<PAGE>
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 March 31, 1995 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
----------------------------
6225 Nancy Ridge Drive, San Diego, California 92121
- -------------------------------------------------------------------------------
(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 7,543,071 shares outstanding of the registrant's Common Stock as of
April 25, 1995.
<PAGE>
PART I: FINANCIAL INFORMATION
MITEK SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ --------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash $ 177,606 $ 99,976
Accounts receivable 1,324,158 1,512,373
Note receivable 316,148 0
Subscription receivable 179,200 0
Income taxes receivable 0 238,950
Inventories 176,169 127,117
Prepaid expenses 69,679 72,534
----------- -----------
Total current assets 2,242,960 2,050,950
----------- -----------
PROPERTY AND EQUIPMENT-at cost: 1,107,816 2,634,279
Less accumulated depreciation
and amortization 966,400 2,425,595
----------- -----------
Property and equipment-net 141,416 208,684
----------- -----------
OTHER ASSETS 680,951 813,982
----------- -----------
TOTAL $ 3,065,327 $ 3,073,616
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Note payable - bank $ 300,000 $ 226,875
Current portion of long-term liabilities 291,879 335,662
Accounts payable 655,667 570,407
Accrued payroll and related taxes 179,331 202,914
Other accrued liabilities 283,584 562,092
----------- -----------
Total current liabilities 1,710,461 1,897,950
----------- -----------
LONG-TERM LIABILITIES 167,118 366,832
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value;
20,000,000 shares authorized;
7,423,071 and 6,913,013 issued and
outstanding, respectively 7,423 6,913
Additional paid-in capital 3,179,265 2,820,619
Accumulated deficit (1,998,940) (2,018,698)
----------- -----------
Total stockholders' equity 1,187,748 808,834
----------- -----------
TOTAL $ 3,065,327 $ 3,073,616
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
MITEK SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
March 31, March 31,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $1,435,852 $3,010,418 $3,328,273 $6,096,178
COST OF GOODS SOLD 689,902 1,930,792 1,720,935 4,048,419
---------- ---------- ---------- ----------
GROSS MARGIN 745,950 1,079,626 1,607,338 2,047,759
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Selling and marketing 398,270 315,314 704,539 652,605
General and administrative 237,952 290,235 468,546 598,032
Research and development 286,997 319,024 575,863 532,412
Interest 20,652 35,288 39,280 73,079
---------- ---------- ---------- ----------
Total costs and expenses 943,871 959,861 1,788,228 1,856,128
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (197,921) 119,765 (180,890) 191,631
OTHER INCOME (Note D) 204,853 204,853
---------- ---------- ---------- ----------
INCOME BEFORE INCOME
TAXES 6,932 119,765 23,963 191,631
PROVISION FOR INCOME
TAXES 800 23,000 4,206 33,800
---------- ---------- ---------- ----------
NET INCOME $ 6,132 $ 96,765 $ 19,757 $ 157,831
========== ========== ========== ==========
EARNINGS
PER SHARE:
Common and Common
equivalent shares $.00 $.01 $.00 $.02
========== ========== ========== ==========
WEIGHTED AVERAGE
COMMON AND COMMON
EQUIVALENT SHARES 7,029,079 7,041,916 7,019,981 7,027,949
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
MITEK SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from customers $ 3,494,295 $ 5,915,980
Cash paid to suppliers and employees (3,744,447) (5,230,289)
Interest paid (42,487) (76,508)
Income taxes refunded (paid) 238,150 (33,800)
----------- -----------
Net cash provided by (used in) operating activities (54,489) 575,383
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment (10,118) (55,293)
Proceeds from sale of property & equipment 6,045
Proceeds from sale of TEMPEST 50,000
----------- -----------
Net cash provided by (used in) investing activities 45,927 (55,293)
----------- -----------
FINANCING ACTIVITIES:
Borrowings under line of credit 390,000
Repayment of debt (483,764) (631,917)
Proceeds from exercise of stock options 26,060 6,195
Net proceeds from sales of stock 153,896
----------- -----------
Net cash provided by (used in)
financing activities 86,192 (625,722)
----------- -----------
NET INCREASE (DECREASE) IN CASH 77,630 (105,632)
CASH AT BEGINNING OF PERIOD 99,976 236,353
----------- -----------
CASH AT END OF PERIOD $ 177,606 $ 130,721
=========== ===========
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Net income $ 19,757 $ 157,831
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 212,387 472,501
Gain on sale of TEMPEST (204,853)
Gain on sale of property & equipment (6,045)
Changes in assets and liabilities:
Deferred rent (76,608) 5,825
Income tax receivable 238,950
Accounts receivable 172,067 (180,198)
Inventories, prepaid expenses and other assets (180,193) 167,663
Accounts payable and accrued expenses (229,951) (48,239)
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (54,489) $ 575,383
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
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, 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.
B. Inventories
<TABLE>
<CAPTION>
Inventories are summarized as follows:
March 31, 1995 September 30, 1994
-------------- ------------------
<S> <C> <C>
Raw materials $ 45,376 $ 69,567
Work in process 97,307 0
Finished goods 33,486 57,550
-------- --------
Total $176,169 $127,117
======== ========
</TABLE>
Inventories are recorded at the lower of cost (on the first-in, first-out
basis) or market.
C. Earnings Per Share
Earnings per share amounts are computed based on the weighted average shares
outstanding during the periods which include any dilutive stock options.
D. 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).
E. Sale of Common Stock
The Company undertook a private placement stock offering during the 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 offering 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.
<PAGE>
MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Continued
F. Commitments
Effective in 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:
<TABLE>
<CAPTION>
Year ending Sept 30:
<S> <C>
1995 (5 months) $ 30,884
1996 86,167
1997 97,965
1998 58,457
--------
Total $273,473
========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SALES Sales for the second quarter of fiscal 1995 ended March 31, 1995,
-----
decreased $1,575,000 compared with the same period of fiscal 1994. Sales for
the six months ended March 31, 1995 decreased $2,768,000 or 45% compared with
the first six months of fiscal 1994. The sales decrease is primarily due to
the continuing decline in the TEMPEST market. The backlog of new orders
decreased to $1,979,000 compared to $4,135,000 at March 31, 1994.
COST OF GOODS SOLD 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. In
the prior year, cost of goods sold as a percentage of sales for the three and
six months ended March 31, 1994 were 64.1% and 66.4%, respectively. The
decrease is due to product mix since ADR products yield a higher gross margin
level than TEMPEST products.
OPERATING EXPENSES (Excluding Interest) Operating expenses decreased
---------------------------------------
$34,000 or 19.1% for six months ended March 31, 1995, with a minimal decrease
for the three month comparison for the same periods for the previous year. The
decrease is a result of company-wide cost reduction efforts.
INTEREST Interest expense decreased $15,000, or 40% and $34,000 or 46.6%
--------
for the three and six months ended March 31, 1995, compared with the same
periods a year earlier. The decrease is due to reduced borrowings and
expiration of notes payable.
INCOME TAXES The charge for income taxes is approximately 19% of income
------------
before taxes.
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 As a result of the aforementioned cost reductions and sale of
----------
TEMPEST business segment, the Company netted income of $6,000 and $20,000 for
the three and six months ended March 31, 1995, respectively, compared with the
net income of $97,000 and $158,000 for the same periods a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, stockholders' equity was $1,188,000, an increase of
$380,000 from September 30, 1994. The Company's working capital and current
ratio was $532,000 and 1.31 to 1 at March 31, 1995 compared to $153,000 and 1.08
to 1 at September 30, 1994, respectively.
At March 31, 1995, the total liabilities to equity ratio was 1.58 to 1 compared
to 2.8 to 1 at September 30, 1994. As of March 31, 1995, the Company's total
liabilities were $387,000 less than September 30, 1994.
Components of working capital with significant changes during the six months
ended March 31, 1995 were: Accounts Receivable, Inventory, and Other Accrued
Liabilities. Compared to September 30, 1994, the components changed as follows:
Accounts Receivable - Decreased $188,000 due to the decrease in sales.
Note Receivable - Increased $316,000 in conjunction with the sale of the
TEMPEST business.
<PAGE>
Subscription Receivable - Increased $179,200 in conjunction with the
outstanding commitments received under a private placement common stock
offering. The proceeds were received in April 1995.
Inventory - Increase $49,000 due to the procurement of materials to support
the introduction of the new products.
Other Accrued Liabilities - Decreased $279,000 primarily because to the
decrease in deferred rents , and idle facilities and warranty reserves in
conjunction with the sale of TEMPEST business.
As of March 31, 1995, the Company had a line of credit of $500,000, of which
$300,000 was in use, to support its working capital requirements. On April 27,
1995, the Company's lender informed the Company that it desired the Company to
seek a new financing institution. The lender agreed to continue to provide
month-to-month financing on an interim basis, based upon the Company's financial
results and progress in seeking a refinance of the debt.
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.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. The exhibits are on Form 8-K: None
b. Reports on Form 8-K: Sale of TEMPEST Business
<PAGE>
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 5, 1995 /s/ John Kessler
------------------------------------------
John Kessler, President and
Chief Executive Officer
Date: May 5, 1995 /s/ Gerald I. Farmer
------------------------------------------
Gerald I. Farmer, Executive Vice President
and Assistant Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 177,606
<SECURITIES> 0
<RECEIVABLES> 1,819,506
<ALLOWANCES> 0
<INVENTORY> 176,169
<CURRENT-ASSETS> 2,242,960
<PP&E> 1,107,816
<DEPRECIATION> 966,400
<TOTAL-ASSETS> 3,065,327
<CURRENT-LIABILITIES> 1,710,461
<BONDS> 167,118
<COMMON> 7,423
0
0
<OTHER-SE> 1,180,325
<TOTAL-LIABILITY-AND-EQUITY> 3,065,327
<SALES> 3,328,273
<TOTAL-REVENUES> 3,328,273
<CGS> 1,720,935
<TOTAL-COSTS> 1,748,948
<OTHER-EXPENSES> (204,853)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,280
<INCOME-PRETAX> 23,963
<INCOME-TAX> 4,206
<INCOME-CONTINUING> 19,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,759
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
