<PAGE>
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 December 31, 1995 or
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[_] 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 7,727,959 shares outstanding of the registrant's Common Stock as
of January 16, 1996.
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PART I: FINANCIAL INFORMATION
MITEK SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
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<S> <C> <C>
ASSETS
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CURRENT ASSETS:
Cash $ 63,986 $ 103,895
Accounts receivable-net 2,010,578 1,619,886
Note receivable 62,929 158,335
Inventories 140,576 131,929
Prepaid expenses 37,607 52,777
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Total current assets 2,315,676 2,066,822
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PROPERTY AND EQUIPMENT-at cost 1,183,360 1,170,634
Less accumulated depreciation
and amortization 1,074,883 1,039,549
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Property and equipment-net 108,477 131,085
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PREPAID LICENSE AND
OTHER ASSETS 591,767 666,393
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TOTAL $ 3,015,920 $ 2,864,300
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Current portion of long-term liabilities $ 236,958 $ 267,927
Amount payable under factoring agreement 382,896 195,545
Accounts payable 507,413 722,955
Accrued payroll and related taxes 153,173 163,789
Other accrued liabilities 290,389 114,803
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Total current liabilities 1,570,829 1,465,019
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LONG-TERM LIABILITIES 13,538 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;
7,727,959 issued and
outstanding, respectively 7,728 7,728
Additional paid-in capital 3,423,250 3,423,072
Accumulated deficit (1,999,425) (2,088,086)
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Total stockholders' equity 1,431,553 1,342,714
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TOTAL $ 3,015,920 $ 2,864,300
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</TABLE>
2
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MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1995 1994
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<S> <C> <C>
NET SALES $1,825,452 $1,892,421
COST OF GOODS SOLD 740,061 1,031,033
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GROSS MARGIN 1,085,391 861,388
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COSTS AND EXPENSES:
General and administrative 355,016 230,594
Research and development 267,763 288,866
Selling and marketing 303,554 306,270
Interest 48,231 18,628
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Total costs and expenses 974,564 844,358
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INCOME BEFORE INCOME TAXES 110,827 17,030
PROVISION FOR INCOME TAXES 22,165 3,406
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NET INCOME $ 88,662 $ 13,624
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EARNINGS PER SHARE $.01 $.00
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,835,458 7,009,980
========== ==========
</TABLE>
3
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MITEK SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1995 1994
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<S> <C> <C>
CASH PROVIDED FROM OPERATING ACTIVITIES:
Net income $ 88,662 $ 13,624
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 109,960 105,542
Increase in deferred rent 2,212
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (390,692) 137,559
Decrease (increase) in inventory and prepaid expense 6,523 (161,799)
Decrease in accounts payable and accrued expenses (50,572) (194,244)
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Cash used in operating activities (236,119) (97,106)
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INVESTING ACTIVITIES:
Purchases of property and equipment (12,726) (3,467)
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Net cash used in investing activities (12,726) (35,767)
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FINANCING ACTIVITIES:
Proceeds from new-bank debt 549,435 390,000
Repayment of debt (436,082) (315,473)
Proceeds from note receivable 95,406
Proceeds from exercise of stock options 177 2,371
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Net cash provided by financing activities 208,936 76,898
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NET DECREASE IN CASH (39,909) (23,675)
CASH AT BEGINNING OF PERIOD 103,895 99,976
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CASH AT END OF PERIOD $ 63,986 $ 76,301
========= =========
</TABLE>
4
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MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 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 quarter ended December 31, 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:
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1995
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<S> <C> <C>
Raw materials $ 31,824 $ 36,929
Work in process 32,909 42,970
Finished goods 75,843 52,030
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Total $140,576 $131,929
================= ==================
</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 number
of common and common equivalent shares outstanding during the periods which
include any dilutive stock options.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NET SALES Sales for the first quarter of Fiscal 1996, ended December 31, 1995,
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decreased $67,000 or 4.5% compared with the same period of Fiscal 1995. The
reduction in sales was the result of the sale of the TEMPEST business segment in
March, 1995, offset by the increase in sales of ADR products. In the first
quarter of Fiscal 1995, the Companys revenue from TEMPEST products totaled
$821,000. Revenue of ADR products increased $753,000, or 70.3% in the first
quarter of Fiscal 1996 compared to the first quarter of Fiscal 1995.
The backlog of orders was $1,488,000 at December 31, 1995 compared with a
backlog of $2,590,000 at December 31, 1994. The reduction in the backlog is
consistent with the sale of the TEMPEST business segment.
COST OF GOODS SOLD Cost of goods sold as percentage of sales for the quarter
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ended December 31, 1995, was 40.5% compared to 54.5% a year earlier. The
decrease, as a percent to sales, reflects the sale of the TEMPEST business
segment, which carried an unusually high cost of sales. In addition, the sale of
the business segment resulted in the reduction of the Companys required
overhead, primarily in the areas of facilities and personnel.
COSTS AND EXPENSES (Excluding Interest) Operating expenses increased $100,600
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or 12.2% in the first quarter of Fiscal 1996 as compared to the same period one
year earlier. The increase was primarily the result of a bad debt recovery of
$60,000 in Fiscal 1995 versus an increase of $42,000 in the bad debt reserve in
Fiscal 1996. These transactions were (credited) / charged to General and
administrative expenses. Operating costs related to research and development and
sales and marketing in Fiscal 1996 were essentially equal to the prior year. The
company anticipates the overall spending levels to increase in the ensuing
quarterly periods due to the costs of developing, introducing and marketing new
products.
INTEREST Interest costs increased $29,600, or 158.9%, for the quarter ended
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December 31, 1995, compared with the same quarter a year earlier, due to
increased net borrowings, along with the increase in cost of funds due to the
factoring agreement.
5
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NET INCOME As a result of the aforementioned sales decreases, gross margin
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increases, increased borrowings and cost of borrowing, the Company had net
income of $88,700 for the quarter ended December 31, 1995, compared to the prior
year net income of $13,600.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, stockholders' equity was $1,431,600, an increase of
$88,800 from September 30, 1995. The Company's working capital and current ratio
was $744,800 and 1.47 at December 31, 1995, compared to $601,800 and 1.41 at
September 30, 1995, respectively. At December 31, 1995, total liabilities to
equity ratio was 1.11 to 1 compared to 1.13 to 1 at September 30, 1995. As of
December 31, 1995, the Company's total liabilities were $62,800 more than
September 30, 1995.
Components of working capital with significant changes during the quarter
ended December 31, 1995 were accounts receivable; accounts payable; amounts
payable under factoring agreement; and other accrued liabilities. Compared to
September 30, 1995, these components of working capital changed as follows:
Accounts receivable - increased $390,700 due to the timing of shipments (late
in the Fiscal quarter).
Accounts payable - decreased $215,500 due the reduction of royalties payable,
and increased borrowings.
Other accrued liabilities - increased due to the increases in unearned revenue,
warranty reserves, and Federal income taxes payable.
The Company has a $650,000 credit facility with a financial institution
which expires in March, 1996. The Company anticipates that a new credit facility
will be obtained prior to the expiration of its current facility.
The Company believes it will have sufficient cash flow from operations and
available borrowings under bank lines of credit to meet its operational needs in
the coming year.
PART II - OTHER INFORMATION
Item 6. Exhibits
a. Exhibit on form 8-K: None
b. Reports on Form 8-K: None
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: January 22, 1996 /s/ John F. Kessler
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John F. Kessler, President and
Chief Executive Officer
Date: January 22, 1996 /s/ Gerald Farmer
---------------------------------------
Gerald Farmer, Executive Vice President
Assistant Treasurer
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 63,986
<SECURITIES> 0
<RECEIVABLES> 2,010,578
<ALLOWANCES> 0
<INVENTORY> 140,576
<CURRENT-ASSETS> 2,315,676
<PP&E> 1,183,360
<DEPRECIATION> 1,074,883
<TOTAL-ASSETS> 3,015,920
<CURRENT-LIABILITIES> 1,570,829
<BONDS> 13,538
<COMMON> 7,728
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,015,920
<SALES> 1,825,452
<TOTAL-REVENUES> 1,825,452
<CGS> 740,061
<TOTAL-COSTS> 926,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,231
<INCOME-PRETAX> 110,827
<INCOME-TAX> 22,165
<INCOME-CONTINUING> 88,662
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,662
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
