206
Prepaid expenses 146,326 240,364
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Total current assets 6,877,848 2,987,524
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PROPERTY AND EQUIPMENT-at cost 1,136,811 1,049,678
Less accumulated depreciation
and amortization 961,236 902,790
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Property and equipment-net 175,575 146,888
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PREPAID LICENSE AND
OTHER ASSETS 528,393 628,030
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TOTAL $7,581,816 $3,762,442
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
liabilities $ 9,413 9,190
Accounts payable 254,857 472,755
Accrued payroll and related
taxes 227,876 302,037
Other accrued liabilities 205,593 319,973
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Total current liabilities 697,739 1,103,955
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LONG-TERM LIABILITIES 1,326 6,147
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COMMITMENTS (NOTE E)
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;
10,087,373 and 7,782,971 issued and
outstanding, respectively 10,087 7,783
Additional paid-in capital 7,814,150 3,503,634
Accumulated deficit (941,486) (859,077)
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Total stockholders' equity 6,882,751 2,652,340
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TOTAL $7,581,816 $3,762,442
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See notes to consolidated financial statements
MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
March 31, March 31,
1997 1996 1997 1996
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NET SALES $1,875,247 $1,923,829 $2,976,179 $3,749,282
COST OF GOODS SOLD 481,227 736,367 882,220 1,476,429
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GROSS MARGIN 1,394,020 1,187,462 2,093,959 2,272,853
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COSTS AND EXPENSES:
Selling and marketing 509,479 283,029 935,090 586,583
General and administrative 372,289 258,172 675,204 613,188
Research and development 320,336 319,482 624,532 587,245
Interest (income) expense (35,678) 33,476 (49,301) 81,707
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Total costs and expenses 1,166,426 894,159 2,185,525 1,868,723
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INCOME (LOSS) BEFORE
INCOME TAXES 227,594 293,303 (91,566) 404,130
INCOME TAX EXPENSE
(BENEFIT) 22,843 38,000 (9,157) 60,165
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NET INCOME (LOSS) $ 204,751 $ 255,303 $(82,409) $ 343,965
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NET INCOME (LOSS)
PER SHARE:
Common and Common
equivalent shares $ .02 $ .03 $ (.01) $ .04
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WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES 10,161,555 7,952,297 9,458,395 7,898,307
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See notes to consolidated financial statements.
MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended March 31,
1997 1996
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OPERATING ACTIVITIES:
Net income (loss) $ (82,409) $ 343,965
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 210,462 218,650
Changes in operating assets and liabilities
Increase in accounts receivable (762,203) (275,972)
(Increase) decrease in inventory and prepaid
expense 102,371 (146,242)
Increase (decrease) in accounts payable and
accrued expenses (406,555) 223,655
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Net cash provided by (used in) operating activities (938,126) 364,056
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INVESTING ACTIVITIES:
Purchases of property and equipment (89,488) (29,166)
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Net cash used in investing activities (89,488) (29,166)
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FINANCING ACTIVITIES:
Proceeds from borrowings 150,000 1,506,816
Repayment of notes payable and long-term
liabilities (154,482) (1,806,274)
Proceeds from note receivable 0 158,335
Net proceeds from exercise of stock options,
warrants and secondary offering 4,312,820 3,528
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Net cash provided by financing activities 4,308,106 137,595
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NET INCREASE IN CASH 3,280,492 197,295
CASH AT BEGINNING OF PERIOD 210,413 103,895
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CASH AT END OF PERIOD $3,490,905 $ 301,190
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See notes to consolidated financial statements
MITEK SYSTEMS, INC.
NOTES TO 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 six months ended March 31, 1997 and 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:
March 31, 1997 September 30, 1996
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Raw materials $ 70,287 $ 55,366
Work in process 130 0
Finished goods 149,456 222,840
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Total $ 219,873 $ 278,206
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Inventories are recorded at the lower of cost (on the first-in, first-out
basis) or market.
C. Net Income (Loss) Per Share
Net income (loss) per share amounts are computed based on the weighted
average shares outstanding during the periods which include any delutive stock
options and warrants.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". This statement specifies the computation, presentation, and
disclosure requirements for earnings per share for entities with publicly
held common stock. SFAS No. 128 is not in effect for the Company in the
second quarter of 1997, but will be in effect for financial statements issued
for periods ending after December 15, 1997, including interim periods. The
Company does not expect the adoption of SFAS No. 128 to have a material
effect on its Net Income (Loss) Per Share.
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 $4,244.098.
MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Continued
E. Commitments
In April, 1997, the Company entered into a exclusive worldwide license
agreement for $650,000 cash, and entered into a cross investment commitment of
$1,000,000 in Company common stock, with Parascript, LLC of Boulder, Colorado.
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 Six Months Ended March 31, 1997 and 1996
NET SALES. Net sales for the three month period ended March 31, 1997
were $1,875,000, compared to $1,924,000 for the same period in 1996, a decrease
of $49,000 or 2.5%. Net sales for the six month period ended March 31, 1997,
were $2,976,000 compared to $3,749,000 for the same period in the prior year, a
decrease of $773,000, or 20.6%.
GROSS MARGIN. Gross margin for the three month period ended March 31,
1997 was $1,394,000 compared to $1,187,000 for the same period in 1996, an
increase of $207,000, or 17.4%. As a percentage of net sales, gross margin
increased from 60.6% of sales in the six month period ended March 31, 1996 to
70.4% of net sales in the same period in 1997. The increases in both periods
were primarily due to product mix.
RESEARCH AND DEVELOPMENT. Research and development expenses for the six
months ended March 31, 1997 were $625,000 compared to $587,000 for the same
period in 1996, an increase of $38,000 or 6.5%. As a percentage of net
sales, research and development expenses increased to 21% for the first six
months of fiscal 1997 compared to 15.7% for the first six months of fiscal
1996. The increases were primarily due to new product development
SELLING AND MARKETING. Selling and marketing expenses for the six months
ended March 31, 1997 were $935,000 compared to $587,000 for the same period
in 1996, an increase of $348,000, or 59.3%. As a percentage of net sales,
selling and marketing expenses increased to 31.4% for the first six months
ended March 31, 1997 compared to 15.7% for the first six months ended March
31, 1996. The increase was primarily due to advertising, promotion, staff
additions and outside consulting costs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
six months ended March 31, 1997 were $675,000 compared to $613,000 for the
same period in 1996, an increase of $62,000, or 10.1%. As a percentage of
net sales, general and administrative expenses increased to 22.7% for the
first six months of fiscal 1997 compared to 16.4% for the first six months of
fiscal 1996. The increase was primarily due to staff additions and legal
fees.
INTEREST (INCOME) EXPENSE. Interest income for the six months ended
March 31, 1997 was ($49,000) compared to interest expense of $82,000 for the
same period in 1996, a decrease of $131,000, or 160%. The decrease in
expense is due to no bank borrowings primarily because of sufficient cash
received from the secondary public offering which in turn generated interest
income.
INCOME TAX EXPENSE (BENEFIT): 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 March 31, 1997, stockholders' equity was $6,883,000, an increase of
$4,230,000 from September 30, 1996. The Company's working capital and current
ratio was $6,180,000 and 9.86 to 1 at March 31, 1997 compared to $1,884,000 and
2.71 to 1 at September 30, 1996, respectively.
At March 31, 1997, the total liabilities to equity ratio was 0.10 to 1 compared
to .419 to 1 at September 30, 1996. As of March 31, 1997, the Company's total
liabilities were $411,000 less than September 30, 1996.
Components of working capital with significant changes during the six months
ended March 31 1997 were: Cash, Accounts Receivable and Accounts Payable.
Compared to September 30, 1996, the components changed as follows:
Cash - Increased $3,280,000 primarily because of proceeds received from
financing activities.
Accounts Receivable - Increased $762,000 primarily because of increase in
sales in the last month of the quarter combined with longer payment cycle
extended on a substantial order.
Accounts Payable - Decreased by $218,000 because of payments made in the
second quarter with cash generated from financing activities combined with
reductions on procurement of inventory materials.
In March, 1996 the Company obtained 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 March 31, 1997, 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.
Also voted on and approved by shareholders was the Corporation's 1996
Stock Option Plan, and the appointment of Deloitte & Touche LLP as the
Corporation's 1997 auditors.
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: May 8, 1997 /s/ JOHN KESSLER
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John Kessler, President and
Chief Executive Officer
Date: May 8, 1997 /s/ GERALD I. FARMER
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Gerald I. Farmer, Executive Vice President
and Assistant Treasurer
5
3-MOS
SEP-30-1997
JAN-01-1997
MAR-31-1997
3,490,905
0
3,020,744
0
219,873
6,877,848
1,136,811
961,236
7,581,816
697,739
1,326
0
0
10,087
0
7,581,816
1,875,247
1,875,247
481,227
1,202,074
0
0
(35,678)
227,594
22,843
204,751
0
0
0
204,751
.02
.02
