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, 2004 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.)
14145 DANIELSON ST, STE B,,POWAY, CALIFORNIA 92064
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (858) 513-4600
--------------------------
-------------------------------------------------------------------------------
(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 11,389,481 shares outstanding of the registrant's Common Stock
as of May 12, 2004.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2 of the Act)
Yes No X.
- -
MITEK SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2004
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements PAGE
a) Balance Sheets
As of March 31, 2004 and September 30, 2003 (unaudited)............. 1
b) Statements of Operations
for the Three and Six Months Ended March 31, 2004 and 2003
(unaudited)......................................................... 2
c) Statements of Cash Flows
for the Six Months Ended March 31, 2004 and 2003 (unaudited)........ 3
d) Notes to Financial Statements (unaudited)........................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 13
Item 4. Controls and Procedures.................................................. 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...................... 13
Item 6. Exhibits and Reports on Form 8-K......................................... 14
SIGNATURE................................................................................. 15
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MITEK SYSTEMS, INC
BALANCE SHEETS
MARCH 31, SEPTEMBER 30,
2004 2003
ASSETS (UNAUDITED) (UNAUDITED)
----------- -----------
CURRENT ASSETS:
Cash $ 681,846 $ 1,819,102
Accounts receivable-net of allowances of
$301,697 and $253,697 respectively 2,510,325 2,900,693
Note receivable - related party 163,344 195,623
Inventories 23,703 43,182
Prepaid expenses and other assets 116,662 84,167
----------- -----------
Total current assets 3,495,880 5,042,767
PROPERTY AND EQUIPMENT-net 242,108 321,029
OTHER ASSETS 156,520 279,985
----------- -----------
TOTAL ASSETS $ 3,894,508 $ 5,643,781
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 741,491 $ 881,032
Accrued payroll and related taxes 467,389 690,388
Deferred revenue 1,246,752 884,917
Other accrued liabilities 229,935 245,818
----------- -----------
Total current liabilities 2,685,567 2,702,155
LONG-TERM LIABILITIES:
Deferred rent 16,013 16,135
Deferred revenue 280,933 318,826
Long-term payable 17,091 34,194
----------- -----------
Total long-term liabilities 314,037 369,155
----------- -----------
TOTAL LIABILITIES 2,999,604 3,071,310
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value; 20,000,000 shares authorized, 11,389,481
and 11,185,282 issued and outstanding at
March 31, 2004 and September 30, 2003, respectively 11,389 11,185
Additional paid-in capital 9,542,527 9,327,736
Accumulated deficit (8,659,012) (6,766,450)
----------- -----------
Net stockholders' equity 894,904 2,572,471
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,894,508 $ 5,643,781
=========== ===========
See notes to financial statements
1
MITEK SYSTEMS, INC
STATEMENTS OF OPERATIONS
UNAUDITED
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
2004 2003 2004 2003
-------------- -------------- -------------- --------------
SALES
Software $ 963,365 2,680,488 $ 1,635,015 $ 5,129,587
Hardware 403,450 753,851 773,555 852,881
Professional Services,
education and other 651,264 423,805 1,304,391 846,773
-------------- -------------- -------------- --------------
NET SALES 2,018,079 3,858,144 3,712,961 6,829,241
COSTS AND EXPENSES:
Cost of sales-Software 211,962 263,877 327,374 521,056
Cost of sales-Hardware 392,955 971,905 732,932 1,159,843
Cost of sales-Prof. Services,
educ. and 174,595 231,126 461,718 426,028
Operations 377,583 397,229 738,692 859,995
Selling and marketing 495,229 978,996 1,122,020 1,807,116
Research and development 658,456 552,113 1,167,516 1,124,233
General and administrative 520,371 433,702 1,059,675 838,344
-------------- -------------- -------------- --------------
Total costs and expenses 2,831,151 3,828,948 5,609,927 6,736,615
-------------- -------------- -------------- --------------
OPERATING INCOME (LOSS) (813,072) 29,196 92,626
Other income (expense) - net (2,773) 5,629 6,956 3,940
-------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES (815,845) 34,825 96,566
PROVISION FOR INCOME TAXES 0 8,745 2,550 9,975
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ (815,845) $ 26,080 $ (1,892,560) $ 86,591
============== ============== ============== ==============
EARNINGS (LOSS) PER SHARE - BASIC $ (0.07) $ -- $ (0.17) $ 0.01
============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC 11,369,942 11,138,772 11,316,861 11,138,772
============== ============== ============== ==============
EARNINGS (LOSS) PER SHARE - DILUTED $ (0.07) $ -- $ (0.17) $ 0.01
============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING - DILUTED 11,369,942 11,208,258 11,316,861 11,205,143
============== ============== ============== ==============
See notes to financial statements
2
MITEK SYSTEMS, INC
STATEMENTS OF CASH FLOWS
UNAUDITED
SIX MONTHS ENDED
MARCH 31,
2004 2003
------------------ --------------
OPERATING ACTIVITIES
Net (loss) income $(1,892,560) $ 86,591
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 228,538 228,755
Provision for bad debts 48,000 (9,000)
Provision for sales returns & allowances 61,112 102,000
Fair value of stock options issued to non-employees 10,776 2,753
Changes in operating assets and liabilities:
Accounts receivable 342,368 452,904
Inventories, prepaid expenses, and other assets (13,016) (216,906)
Accounts payable (139,541) (32,497)
Accrued payroll and related taxes (222,999) 68,441
Long-term payable (17,103) (17,103)
Deferred revenue 323,942 293,061
Other accrued liabilities (77,117) (14,043)
----------- -----------
Net cash (used in) provided by operating activities (1,347,600) 944,956
INVESTING ACTIVITIES
Purchases of property and equipment (26,155) (150,944)
Proceeds from sale of property and equipment 0 1,203
Payment (advances) on related party note receivable-net 32,279 (19,428)
----------- -----------
Net cash provided by (used in) investing activities 6,124 (169,169)
FINANCING ACTIVITIES
Proceeds from borrowings 0 360,000
Repayment of borrowings 0 (360,000)
Proceeds from exercise of stock options 204,220
----------- -----------
Net cash provided by financing activities 204,220 0
----------- -----------
NET INCREASE (DECREASE) IN CASH (1,137,256) 775,787
CASH AT BEGINNING OF PERIOD 1,819,102 760,416
----------- -----------
CASH AT END OF PERIOD $ 681,846 $ 1,536,203
=========== ===========
$ --
Supplemental Disclosure of Cash Flow Information
----------- -----------
Cash paid for interest $ 695 $ 6,526
=========== ===========
Cash paid for income taxes $ 2,550 $ 9,975
=========== ===========
See notes to financial statements
3
MITEK SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited financial statements of Mitek Systems, Inc.
(the "Company") 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, 2004 and March 31,
2003 are not necessarily indicative of results which may be reported for any
other interim period or for the year as a whole.
Going Concern and Management's Plans
The Company's financial statements have been prepared on a "going concern"
basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. Management
recognizes that the Company must generate capital and revenue resources to
enable it to continue to operate. Ultimately, Mitek Systems must achieve
profitable operations. The Company is considering various means of obtaining
additional capital including the issuance of debt or equity, entering into
alliances or joint ventures, or selling assets. The realization of assets and
satisfaction of liabilities in the normal course of business is dependent upon
the Company's obtaining additional capital and ultimately achieving profitable
operations. However, no assurances can be given that the Company will be
successful in these activities. Should any of these events not occur, the
accompanying Financial Statements will be materially affected and the Company
may not be able to continue operating as a going concern.
The operations from Fiscal 2003 and the quarters ended December 31, 2003
and March 31, 2004 have resulted in significant operating losses. Based upon
these losses, the Company will need to raise significant additional funds to
continue its activities as a going concern. If adequate funds are not available,
the Company may be forced to significantly or entirely curtail its operations.
The Company's failure to raise sufficient additional funds on favorable terms,
or at all, would have a material adverse effect on its business, results of
operations and financial position. See also Note 4 regarding Revolving Line of
Credit.
Certain prior year's balances have been reclassified to conform to the
2003 presentation.
2. New Accounting Pronouncements
In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees. This Interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. This
Interpretation does not prescribe a specific approach for subsequently measuring
the guarantor's recognized liability over the term of the related guarantee.
This Interpretation also incorporates, without change, the guidance in FASB
Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of
Others, which is being superseded. The initial recognition and measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The disclosure requirements in this Interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company has issued no guarantees that qualify for
disclosure in this interim financial statement.
4
In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148 Accounting for Stock-Based Compensation - Transition
and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
amendments to SFAS No. 123 provided for under SFAS No. 148 are effective for
financial statements for fiscal years ending after December 15, 2002. The
Company has not elected to adopt the fair value accounting provisions of SFAS
No. 123 and therefore the adoption of SFAS No. 148 did not have a material
effect on our results of operations or financial position.
In January 2003, the FASB issued SFAS No. 150 Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). This Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company adopted the provisions of this Statement and it
had no impact on its financial statements.
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. FIN 46 requires a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 were initially to apply to variable
interest entities created after January 31, 2003. The consolidation requirements
were initially to apply to transactions entered into prior to February 1, 2003
in the first fiscal year or interim period beginning after June 15, 2003. The
FASB postponed implementation of FIN 46 in December 2003. The Company has no
variable interest entities.
3. Accounting for Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued
to Employees, and FASB Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation.
Pro forma information regarding net loss and loss per share is required
by SFAS No. 123, Accounting for Stock-based Compensation, and has been
determined as if the Company had accounted for its employee stock options under
the fair value method of that Statement. The fair value for these options was
estimated at the dates of grant using the Black-Scholes option valuation model
with the following weighted-average assumptions for the three months and six
months ended March 31, 2004 and 2003.
2004 2003
Risk free interest rates 2.3% 1.9%
Dividend yields 0% 0%
Volatility 111% 82%
Weighted average expected life 3 years 3 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
5
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands, except for net income/loss
per share information):
Three months ended Six months ended
March 31 March 31
------------------------------------------------------
2004 2003 2004 2003
Net income (loss) as reported $ (815) $ 26 $ (1,892) $ 87
Net loss pro forma (1,194) (170) (2,431) (170)
Net income (loss) per share as reported (.07) (.00) (.17) .01
Net loss per share pro forma (.10) (.02) (.28) (.03)
4. Revolving Line of Credit
On February 19, 2004 the Company renewed its working capital revolving
line of credit. This line requires interest to be paid at prime plus 1
percentage point, and is subject to a limit on maximum available borrowings of
$500,000. The Company had no borrowings under the working capital line of credit
on March 31, 2004 or on September 30, 2003. This credit line is subject to a net
worth covenant whereby the Company must maintain a tangible net worth of
$2,000,000 in order to use the credit line. The loss sustained during the
quarter ended March 31, 2004 caused the Company's net worth to fall to $895,000.
Though the Company had no borrowings under the credit line as of March 31, 2004,
the Company was no longer in compliance with the aforementioned net worth
covenant and is unable to borrow on the credit line. No assurance can be made
that the Company will be able to obtain a new credit line on favorable terms, or
at all. The inability to obtain a favorable credit line would have a detrimental
impact on the Company's liquidity and could have a material adverse effect on
its business, results of operations and financial position.
5. Product Revenues - Below is a summary of the revenues by product lines.
Three Months Ended Six Months Ended
March 31 March 31
REVENUE 2004 2003 2004 2003
(000'S)
Recognition Toolkits $ 836 $2,079 $1,288 $3,617
Check Image Solutions 522 1,367 1,209 2,192
Document and Image Processing
Solutions 115 222 355 571
Maintenance and other 545 190 861 449
------ ------ ------ ------
Total Revenue $2,018 $3,858 $3,713 $6,829
====== ====== ====== ======
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion
The Company's financial statements have been prepared on a "going concern"
basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. Management
recognizes that the Company must generate capital and revenue resources to
enable it to continue to operate. Ultimately, Mitek Systems must achieve
profitable operations. The Company is considering various means of obtaining
additional capital including the issuance of debt or equity, entering into
alliances or joint ventures, or selling assets. The realization of assets and
satisfaction of liabilities in the normal course of business is dependent upon
the Company's obtaining additional capital and ultimately achieving profitable
operations. However, no assurances can be given that the Company will be
successful in these activities. Should any of these events not occur, the
accompanying Financial Statements will be materially affected and the Company
may not be able to continue operating as a going concern.
In addition to historical information, this Management's Discussion and
Analysis of Financial Condition and Results of Operations (the "MD&A") contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. As contained herein, the words "expects,"
"anticipates," "believes," "intends," "will," and similar types of expressions
identify forward-looking statements, which are based on information that is
currently available to the Company, speak only as of the date hereof, and are
subject to certain risks and uncertainties. To the extent that the MD&A contains
forward-looking statements regarding the financial condition, operating results,
business prospects or any other aspect of the Company, please be advised that
the Company's actual financial condition, operating results and business
performance may differ materially from that projected or estimated by the
Company in forward-looking statements. The Company has attempted to identify
certain of the factors that it currently believes may cause actual future
experiences and results to differ from the Company's current expectations. The
difference may be caused by a variety of factors, including, but not limited, to
the following: (i) adverse economic conditions; (ii) decreases in demand for
Company products and services; (iii) intense competition, including entry of new
competitors into the Company's markets; (iv) increased or adverse federal, state
and local government regulation; (v) the Company's inability to retain or renew
its working capital credit line or otherwise obtain additional capital on terms
satisfactory to the Company; (vi) increased or unexpected expenses; (vii) lower
revenues and net income than forecast; (viii) price increases for supplies; (ix)
inability to raise prices; (x) the risk of additional litigation and/or
administrative proceedings involving the Company and its employees; (xi) higher
than anticipated labor costs; (xii) adverse publicity or news coverage regarding
the Company; (xiii) inability to successfully carry out marketing and sales
plans, including the Company's strategic realignment; (xiv) loss of key
executives; (xv) changes in interest rates; (xvi) inflationary factors; (xvii)
and other specific risks that may be alluded to in this MD&A.
The Company's strategy for fiscal 2004 is to grow the identified markets
for its new products and enhance the functionality and marketability of the
Company's character recognition technology. In particular, Mitek is determined
to expand the installed base of its Recognition Toolkits and leverage existing
technology by devising recognition-based applications to detect potential fraud
and loss at financial institutions. The Company also seeks to penetrate
additional markets for its Document and Image Processing Solutions by taking
advantage of specific vertical applications which lend themselves to this type
of labor-saving technology. The Company also seeks to expand the installed base
of its Check Imaging Solutions by entering into reselling relationships with key
resellers who will better penetrate the market and provide entree into a larger
base of customers.
Management presumes that users of these interim financial statements and
information have read or have access to the discussion and analysis for the
preceding fiscal year. See also Item 3, "Quantitative and Qualitative
Disclosures about Market Risk."
7
CRITICAL ACCOUNTING POLICIES
Revenue Recognition
The Company enters into contractual arrangements with end users that may
include licensing of the Company's software products, product support and
maintenance services, consulting services, resale of third-party hardware, or
various combinations thereof, including the sale of such products or services
separately. The Company's accounting policies regarding the recognition of
revenue for these contractual arrangements is fully described in Notes to the
Audited Financial Statements for the year ended September 30, 2003 included in
the Company's Form 10-K.
The Company considers many factors when applying accounting principles
generally accepted in the United States of America related to revenue
recognition. These factors include, but are not limited to:
o The actual contractual terms, such as payment terms, delivery dates, and
pricing of the various product and service elements of a contract
o Availability of products to be delivered
o Time period over which services are to be performed
o Creditworthiness of the customer
o The complexity of customizations to the Company's software required by
service contracts
o The sales channel through which the sale is made (direct, VAR,
distributor, etc.)
o Discounts given for each element of a contract
o Any commitments made as to installation or implementation "go live" dates
Each of the relevant factors is analyzed to determine its impact,
individually and collectively with other factors, on the revenue to be
recognized for any particular contract with a customer. Management is required
to make judgments regarding the significance of each factor in applying the
revenue recognition standards, as well as whether or not each factor complies
with such standards. Any misjudgment or error by management in its evaluation of
the factors and the application of the standards, especially with respect to
complex or new types of transactions, could have a material adverse affect on
the Company's future revenues and operating results.
Accounts Receivable.
We evaluate the creditworthiness of our customers prior to order
fulfillment and we perform ongoing credit evaluations of our customers to adjust
credit limits based on payment history and our assessment of the customer's
current creditworthiness. We constantly monitor collections from our customers
and maintain a provision for estimated credit losses that is based on historical
experience and on specific customer collection issues. While such credit losses
have historically been within our expectations and the provisions established,
we cannot guarantee that we will continue to experience the same credit loss
rates that we have in the past. Since our revenue recognition policy requires
customers to be deemed creditworthy, our accounts receivable are based on
customers whose payment is reasonably assured. Our accounts receivable are
derived from sales to a wide variety of customers. We do not believe a change in
liquidity of any one customer or our inability to collect from any one customer
would have a material adverse impact on our financial position.
Deferred Income Taxes.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. We maintain a
valuation allowance against the deferred tax asset due to uncertainty regarding
the future realization based on historical taxable income, projected future
taxable income, and the expected timing of the reversals of existing temporary
differences. Until such time as the Company can demonstrate that it will no
longer incur losses or if the Company is unable to generate sufficient future
taxable income we could be required to maintain the valuation allowance against
our deferred tax assets.
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
Comparison of Three Months and Six Months Ended March 31, 2004 and 2003
8
Net Sales. Net sales for the three-month period ended March 31, 2004 were
$2,018,000, compared to $3,858,000 for the same period in 2003, a decrease of
$1,840,000, or 48%. The decrease was primarily attributable to a 60% decline in
revenue associated with our recognition toolkits, the result of enterprise
licenses signed in the second quarter of 2003 which will not renew until later
in fiscal 2004. Revenue from Check Image Solutions also declined by 62%. The
Company continues to experience delayed purchasing decisions, which we believe
are due to continued customer hesitancy to adopt check imaging solutions
mandated by the passage of Check 21, as well as expressed concern over the
Company's recent quarterly losses and the potential delisting of the Company's
stock from NASDAQ. While the Company believes the Check 21 legislation will
eventually result in additional customer demand for check imaging solutions, the
Company believes customers have been reluctant to commit to purchases, while
evaluating the full impact of this newly-enacted legislation. Once
implementation of this technology begins, the Company believes revenue from some
of these customer leads will come forth, if the Company's financial position is
improved. Sales in the Document and Image Processing Solutions also declined, by
48%. This is primarily due to the absence of a dedicated sales force for this
product line, which the Company intends to put into place later during the 2004
fiscal year. Sales of Maintenance rose by 186%, reflecting the Company's efforts
to contact current and past customers to encourage the renewal of product
support contracts. This has resulted in an increase in the installed base of
customers purchasing product support.
Net sales for the six-month period ended March 31, 2004 were
$3,713,000, compared to $6,829,000 for the same period in 2003, a decrease of
$3,116,000 or 46%. The decrease was primarily attributable to a 64% decline in
revenue associated with our recognition toolkits, the result of enterprise
licenses signed in the first and second quarters of 2003 which will not renew
until later in fiscal 2004. Revenue from Check Image Solutions also declined by
45%. The Company continues to experience delayed purchasing decisions, which we
believe are due to continued customer hesitancy to adopt check imaging solutions
mandated by the passage of Check 21, as well as expressed concern over the
Company's recent quarterly losses and the potential delisting of the Company's
stock from NASDAQ. While the Company believes the Check 21 legislation will
eventually result in additional customer demand for check imaging solutions, the
Company believes customers have been reluctant to commit to purchases, while
evaluating the full impact of this newly-enacted legislation. Once
implementation of this technology begins, the Company believes revenue from
these customer leads will forth come, if the Company's financial position is
improved. Sales in the Document and Image Processing Solutions also declined, by
38%. This is primarily due to the absence of a dedicated sales force for this
product line, which the Company intends to put into place later during the 2004
fiscal year. Sales of Maintenance rose by 92%, reflecting the Company's efforts
to contact current and past customers to encourage the renewal of product
support contracts. This has resulted in an increase in the installed base of
customers purchasing product support
Cost of Sales. Cost of sales for the three-month period ended March 31,
2004 was $780,000, compared to $1,467,000 for the same period in 2003, a
decrease of $687,000 or 47%. Stated as a percentage of net sales, cost of sales
increased to 39% for the three-month period ended March 31, 2004 compared to 38%
for the same period in 2003. The dollar decrease in cost of sales is almost
entirely due to reduced hardware installations related to the Company's
Checkquest product line, which typically carry higher costs, during the quarter,
as compared to the same quarter in 2003. The increase as a percentage of net
sales is due to the product mix of software sold shifting toward the Company's
Checkscript product line, which carries a royalty.
Cost of sales for the six-month period ended March 31, 2004 was
$1,522,000, compared to $2,107,000 for the same period in 2003, a decrease of
$585,000 or 28%. Stated as a percentage of net sales, cost of sales increased to
41% for the six-month period ended March 31, 2004, compared to 31% for the same
period in 2003. The dollar decrease in cost of sales is almost entirely due to
reduced hardware installations related to the Company's Checkquest product line,
which typically carry higher costs, during the quarter, as compared to the same
quarter in 2003. The increase as a percentage of net sales is due to the product
mix of software sold shifting toward the Company's Checkscript product line,
which carries a royalty.
Operations Expenses. Operations expenses include costs associated with
shipping and receiving, quality assurance, customer support, installation and
training. As installation, training, maintenance and customer support revenues
are recognized, an appropriate amount of these costs are charged to cost of
sales, with unabsorbed costs remaining in operations expense. Gross Operations
9
expenses for the three-month period ended March 31, 2004 were $510,000, compared
to $555,000 for the same period in 2003, a decrease of $45,000 or 8%. Net
Operations expenses for the three-month period ended March 31, 2004 were
$361,000, compared to $463,000 for the same period in 2003, a decrease of
$102,000 or 22%.Stated as a percentage of net sales, operations expenses were
19% for the three-month period ended March 31, 2003, as compared with 10% for
the same period in 2003. The dollar decrease in gross expenses is primarily
attributable to reduced amount of salaries and wages, due to a reassignment of
personnel into sales functions. The dollar decrease in net expense is
attributable to the reduced spending discussed above and additional amounts
being charged to cost of sales, as a result of the completion of several
installations. The increase in expenses as a percentage of net sales is
primarily attributable to lower revenues.
Gross Operations expenses for the six-month period ended March 31, 2004
were $1,005,000, compared to $1,133,000 for the same period in 2003, a decrease
of $128,000 or 11%. Net Operations expenses for the six-month period ended March
31, 2004 were $739,000, compared to $860,000 for the same period in 2003, a
decrease of $121,000 or 14%. Stated as a percentage of net sales, operations
expenses increased to 20% for the six-month period ended March 31, 2004,
compared to 13% for the same period in 2003. The dollar decrease in gross
expenses is primarily attributable to reduced amount of salaries and wages, due
to a reassignment of personnel into sales functions. The dollar decrease in net
expense is attributable to the reduced spending discussed above and additional
amounts being charged to cost of sales, as a result of the completion of several
installations. The increase in expenses as a percentage of net sales is
primarily attributable to lower revenues.
Selling and Marketing Expenses. Selling and marketing expenses for the
three-month period ended March 31, 2004 were $495,000, compared to $979,000 for
the same period in 2003, a decrease of $484,000 or 49%. Stated as a percentage
of net sales, selling and marketing expenses remained 25%, as it was for the
same period in 2003. The dollar decrease in expenses is primarily attributable
to reduced commissions resulting from lower sales, as well as reduced salaries
expense, as the Company reduced its direct sales force in the check image
solution product line. The Company believes this product line is better suited
to an indirect sales channel, and the Company has signed two resellers to
representation agreements to move in this direction.
Selling and marketing expenses for the six-month period ended March 31, 2004
were $1,122,000, compared to $1,807,000 for the same period in 2003, a decrease
of $685,000 or 38%. Stated as a percentage of net sales, selling and marketing
expenses increased to 30% from 26% for the same period in 2003. The dollar
decrease in expenses is primarily attributable to reduced commissions resulting
from lower sales, as well as reduced salaries expense, as the Company reduced
its direct sales force in the check image solution product line. The Company
believes this product is better suited to an indirect sales channel, and the
Company has signed two resellers to representation agreements to move in this
direction. The increase as a percentage of net sales is primarily attributable
to reduced sales.
Research and Development Expenses. Research and development expenses
are incurred to maintain existing products, develop new products or new product
features, technical customer support, and development of custom projects.
Research and development expenses for the three-month period ended March 31,
2004 were $658,000, compared to $552,000 for the same period in 2003, an
increase of $106,000 or 19%. Stated as a percentage of net sales, research and
development expenses increased to 33% for the three-month period ended March 31,
2004, compared to 14% for the same period in 2003. The dollar increase in
expenses is the result of consultants engaged to complete two engineering
projects. The increase as a percentage of net sales for the three-month period
is primarily attributable to the decrease in sales.
Research and development expenses for the six-month period ended March
31, 2004 were $1,168,000, compared to $1,124,000 for the same period in 2003, an
increase of $44,000 or 4%. Stated as a percentage of net sales, research and
development expenses increased to 31% for the six-month period ended March 31,
2004, compared to 16% for the same period in 2003. The dollar increase in
expenses is the result of consultants engaged to complete two engineering
projects, offset by the prior quarters' reclassification of costs. Such costs,
amounting to $92,000 were reclassified as costs of goods sold, and served to
reduce research and development expense during the first quarter. The increase
as a percentage of net sales for the three-month period is primarily
attributable to the decrease in sales.
10
General and Administrative Expenses. General and administrative expenses
for the three-month period ended March 31, 2004 were $520,000, compared to
$434,000 for the same period in 2003, an increase of $86,000 or 20%. Stated as a
percentage of net sales, general and administrative expenses increased to 26%
for the three-month period ended March 31, 2004, compared to 11% for the same
period in 2003. The dollar increase in expenses for the three month period is
attributable to $22,000 of additional salaries expense, as the President and
Chief Executive Officer was not a separate position in 2003 and $81,000 in
increased legal costs primarily relating to analysis of strategic alternatives,
including potential mergers, capital infusions, and other strategic
alternatives. The increase in expenses as a percentage of net sales is primarily
attributable to lower revenues.
General and administrative expenses for the six-month period ended March
31, 2004 were $1,060,000, compared to $838,000 for the same period in 2003, an
increase of $222,000 or 26%. Stated as a percentage of net sales, general and
administrative expenses increased to 29% for the six-month period ended March
31, 2004, compared to 12% for the same period in 2003. The dollar increase in
expenses for the three month period is attributable to $100,000 of additional
salaries expense, as the President and Chief Executive Officer was not a
separate position in 2003 and $103,000 in increased legal costs primarily
relating to analysis of strategic alternatives, including potential mergers,
capital infusions, and other strategic alternatives. The increase in expenses as
a percentage of net sales is primarily attributable to lower revenues.
Interest and Other Income (Expense) - Net. Interest and other income
(expense) for the three-month period ended March 31, 2004 was ($3,000), compared
to $6,000 for the same period in 2003, a decrease of $9,000. Interest and other
income (expense) for the six-month period ended March 31, 2004 was $7,000,
compared to $4,000 for the same period in 2003, an increase of $3,000. The
decrease in net interest and other income (expense) for the period ended March
31, 2004 is primarily the result of the Company's share of the net income from
the Company's affiliate, Mitek Systems, Ltd.
LIQUIDITY AND CAPITAL
Going Concern and Management's Plans
The Company's financial statements have been prepared on a "going concern"
basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. Management
recognizes that the Company must generate capital and revenue resources to
enable it to continue to operate. Ultimately, Mitek Systems must achieve
profitable operations. The Company is considering various means of obtaining
additional capital including the issuance of debt or equity, entering into
alliances or joint ventures, or selling assets. The realization of assets and
satisfaction of liabilities in the normal course of business is dependent upon
the Company's obtaining additional capital and ultimately achieving profitable
operations. However, no assurances can be given that the Company will be
successful in these activities. Should any of these events not occur, the
accompanying Financial Statements will be materially affected and the Company
may not be able to continue operating as a going concern.
At March 31, 2004 the Company had $682,000 in cash as compared to
$1,819,000 at September 30, 2003. Accounts receivable totaled $2,510,000, a
decrease of $391,000 over the September 30, 2003, balance of $2,901,000.
The Company has financed its cash needs during the second quarter of
fiscal 2004 primarily from collection of accounts receivable. The Company
financed its cash needs during fiscal 2003 primarily from collection of accounts
receivable.
Net cash provided by (used by) operating activities during the six months
ended March 31, 2004 was ($1,348,000). The primary use of cash from operating
activities was the operating loss of (1,893,000), a decrease in the accrued
payroll and related taxes of ($222,000) and a decrease in accounts payable of
($140,000) . The primary source of cash from operating activities was a decrease
in accounts receivable of $342,000, an increase in deferred maintenance revenue
of $324,000 and depreciation and amortization of $229,000. During the second
quarter, the Company had no borrowings on its revolving line of credit.
11
The Company used part of the cash provided from operating activities to
finance the acquisition of equipment used in its business.
During the six months ended March 31, 2004, the Company also received cash
of approximately $204,000 from financing activities in the form of proceeds from
the exercise of stock options by employees and directors.
The Company's working capital and current ratio were $810,000 and 1.30,
respectively, at March 31, 2004, and $2,341,000 and 1.87, respectively, at
September 30, 2003. At March 31, 2004, total liabilities to equity ratio was
3.35 to 1 compared to 1.19 to 1 at September 30, 2003. As of March 31, 2004,
total liabilities were decreased by $72,000 than on September 30, 2003.
The Company currently has a working capital line of credit. This line
requires interest to be paid at prime plus 1 percentage point, but is subject to
a limit on available borrowings of $500,000. The Company had no borrowings under
the working capital line of credit on March 31, 2004 or on September 30, 2003.
This credit line is subject to a net worth covenant whereby the Company must
maintain a net worth of $2,000,000 in order to use the credit line. At March 31,
2004, the Company's net worth was $810,000 and the Company is unable to borrow
under the line of credit.
Though the Company had no borrowings under the credit line as of March 31,
2004, the Company was no longer in compliance with the aforementioned net worth
covenant. The Company is currently negotiating with several capital providers,
in order to bring the Company's net worth into compliance. No assurance can be
made that the Company will be able to obtain such capital favorable terms, or at
all. The inability to obtain a favorable credit line would have a detrimental
impact on the Company's liquidity and could have a material adverse effect on
its business, results of operations and financial position.
There are no significant capital expenditures planned for the foreseeable
future.
The Company evaluates its cash requirements on a quarterly basis.
Historically, the Company has managed its cash requirements principally from
cash generated from operations. Although the Company's strategy for fiscal 2004
is to grow the identified markets for its new products and enhance the
functionality and marketability of the Company's character recognition
technology, it has not yet observed a significant change in liquidity or future
cash requirements as a result of this strategy. Cash requirements over the next
twelve months are principally to fund operations, including spending on research
and development.
The operations from Fiscal 2003 and the quarters ended December 31, 2003
and March 31, 2004 have resulted in significant operating losses. Based upon
these losses, the Company will need to raise significant additional funds to
continue its activities as a going concern. If adequate funds are not available,
the Company may be forced to significantly or entire curtail its operations. The
Company's failure to raise sufficient additional funds on favorable terms, or at
all, would have a material adverse effect on its business, results of operations
and financial position.
New Accounting Pronouncements
In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees. This Interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. This
Interpretation does not prescribe a specific approach for subsequently measuring
the guarantor's recognized liability over the term of the related guarantee.
This Interpretation also incorporates, without change, the guidance in FASB
Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of
Others, which is being superseded. The initial recognition and measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The disclosure requirements in this Interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company has issued no guarantees that qualify for
disclosure in this interim financial statement.
12
In December 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 148 Accounting for Stock-Based Compensation - Transition
and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
amendments to SFAS No. 123 provided for under SFAS No. 148 are effective for
financial statements for fiscal years ending after December 15, 2002. The
Company has not elected to adopt the fair value accounting provisions of SFAS
No. 123 and therefore the adoption of SFAS No. 148 did not have a material
effect on our results of operations or financial position.
In January 2003, the FASB issued SFAS No. 150 Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). This Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company adopted the provisions of this Statement and it
had no impact on its financial statements.
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. FIN 46 requires a variable
interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 were initially to apply to variable
interest entities created after January 31, 2003. The consolidation requirements
were initially to apply to transactions entered into prior to February 1, 2003
in the first fiscal year or interim period beginning after June 15, 2003. The
FASB postponed implementation of FIN 46 in December 2003. The Company has no
variable interest entities.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
PART I, ITEM 3
The Company is exposed to certain market risks arising from adverse
changes in interest rates, primarily due to the potential effect of such changes
on the Company's variable rate working capital line of credit, as described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital." The Company had no borrowings at March
31, 2004. The Company does not use interest rate derivative instruments to
manage exposure to interest rate changes.
Controls and Procedures
The Company carried out an evaluation, under the supervision and with the
participation of our management, including Mr. DeBello, the Company's President
and Chief Executive Officer and Mr. Thornton, the Company's Chairman of the
Board and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14 as of the end of the period covered by this Quarterly
Report on Form 10-Q. Based upon that evaluation, Mr. DeBello and Mr. Thornton
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company required to
be included in the Company's periodic filings with the Securities and Exchange
Commission. There was no change in the Company's internal control over financial
reporting that occurred during the fiscal quarter covered by this Quarterly
Report likely to materially affect our internal control over financial
reporting.
13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company's Annual Meeting of Stockholders was held on February 4,
2004 (the "Meeting")
b. The following directors were elected at the Meeting.
NUMBER OF SHARES VOTED:
DIRECTOR FOR AGAINST OR WITHHELD ABSTAIN OR BROKER NON-VOTE
John M. Thornton 10,410,759 106,342
Sally B. Thornton 10,248,673 268,285
James B. DeBello 10,426,911 90,047
Gerald I. Farmer, Ph.D 10,408,171 108,787
John G. Rebelo Jr. 10,448,657 68,301
Robert D. Holvey 10,447,057 69,901
c. Deloitte & Touche LLP was ratified as the Company's 2004 auditors:
NUMBER OF SHARES VOTED:
FOR AGAINST OR WITHHELD ABSTAIN OR BROKER NON-VOTE
10,478,335 22,910 15,713
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
The following exhibits are filed herewith:
--------------------------------------------------------------------------------------
Exhibit Number Exhibit Title
--------------------------------------------------------------------------------------
31.1 Rule 15d-14(a) Certification of the Chief Executive
Officer
--------------------------------------------------------------------------------------
31.2 Rule 15d-14(a) Certification of the Chief Financial
Officer
--------------------------------------------------------------------------------------
32.1 Section 1350 Certification of the Chief Executive
Officer
--------------------------------------------------------------------------------------
32.2 Section 1350 Certification of the Chief Financial
Officer
--------------------------------------------------------------------------------------
b. Reports on Form 8-K: Reports on Form 8-K were filed on November 18,
2003, December 30, 2003, February 2, 2004 and February 4, 2004 by
the Company during the six months ended March 31, 2004.
14
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.
Date: May 12, 2004 /S/ JAMES B. DEBELLO
----------------------------------
James B. DeBello, President and
Chief Executive Officer
Date: May 12, 2004 /S/ JOHN M. THORNTON
----------------------------------
John M. Thornton, Chairman and
Chief Financial Officer
15
MITEK SYSTEMS, INC.
FORM 10-Q CERTIFICATIONS
1. REVISED CERTIFICATIONS PURSUANT TO SECTION 302(A) OF THE SARBANES-OXLEY ACT.
THESE CERTIFICATIONS MUST BE FILED AS EXHIBITS 31.1(CEO) AND 31.2(CFO).
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
I, James B. DeBello, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mitek Systems,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report.
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared; and
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: May 12, 2004 By: /S/ JAMES B. DEBELLO
----------------------------------
James B. DeBello
President and
Chief Executive Officer
16
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
I, John M. Thornton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Mitek Systems,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report.
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared; and
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: May 12, 2004 By: /S/ JOHN M. THORNTON
-----------------------------
John M. Thornton
Chairman of the Board and
Chief Financial Officer
17
2. REVISED CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002 (THE "SARBANES-OXLEY ACT"). THESE CERTIFICATIONS SHOULD BE FILED AS
EXHIBITS 32.1(CEO) AND 32.2(CFO).
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, James B. DeBello, President and Chief Executive Officer of Mitek Systems,
Inc. (the "Registrant"), do hereby certify pursuant to Rule 15d-14(b) of the
Securities and Exchange Act of 1934, as amended, and Section 1350 of Chapter 63
of Title 18 of the United States Code that:
(1) the Registrant's Quarterly Report on Form 10-Q of the Registrant for the
period ended March 31, 2004 (the "Report"), to which this statement is filed as
an exhibit, fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Dated: May 12, 2004 By: /S/ JAMES B. DEBELLO
---------------------------
James B. DeBello
President and
Chief Executive Officer
18
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, John M. Thornton, Chairman of the Board and Chief Financial Officer of Mitek
Systems, Inc. (the "Registrant"), do hereby certify pursuant to Rule 15d-14(b)
of the Securities and Exchange Act of 1934, as amended, and Section 1350 of
Chapter 63 of Title 18 of the United States Code that:
(1) the Registrant's Quarterly Report on Form 10-Q of the Registrant for the
period ended March 31, 2004 (the "Report"), to which this statement is filed as
an exhibit, fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
Dated: May 12, 2004 By: /S/ JOHN M. THORNTON
-----------------------------
John M. Thornton
Chairman of the Board and
Chief Financial Officer