SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC. 20549
FORM
10-QSB
(Mark
One)
x
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For
the
quarterly period ended June
30, 2005
or
o
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 xNo
o
There
were 13,557,337 shares outstanding of the registrant's Common Stock as
of August 2, 2005.
MITEK
SYSTEMS, INC.
FORM
10-QSB
For
the Quarter Ended June 30, 2005
INDEX
Part
1. Financial Information
Item
1.
|
Financial
Statements
|
Page
|
|
a)
|
Balance
Sheets
|
|
|
|
As
of June 30, 2005 (Unaudited) and September 30, 2004
(Audited)
|
1
|
|
|
|
|
|
b)
|
Statements
of Operations
|
|
|
|
for
the Three and Nine Months Ended June 30, 2005
and
2004 (Unaudited)
|
2
|
|
|
|
|
|
c)
|
Statements
of Cash Flows
|
|
|
|
for
the Nine Months Ended June 30, 2005 and 2004 (Unaudited)
|
3
|
|
|
|
|
|
d)
|
Notes
to Financial Statements
|
4
|
Item
2.
|
Management’s
Discussion and Analysis of Financial
|
|
|
Condition
and Results of Operations
|
10
|
Item
3. .
|
Controls
and Procedures
|
16
|
Part
II. Other Information
Item
1.
|
Legal
Proceedings
|
17
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
17
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
17
|
Item
6
|
Exhibits
|
17
|
ITEM
1:
|
FINANCIAL
INFORMATION
|
MITEK
SYSTEMS, INC
|
BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
June
30,
|
|
September
30,
|
|
|
|
2005
|
|
2004
|
|
ASSETS
|
|
(Unaudited)
|
|
(Audited)
|
|
CURRENT
ASSETS: |
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
1,970,069
|
|
$
|
2,607,173
|
|
Accounts
receivable-net of allowances of
|
|
|
|
|
|
|
|
$587,043
and $773,473 respectively
|
|
|
1,062,711
|
|
|
570,154
|
|
Note
receivable - related party
|
|
|
0
|
|
|
133,841
|
|
Inventories
- net
|
|
|
13,555
|
|
|
11,078
|
|
Prepaid
expenses and other assets
|
|
|
126,754
|
|
|
180,876
|
|
Total
current assets
|
|
|
3,173,089
|
|
|
3,503,122
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT-net
|
|
|
96,612
|
|
|
119,111
|
|
OTHER
ASSETS
|
|
|
65,849
|
|
|
0
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
3,335,550
|
|
$
|
3,622,233
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
333,521
|
|
$
|
288,909
|
|
Accrued
payroll and related taxes
|
|
|
276,445
|
|
|
240,000
|
|
Deferred
revenue
|
|
|
517,116
|
|
|
397,724
|
|
Warrants-liability
|
|
|
0
|
|
|
415,907
|
|
Current
portion of Convertible Debt, net of unamortized
|
|
|
|
|
|
|
|
financing
costs of $408,764 and $338,624 respectively
|
|
|
682,145
|
|
|
570,827
|
|
Other
accrued liabilities
|
|
|
371,693
|
|
|
743,056
|
|
Total
current liabilities
|
|
|
2,180,920
|
|
|
2,656,423
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
Deferred
rent
|
|
|
6,024
|
|
|
13,215
|
|
Convertible
Debt, net of unamortized financing costs
|
|
|
|
|
|
|
|
of
$151,525 and $606,760 respectively
|
|
|
1,103,702
|
|
|
1,484,149
|
|
Total
long-term liabilities
|
|
|
1,109,726
|
|
|
1,497,364
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
3,290,646
|
|
|
4,153,787
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock - $.001 par value; 40,000,000
|
|
|
|
|
|
|
|
shares
authorized, 13,557,337 and 11,389,481
|
|
|
|
|
|
|
|
issued
and outstanding at
|
|
|
|
|
|
|
|
June
30, 2005 and September 30, 2004, respectively
|
|
|
13,557
|
|
|
11,389
|
|
Additional
paid-in capital
|
|
|
12,129,661
|
|
|
10,069,833
|
|
Accumulated
deficit
|
|
|
(12,098,314
|
)
|
|
(10,612,776
|
)
|
Net
stockholders' equity
|
|
|
44,904
|
|
|
(531,554
|
)
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
3,335,550
|
|
$
|
3,622,233
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial
statements
|
MITEK
SYSTEMS, INC
|
|
STATEMENTS
OF OPERATIONS
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE
MONTHS ENDED
|
|
NINE
MONTHS ENDED
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
SALES
|
|
|
|
|
|
|
|
|
|
Software
|
|
$
|
751,488
|
|
$
|
389,440
|
|
$
|
2,696,435
|
|
$
|
2,024,455
|
|
Hardware
|
|
|
-
|
|
|
85,016
|
|
|
-
|
|
|
858,571
|
|
Professional
Services, education and other
|
|
|
730,432
|
|
|
513,012
|
|
|
1,857,706
|
|
|
1,817,403
|
|
NET
SALES
|
|
|
1,481,920
|
|
|
987,468
|
|
|
4,554,141
|
|
|
4,700,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales-Software
|
|
|
109,362
|
|
|
141,573
|
|
|
248,099
|
|
|
468,947
|
|
Cost
of sales-Hardware
|
|
|
0
|
|
|
71,227
|
|
|
0
|
|
|
804,159
|
|
Cost
of sales-Professional services, education and other
|
|
|
221,358
|
|
|
158,585
|
|
|
495,381
|
|
|
620,303
|
|
Operations
|
|
|
35,308
|
|
|
326,343
|
|
|
111,716
|
|
|
1,065,035
|
|
Selling
and marketing
|
|
|
514,311
|
|
|
449,742
|
|
|
1,717,084
|
|
|
1,571,762
|
|
Research
and development
|
|
|
476,565
|
|
|
644,090
|
|
|
1,193,508
|
|
|
1,811,606
|
|
General
and administrative
|
|
|
622,675
|
|
|
613,914
|
|
|
2,634,007
|
|
|
1,673,589
|
|
Gain
on disposition of assets
|
|
|
(1,000,000
|
)
|
|
|
|
|
(1,000,000
|
)
|
|
|
|
Total
costs and expenses
|
|
|
979,579
|
|
|
2,405,474
|
|
|
5,399,795
|
|
|
8,015,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (LOSS)
|
|
|
502,341
|
|
|
(1,418,006
|
)
|
|
(845,654
|
)
|
|
(3,314,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, including liquidating damages (2005)
|
|
|
(241,241
|
)
|
|
(25,741
|
)
|
|
(745,652
|
)
|
|
(32,010
|
)
|
Change
in fair value of warrant liability
|
|
|
(33,418
|
)
|
|
0
|
|
|
81,993
|
|
|
0
|
|
Interest
and other income
|
|
|
2,171
|
|
|
8,185
|
|
|
23,172
|
|
|
21,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense) - net
|
|
|
(272,488
|
)
|
|
(17,556
|
)
|
|
(640,487
|
)
|
|
(10,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES
|
|
|
229,853
|
|
|
(1,435,562
|
)
|
|
(1,486,141
|
)
|
|
(3,325,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES (BENEFIT)
|
|
|
(604
|
)
|
|
457
|
|
|
(604
|
)
|
|
3,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
230,457
|
|
$
|
(1,436,019
|
)
|
$
|
(1,485,537
|
)
|
$
|
(3,328,579
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
(LOSS) PER SHARE - BASIC
|
|
$
|
0.02
|
|
$
|
(0.13
|
)
|
$
|
(0.12
|
)
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING - BASIC
|
|
|
13,143,797
|
|
|
11,389,481
|
|
|
12,123,390
|
|
|
11,340,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
(LOSS) PER SHARE - DILUTED
|
|
$
|
0.02
|
|
$
|
(0.13
|
)
|
$
|
(0.12
|
)
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING - DILUTED
|
|
|
13,308,659
|
|
|
11,389,481
|
|
|
12,123,390
|
|
|
11,340,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial
statements
|
MITEK
SYSTEMS, INC
|
|
STATEMENTS
OF CASH FLOWS
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
NINE
MONTHS ENDED
|
|
|
|
June
30,
|
|
|
|
2005
|
|
2004
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,485,537
|
)
|
$
|
(3,328,579
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
74,595
|
|
|
340,996
|
|
Provision
for bad debts
|
|
|
24,000
|
|
|
72,000
|
|
Loss
on disposal of property and equipment
|
|
|
0
|
|
|
2,113
|
|
Change
in fair value of warrant liability
|
|
|
(81,993
|
)
|
|
0
|
|
Amortization
of debt discount
|
|
|
384,735
|
|
|
14,462
|
|
Provision
for sales returns & allowances
|
|
|
(6,412
|
)
|
|
104,090
|
|
Fair
value of stock options issued to non-employees
|
|
|
2,580
|
|
|
10,776
|
|
Gain
on sale of equity investment
|
|
|
(16,159
|
)
|
|
0
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(516,557
|
)
|
|
1,389,034
|
|
Inventories,
prepaid expenses, and other assets
|
|
|
(17,940
|
)
|
|
79,745
|
|
Accounts
payable
|
|
|
44,612
|
|
|
(403,857
|
)
|
Accrued
payroll and related taxes
|
|
|
36,445
|
|
|
(152,807
|
)
|
Long-term
payable
|
|
|
0
|
|
|
(25,655
|
)
|
Deferred
revenue
|
|
|
119,392
|
|
|
(557,523
|
)
|
Liabilities
in excess of assets held for sale
|
|
|
0
|
|
|
376,516
|
|
Other
accrued liabilities
|
|
|
(164,139
|
)
|
|
(78,446
|
)
|
Net
cash used in operating activities
|
|
|
(1,602,378
|
)
|
|
(2,157,135
|
)
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(48,931
|
)
|
|
(45,339
|
)
|
Proceeds
from sale of property and equipment
|
|
|
569
|
|
|
0
|
|
Payment
(advances) on related party note receivable-net
|
|
|
150,000
|
|
|
49,378
|
|
Net
cash provided by investing activities
|
|
|
101,638
|
|
|
4,039
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds
from convertible debt
|
|
|
0
|
|
|
3,000,000
|
|
Repayment
on convertible debt
|
|
|
(636,364
|
)
|
|
0
|
|
Deferred
costs related to convertible debt
|
|
|
0
|
|
|
(151,000
|
)
|
Proceeds
from sale of common shares
|
|
|
1,500,000
|
|
|
|
|
Proceeds
from exercise of stock options
|
|
|
0
|
|
|
204,220
|
|
Net
cash provided by financing activities
|
|
|
863,636
|
|
|
3,053,220
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(637,104
|
)
|
|
900,124
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
2,607,173
|
|
|
1,819,102
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
1,970,069
|
|
$
|
2,719,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
360,916
|
|
$
|
18,510
|
|
Cash
paid for income taxes
|
|
$
|
1,056
|
|
$
|
3,007
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Options
issued in exchange for services
|
|
$
|
-
|
|
$
|
10,776
|
|
Warrants
issued in connection with financing
|
|
$
|
73,159
|
|
$
|
367,887
|
|
Beneficial
conversion feature of convertible debt
|
|
$
|
-
|
|
$
|
522,384
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial
statements
|
MITEK
SYSTEMS, INC.
NOTES
TO
FINANCIAL STATEMENTS
The
accompanying unaudited financial statements of Mitek Systems, Inc. (the
“Company”) have been prepared in accordance with the instructions to Form 10-QSB
and, therefore, do not include all information and footnote disclosures that
are
otherwise required by Regulation S-B 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.
Mitek
recently began to file its periodic reports with the SEC in compliance with
the
“small business issuer” provisions of Regulation S-B, under the Securities
Exchange Act of 1934. Previously, Mitek had filed its periodic reports under
Regulation S-K and S-X under the Exchange Act. Generally, a small business
issuer cannot file under Regulation S-B if its annual revenues or public float
exceed $25.0 million for two consecutive years. Mitek qualifies as a Regulation
S-B filer since its annual revenues for both 2004 and 2003 were less than $25.0
million and its public float has not exceeded $25.0 million. Regulation S-B
is
tailored for the small business issuer, and although it requires accurate and
complete disclosure, it does not require certain specific disclosure which
is
required under Regulation S-K and S-X.
Results
for the three and nine months ended June 30, 2005 are not necessarily indicative
of results which may be reported for any other interim period or for the year
as
a whole.
2. |
New
Accounting
Pronouncements
|
In
December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based Payment”
Statement 123(R) will provide investors and other users of financial statements
with more complete and neutral financial information by requiring that the
compensation cost relating to share-based payment transactions be recognized
in
financial statements. That compensation cost will be measured based on the
fair
value of the equity or liability instruments issued. Statement 123(R) covers
a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights,
and
employee share purchase plans. Statement 123(R) replaces FASB Statement No.
123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. Statement 123, as originally issued
in
1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that Statement
permitted entities the option of continuing to apply the guidance in Opinion
25,
as long as the footnotes to financial statements disclosed what net income
would
have been had the preferable fair-value-based method been used. Public entities
(other than those filing as small business issuers) will be required to apply
Statement 123(R) as of the first interim or annual reporting period that begins
after June 15, 2005. The Company is continuously evaluating the impact of the
adoption of SFAS 123(R), and currently believes the impact will be significant
to the Company's overall results of operations or financial
position.
In
January 2003, the FASB issued FASB Interpretation No. ("FIN") 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). In December 2003,
FIN 46 was replaced by FASB interpretation No. 46(R)
"Consolidation of Variable Interest Entities." FIN 46(R) clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46(R) requires an
enterprise to consolidate a variable interest entity if that enterprise will
absorb a majority of the entity's expected losses, is entitled to receive a
majority of the entity's expected residual returns, or both. FIN 46(R) is
effective for entities being evaluated under FIN 46(R) for consolidation no
later than the end of the first reporting period that ends after March 15,
2004. The Company does not currently have any variable interest entities that
will be impacted by adoption of FIN 46(R).
In
March
2004, the Financial Accounting Standards Board (FASB) approved the consensus
reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, "The Meaning
of
Other-Than-Temporary Impairment and Its Application to Certain Investments."
The
objective of this Issue is to provide guidance for identifying impaired
investments. EITF 03-1 also provides new disclosure requirements for investments
that are deemed to be temporarily impaired. The accounting provisions of EITF
03-1 are effective for all reporting periods beginning after June 15, 2004,
while the disclosure requirements for certain investments are effective for
annual periods ending after December 15, 2003, and for other investments such
disclosure requirements are effective for annual periods ending after June
15,
2004. The Company does not currently have any investments that will be impacted
by this provision.
In
September 2004, the EITF delayed the effective date for the recognition and
measurement guidance previously discussed under EITF Issue No. 03-01, “The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments” (“EITF 03-01”) as included in paragraphs 10-20 of the proposed
statement. The proposed statement will clarify the meaning of
other-than-temporary impairment and its application to investments in debt
and
equity securities, in particular investments within the scope of FASB Statement
No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and
investments accounted for under the cost method. The Company is currently
evaluating the effect of this proposed statement on its financial position
and
results of operations.
Effective
April 1, 2004, the SEC adopted Staff Accounting Bulletin No. 105, “Application
of Accounting Principles to Loan Commitments” (“SAB 105”). SAB 105
clarifies the requirements for the valuation of loan commitments that are
accounted for as derivatives in accordance with SFAS 133. Management
does
not expect the implementation of this new bulletin to have any impact on
our
financial position, results of operations and cash flows. The Company
does
not have any loan commitments.
In
July
2004, the EITF issued a draft abstract for EITF Issue No. 04-08, “The Effect of
Contingently Convertible Debt on Diluted Earnings per Share” (“EITF
04-08”). EITF 04-08 reflects the Task Force's tentative conclusion that
contingently convertible debt should be included in diluted earnings per
share
computations regardless of whether the market price trigger has been met.
If adopted, the consensus reached by the Task Force in this Issue will be
effective for reporting periods ending after December 15, 2004. Prior
period earnings per share amounts presented for comparative purposes would
be
required to be restated to conform to this consensus and the Company would
be
required to include the shares issuable upon the conversion of the Notes
in the
diluted earnings per share computation for all periods during which the Notes
are outstanding. Management does not expect the implementation
of this new standard to have a material impact on its computation of diluted
earnings per share.
In
December 2004, the FASB issued a revision to SFAS 123, “Share-Based Payment, an
amendment of FASB Statements Nos. 123 and 95,” that addresses the accounting for
share-based payment transactions in which a Company receives employee services
in exchange for either equity instruments of the Company or liabilities that
are
based on the fair value of the Company's equity instruments or that may be
settled by the issuance of such equity instruments. This statement
would
eliminate the ability to account for share-based compensation transactions
using
the intrinsic method that the Company currently uses and generally would
require
that such transactions be accounted for using a fair-value-based method and
recognized as expense in the consolidated statement of operations.
The
effective date of this standard is for periods beginning after December 15,
2005. The Company has determined that the adoption of SFAS 123R will
result in the Company having to recognize additional compensation expense
related to the options or warrants granted to employees, and it will have
an
impact on the Company’s net earnings in the future. This standard requires
expensing the fair value of stock option grants and stock purchases under
In
December 2004, the FASB issued two Staff Positions (FSP) that provide accounting
guidance on how companies should account for the effect of the American Jobs
Creation Act of 2004 that was signed into law on October 22, 2004. In FSP
FAS
109-1, "Application of FASB Statement No. 109, Accounting for Income Taxes,
to
the Tax Deduction on Qualified Production Activities Provided by the American
Jobs Creation Act of 2004", the FASB concluded that the special tax deduction
for domestic manufacturing, created by the new legislation, should be accounted
for as a "special deduction" instead of a tax rate reduction. As such, the
special tax deduction for domestic manufacturing is recognized no earlier
than
the year in which the deduction is taken on the tax return. FSP FAS 109-2,
"Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004", allows additional
time
to evaluate the effects of the new legislation on any plan for reinvestment
or
repatriation of foreign earnings for purposes of applying FASB Statement
No.
109. The Company does not anticipate that this legislation will impact its
results of operations or financial condition. Accordingly, FSP FAS 109-1
and FSP
FAS 109-2 are not currently expected to have any material impact on its
consolidated financial statements. These FSPs were effective December 21,
2004.
In
December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 154, Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No.
3. SFAS No. 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. SFAS No. 154 also requires that retrospective
application of a change in accounting principle be limited to the direct
effects
of the change. Indirect effects of a change in accounting principle,
such
as a change in nondiscretionary profit-sharing payments resulting from an
accounting change, should be recognized in the period of the accounting
change. SFAS No. 154 also requires that a change in depreciation,
amortization or depletion method for long-lived, non-financial assets be
accounted for as a change in accounting estimate effected by a change in
accounting principle. SFAS No. 154 is effective for accounting changes
and
corrections of errors made in fiscal years beginning after December 15,
2005. Early adoption is permitted for accounting changes and corrections
of errors made in fiscal years beginning after the date this Statement is
issued. Management does not expect the implementation of this new
standard
to have a material impact on the Company’s financial position, results of
operations and cash flows.
In
March
2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based
Payment”(“SAB 107”), which provides interpretive guidance related to the
interaction between SFAS 123(R) and certain SEC rules and regulations.
It
also provides the SEC staff's views regarding valuation of share-based payment
arrangements. In April 2005, the SEC amended the compliance dates
for SFAS
123(R), to allow companies to implement the standard at the beginning of
their
next fiscal year, instead of the next reporting period beginning after June
15,
2005. Management is currently evaluating the impact SAB 107 will
have on
the Company’s consolidated financial statements.
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 June 30, 2005 and
2004.
|
2005
|
|
2004
|
Risk
free interest rates
|
3.7
|
|
2.6
|
Dividend
yields
|
0%
|
|
0%
|
Volatility
|
74%
|
|
77%
|
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.
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 loss per share
information):
|
|
Three
months ended June
30
|
|
Nine
months ended June June 30
|
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|
Net
income (loss) as reported
|
|
$
|
230
|
|
$
|
(1,436
|
)
|
$
|
(1,486
|
)
|
$
|
(3,329
|
)
|
Net
income (loss) pro forma
|
|
|
149
|
|
|
(1,532
|
)
|
|
(1,765
|
)
|
|
(3,617
|
)
|
Net
income (loss) per share as reported
|
|
|
.02
|
|
|
(.13
|
)
|
|
(.12
|
)
|
|
(.29
|
)
|
Net
income (loss) per share pro forma
|
|
|
.01
|
|
|
(.13
|
)
|
|
(.16
|
)
|
|
(.32
|
)
|
On
June
11, 2004, the Company secured a financing arrangement with Laurus Master Fund,
LTD. (“Laurus”). The financing consists of a $3 million Secured Note that bears
interest at the rate of prime (as published in the Wall Street Journal), plus
one percent (6% as of December 2, 2004) and has a term of three years (June
11,
2007). The Secured Note is convertible into shares of the Company's common
stock
at an initial fixed price of $0.70 per share, a premium to the 10-day average
closing share price as of June 11, 2004. The conversion price of the Secured
Note is subject to adjustment upon the occurrence of certain events. As of
the
effective date of this report, the effective annual interest rate of this
Convertible Debt, after considering the total debt issue costs (discussed
below), is approximately 23%.
In
connection with the financing, Laurus was also issued warrants to purchase
up to
860,000 shares of the Company's common stock. The warrants are exercisable
as
follows: 230,000 shares at $0.79 per share; 230,000 shares at $0.85 per share
and the balance at $0.92 per share. The gross proceeds of the convertible debt
were allocated to the debt instrument and the warrants on a relative fair value
basis. Then the Company computed the beneficial conversion feature embedded
in
the debt instrument using the effective conversion price in accordance with
EITF
98-5 and 00-27. The Company recorded a debt discount of (i) $367,887 for the
valuation of the 860,000 warrants issued with the note (computed using a
Black-Scholes model with an interest rate of 2.53%, volatility of 81%, zero
dividends and expected term of three years); (ii) $522,384 for a beneficial
conversion feature inherent in the Secured Note and (iii) $151,000 for debt
issue costs paid to affiliates of the lender, for a total discount of
$1,041,271. The $1,041,271 is being amortized over the term of the Secured
Note.
Amortization of the debt discounts through September 30, 2004 was $96,247.
During the nine months ended June 30, 2005, amortization of the debt discount
was $384,735.
To
secure
the payment of all obligations, the Company entered into a Master Security
Agreement which assigns and grants to Laurus a continuing security interest
in
all of the following property now owned or at any time upon execution of the
agreement, acquired by the Company or subsidiaries, or in which any assignor
now
have or at any time in the future may acquire any right, title or interest:
all
cash, cash equivalents, accounts, deposit accounts, inventory, equipment, goods,
documents, instruments (including, without limitation, promissory notes),
contract rights, general tangibles, chattel paper, supporting obligations,
investment property, letter-of-credit rights, trademarks, trademark
applications, patents, patent applications, copyrights, copyright applications,
tradestyles and any other intellectual property, in each case, in which any
Assignor now have or may acquire any right, title or interest, all proceeds
and
products thereof (including, without limitation, proceeds of insurance) and
all
additions, accessions and substitutions. In the event any Assignor wishes to
finance an acquisition in the ordinary course of business of any
hereafter-acquired equipment and has obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Laurus agrees
to
release its security interest on such hereafter-acquired equipment so financed
by such third party financing source.
The
Secured Note stipulates that the Secured Note is to be repaid using cash payment
along with an equity conversion option; the details of both methods for
repayment are as follows: The cash repayments stipulate that beginning on
December 1, 2004, or the first amortization date, the Company shall make monthly
payments to Laurus on each repayment date until the maturity date, each in
the
amount of $90,909, together with any accrued and unpaid interest to date. The
conversion repayment states that each month by the fifth business day prior
to
each amortization date, Laurus shall deliver to the Company a written notice
converting the monthly amount payable on the next repayment date in either
cash
or shares of common stock, or a combination of both. If a repayment notice
is
not delivered by Laurus on or before the applicable notice date for such
repayment date, then the Company pays the monthly amount due in cash. Any
portion of the monthly amount paid in cash shall be paid to Laurus in an amount
equal to 102% of the principal portion of the monthly amount due. If Laurus
converts all or a portion of the monthly amount in shares of the Company's
common stock, the number of such shares to be issued by the Company will be
the
number determined by dividing the portion of the monthly amount to be paid
in
shares of common stock, by the applicable fixed conversion price, which is
presently $0.70 per share.
A
registration rights agreement was executed requiring the Company to register
the
shares of its common stock underlying the Secured Note and warrants so as to
permit the public resale thereof . Liquidated damages of 2% of the Secured
Note
balance per month accrue if stipulated deadlines are not met. The registration
statement was filed with the Securities and Exchange Commission on October
4,
2004. The Company was required to have received an effective registration no
later than December 31, 2004. The registration was not effective by that time,
so the Company incurred liquidated damages, payable in cash, in the amount
of
$215,000 for the period January 1, 2005 to May 13, 2005. The registration became
effective on May 13, 2005, and the Company does not anticipate there will be
future penalties associated with the registration.
During
the nine months ended June 30, 2005, the Company has paid $653,864 of principal
and $360,916 in cash interest.
The
following table reflects the Convertible Debt at June 30, 2005:
|
|
Current
|
|
Long-Term
|
|
Total
|
|
Convertible
Debt
|
|
$
|
1,090,909
|
|
$
|
1,255,227
|
|
$
|
2,346,136
|
|
Deferred
financing costs
|
|
|
(408,764
|
)
|
|
(151,525
|
)
|
|
(560,289
|
)
|
|
|
$
|
682,145
|
|
$
|
1,103,702
|
|
$
|
1,785,847
|
|
The
debt
has the following principal amounts due over the remaining life as
follows:
Year
ended 9/30/05
|
|
$
|
255,227
|
|
Year
ended 9/30/06
|
|
|
1,090,909
|
|
Year
ended 9/30/07
|
|
$
|
1,000,000
|
|
In
conjunction with raising capital through the issuance of convertible debt,
the
Company has issued various warrants that have registration rights for the
underlying shares. As the contracts must be settled by the delivery
of
registered shares and the delivery of the registered shares is not controlled
by
the Company, pursuant to EITF 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the
net value of the warrants at the date of issuance was recorded as a warrant
liability on the balance sheet ($407,073) and the change in fair value from
the
date of issuance to June 30, 2005 has been included in other (expense)
income.
Prior
to
the end of fiscal 2004, the Company incurred a penalty to Laurus Funds for
failing to register the securities underlying the Debt Instrument described
in
Note 7. The amount of the penalty was $208,000. This amount was shown as
interest expense in the Financial Statements for the year ended September 30,
2004. On October 4, 2004, the Company settled this penalty with Laurus Master
Fund, LTD. by agreeing to issue an additional warrant for the purchase of
200,000 shares at a price of $0.70 per share. The value of this additional
warrant was calculated by the Company to be $73,159, using a Black-Scholes
option pricing model.
For
the
quarter ended June 30, 2005 the change in fair value of the warrants issued
with
registration rights for the underlying shares decreased by approximately $81,993
to $407,073 at June 30, 2005 and is recognized in other income.
The
Registration Statement covering the Laurus shares was declared effective on
May
13, 2005 by the Securities and Exchange Commission. As a result, the warrant
liability will be re-determined on that date, with any difference between the
$373,655 value as of March 31, 2005 and the value on May 13, 2005 of $407,073
being recognized in other income or expense. The value of such warrants was
reclassified to warrant equity effective on this date.
As
previously reported by the Company, on May 4, 2005, John H. Harland Company
("John Harland") acquired 1,071,428 shares of unregistered common stock for
an
aggregate purchase price of $750,000, or $.70 per share. As part of the
acquisition of the shares on May 4, John Harland received warrants to purchase
160,714 additional shares of common stock at an exercise price of $0.70 per
share. These warrants are valid until May 4, 2012. This sale was the second
sale
of securities pursuant to the terms of a Securities Purchase Agreement between
the Company and John Harland dated February 22, 2005, under which, on February
22, 2005, John Harland acquired 1,071,428 shares of unregistered common stock
for an aggregate purchase price of $750,000, or $.70 per share As
part
of the acquisition of shares on February 22, John Harland received warrants
to
purchase 160,714 additional shares of common stock at $0.70 per share. These
warrants are valid until February 22, 2012.
Under
the
terms of the Securities Purchase Agreement, John Harland had the right to make
the second investment of $750,000 in the event the Company was able to increase
the Company's authorized shares of common stock. On May 4, 2005, the
Shareholders of the Company approved an amendment to the Company’s Certificate
of Incorporation which increased the authorized number of shares of common
stock
of the Company from 20,000,000 to 40,000,000 and John Harland completed the
second investment of $750,000. In connection with the sale, the Company granted
John Harland board observation rights for as long as John Harland continues
to
hold at least 20% of the shares of common stock it purchased under the
Securities Purchase Agreement together with the shares of common stock issuable
upon exercise of the warrants. As a result of these transactions, John Harland
will be considered a related party, as defined under Generally Accepted
Accounting Principles.
7.
Product
Revenues
- To aid
investor understanding of our historical results of operations and the impact
of
the transaction described in Footnote 8 of our Form 10K/A for the fiscal year
ended September 30, 2004, as previously filed with the Securities and Exchange
Commission on May 12, 2005, whereby certain assets relating to the Company’s
Check Image Solution business were sold to Harland Financial Solutions,
presented below are the sales and cost of sales for the above mentioned revenue
items, with detail corresponding to the line items of revenue and cost of sales
as presented in the accompanying financial statements.
|
|
Quarter
Ended June 30, 2005
|
|
|
|
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Document
and
|
|
|
|
|
|
|
|
Recognition
|
|
Check
Image
|
|
Image
Processing
|
|
Maintenance
|
|
|
|
|
|
Toolkits
|
|
Solutions
|
|
Solutions
|
|
&
Other
|
|
Total
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
716
|
|
|
0
|
|
|
36
|
|
|
0
|
|
|
752
|
|
Hardware
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Professional
Services
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
730
|
|
|
730
|
|
Total
Sales
|
|
|
716
|
|
|
0
|
|
|
36
|
|
|
730
|
|
|
1,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
103
|
|
|
0
|
|
|
6
|
|
|
0
|
|
|
109
|
|
Hardware
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Professional
Services
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
222
|
|
|
222
|
|
Total
Cost of Sales
|
|
|
103
|
|
|
0
|
|
|
6
|
|
|
222
|
|
|
331
|
|
|
|
Quarter
Ended June 30, 2004
|
|
|
|
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Document
and
|
|
|
|
|
|
|
|
Recognition
|
|
Check
Image
|
|
Image
Processing
|
|
Maintenance
|
|
|
|
|
|
Toolkits
|
|
Solutions
|
|
Solutions
|
|
&
Other
|
|
Total
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
280
|
|
|
57
|
|
|
52
|
|
|
0
|
|
|
389
|
|
Hardware
|
|
|
0
|
|
|
85
|
|
|
0
|
|
|
0
|
|
|
85
|
|
Professional
Services
|
|
|
0
|
|
|
55
|
|
|
13
|
|
|
445
|
|
|
513
|
|
Total
Sales
|
|
|
280
|
|
|
197
|
|
|
65
|
|
|
445
|
|
|
987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
62
|
|
|
63
|
|
|
16
|
|
|
0
|
|
|
141
|
|
Hardware
|
|
|
0
|
|
|
72
|
|
|
0
|
|
|
0
|
|
|
72
|
|
Professional
Services
|
|
|
0
|
|
|
53
|
|
|
5
|
|
|
100
|
|
|
158
|
|
Total
Cost of Sales
|
|
|
62
|
|
|
188
|
|
|
21
|
|
|
100
|
|
|
371
|
|
|
|
Nine
Months Ended June 30, 2005
|
|
|
|
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Document
and
|
|
|
|
|
|
|
|
Recognition
|
|
Check
Image
|
|
Image
Processing
|
|
Maintenance
|
|
|
|
|
|
Toolkits
|
|
Solutions
|
|
Solutions
|
|
&
Other
|
|
Total
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
2,564
|
|
|
0
|
|
|
132
|
|
|
0
|
|
|
2,696
|
|
Hardware
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Professional
Services
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,858
|
|
|
1,858
|
|
Total
Sales
|
|
|
2,564
|
|
|
0
|
|
|
132
|
|
|
1,858
|
|
|
4,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
226
|
|
|
0
|
|
|
22
|
|
|
0
|
|
|
248
|
|
Hardware
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Professional
Services
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
495
|
|
|
495
|
|
Total
Cost of Sales
|
|
|
226
|
|
|
0
|
|
|
22
|
|
|
495
|
|
|
743
|
|
|
|
Nine
Months Ended June 30, 2004
|
|
|
|
(000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Document
and
|
|
|
|
|
|
|
|
Recognition
|
|
Check
Image
|
|
Image
Processing
|
|
Maintenance
|
|
|
|
|
|
Toolkits
|
|
Solutions
|
|
Solutions
|
|
&
Other
|
|
Total
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
1,568
|
|
|
266
|
|
|
190
|
|
|
0
|
|
|
2,024
|
|
Hardware
|
|
|
0
|
|
|
859
|
|
|
0
|
|
|
0
|
|
|
859
|
|
Professional
Services
|
|
|
0
|
|
|
281
|
|
|
230
|
|
|
1,306
|
|
|
1,817
|
|
Total
Sales
|
|
|
1,568
|
|
|
1,406
|
|
|
420
|
|
|
1,306
|
|
|
4,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
|
|
|
238
|
|
|
192
|
|
|
39
|
|
|
0
|
|
|
469
|
|
Hardware
|
|
|
0
|
|
|
804
|
|
|
0
|
|
|
0
|
|
|
804
|
|
Professional
Services
|
|
|
0
|
|
|
191
|
|
|
101
|
|
|
328
|
|
|
620
|
|
Total
Cost of Sales
|
|
|
238
|
|
|
1,187
|
|
|
140
|
|
|
328
|
|
|
1,893
|
|
8.
Commitments and Contingencies
As
discussed in Item 3 of the Company’s Form 10-K, the Company was party to a
binding arbitration with BSM regarding a certain license agreement pursuant
to
which the Company licensed certain of BSM’s technology. BSM had claimed over
$400,000 in unpaid royalties and the Company has counterclaimed for over
$1,000,000 with respect to interference with business relations, breach of
confidentiality and unfair competition. Pending the successful outcome of this
arbitration, HFS withheld final payment on the assets purchased and no income
was recognized on this contingent payment. This arbitration was held in San
Diego from March 21 to March 24, 2005. On March 30, 2005, the Company
was
notified that the arbitration was concluded and on March 31, 2005, the Company
notified HFS of the results of the binding arbitration. On April
13th
,
the
Company received the additional $1,000,000 and delivered
certain
executed documents according to terms satisfactory to the
buyer. Accordingly, the Company recognized the gain
as of
April 13, 2005.
Other
On
February 22, 2005, the Company signed an agreement with John Harland, whereby
the Company would perform certain engineering services. If certain engineering
milestones are met, the Company could earn as much as $1,000,000. As of June
30
2005, the Company has met milestones sufficient to earn $500,000 under this
related party agreement. Though the Company believes it will meet all milestones
under this agreement, no assurances of such achievement can be
made.
ITEM
2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
Management’s
Discussion
In
addition to historical information, this Management’s Discussion and Analysis or
Plan of Operation (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 2005 is to grow the identified markets for its new
products and enhance the functionality and marketability of the
Company’s image based recognition and forgery detection
technologies. 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 expand the installed
base of
its Check Forgery Detection Solutions by entering into reselling
relationships with key resellers who will better penetrate the market and
provide entrée into a larger base of community banks.
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.
CRITICAL
ACCOUNTING POLICIES
Mitek’s
financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States of America.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates by management are affected by management’s
application of accounting policies are subjective and may differ from actual
results. Critical accounting policies for Mitek include revenue recognition,
impairment of accounts and notes receivable, loss contingencies, fair value
of
equity instruments and accounting for income taxes.
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
Financial Statements on Form 10K previously filed.
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:
· |
The
actual contractual terms, such as payment terms, delivery dates,
and
pricing of the various product and service elements of a
contract
|
· |
Availability
of products to be delivered
|
· |
Time
period over which services are to be
performed
|
· |
Creditworthiness
of the customer
|
· |
The
complexity of customizations to the Company’s software required by service
contracts
|
· |
The
sales channel through which the sale is made (direct, VAR, distributor,
etc.)
|
· |
Discounts
given for each element of a
contract
|
· |
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.
Loss
Contingencies
The
financial statements presented included an accrual for a loss contingency,
relating to the litigation with BSM. As discussed in Footnote 8 of the Financial
Statements, the BSM matter was resolved and no loss relating to this claim
was
incurred by the Company. There are no other loss contingencies of which the
Company is aware.
Fair
Value of Equity Instruments
The
valuation of certain items, including valuation of warrants, beneficial
conversion feature related to convertible debt and compensation expense related
to stock options granted, involve significant estimations with underlying
assumptions judgmentally determined. The valuation of warrants and stock options
are based upon a Black Scholes valuation model, which involve estimates of
stock
volatility, expected life of the instruments and other assumptions. As the
Company’s stock is thinly traded, the estimates, which are based partly on
historical pricing of the Company’s stock, may not represent fair value, but the
Company believes it is presently the best form of estimating objective fair
value.
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 Nine Months Ended June 30, 2005 and 2004
Net
Sales. Net
sales
for the three-month period ended June 30, 2005 were $1,482,000, compared to
$987,000 for the same period in 2004, an increase of $495,000, or 50%. The
increase was primarily attributable to increase in our Recognition Toolkits
revenues from $329,000 in third quarter of 2004 to $716,000 in third quarter
of
2005, which was an increase of 118%, and Maintenance revenues which increased
from $513,000 to $730,000, an increase of 42%. Sales in the Document and Image
Processing Solutions declined from $52,000 to 36,000 or 31% and the Company
had
no revenue from Check Image Solutions in the third quarter of 2005 compared
with
$93,000 for the same period in 2004.
Net
sales
for the nine-month period ended June 30, 2005 were $4,554,000, compared to
$4,700,000 for the same period in 2004, a decrease of $146,000 or 3%. The
decrease was primarily attributable to the elimination of revenue from Check
Image Solutions line of business, which the Company exited following its sale
of
certain assets to Harland, which line accounted for sales of $1,405,000 for
the
nine month period ended June 30, 2004. Net sales for the nine month period
ended
June 30, 2004 without the Check Image Solutions line of business were
$3,295,000, which when compared to revenues for the same period in 2005 shows
an
increase of $1,259,000 or 43% for 2005. The increase was primarily attributable
to the increase in sales of our Recognition Toolkits.
Cost
of Sales.
Cost of
sales for the three-month period ended June 30, 2005 was $331,000, compared
to
$371,000 for the same period in 2004, a decrease of $40,000 or 11%. Stated
as a
percentage of net sales, cost of sales was 22% in third quarter of 2005 compared
with 38% in the same period of 2004. The dollar decrease, and the decrease
as a
percentage of sales, and in cost of sales, is almost entirely due to the
elimination of hardware installations related to the Company’s CheckQuest
product line, which was sold to Harland Financial Solutions last year, during
the three months, as compared to the same period in 2004.
Cost
of
sales for the nine-month period ended June 30, 2005 was $743,000, compared
to
$1,893,000 for the same period in 2004, a decrease of $1,150,000 or 61%. Cost
of
sales decreased to 16% for the nine-month period ended June 30, 2005, compared
with 40% for the same period in 2004. The dollar decrease, and the decrease
as a
percentage of sales, and in cost of sales, is almost entirely due to the
elimination of hardware installations related to the Company’s CheckQuest
product line, which was sold to Harland Financial Solutions last
year.
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. Net Operations expenses for the
three-month period ended June 30, 2005 were $35,000, compared to $326,000 for
the same period in 2004, a decrease of $291,000 or 89%. Net Operations expenses
as a percent of revenues were 2% in 2005 compared to 30% in the same period
of
2004. The dollar decrease in net expenses is almost entirely due to the
elimination of hardware installations related to the Company’s CheckQuest
product line, which was sold to Harland Financial Solutions last
year.
Net Operations
expenses for the nine-month period ended June 30, 2005 were $111,700 or 3%
of
sales compared to $1,065,000 or 23% of sales for the same period in 2004, a
decrease of $953,000 or 90% of operations expenses for the nine-month period
ended June 30, 2005. The decrease is almost entirely due to the elimination
of
hardware installations related to the Company’s CheckQuest product line, which
was sold to Harland Financial Solutions last year. The dollar decrease in net
expense, and the decrease in expense as a percentage of net sales attributable
to the reduced spending discussed above.
Selling
and Marketing Expenses. Selling
and marketing expenses for the three-month period ended June 30, 2005 were
$514,000, compared to $450,000 for the same period in 2004, an increase of
$64,000 or 14%. Stated as a percentage of net sales, selling and marketing
expenses decreased to 35% for the three-month period ended June 30, 2005, as
compared to 52% for the same period in 2004. The dollar increase in expenses
is
primarily attributable to additional Marketing personnel and outside services.
The decrease as a percentage of net sales is attributable to the increase in
sales in third quarter of 2005 compared with the same period in
2004.
Selling
and marketing expenses for the nine-month period ended June 30, 2005 were
$1,717,000, compared with $1,572,000 for the same period in 2004, an increase
of
$145,000 or 9%. Stated as a percentage of net sales, selling and marketing
expenses increased to 38% from 33% for the same period in 2004. The dollar
increase in expenses is primarily attributable to additional Marketing personnel
and outside services. The increase as a percentage of net sales is attributable
to additional marketing personnel and outside services.
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
June 30, 2005 were $477,000, compared to $644,000 for the same period in 2004,
a
decrease of $167,000 or 26%. Stated as a percentage of net sales, research
and
development expenses decreased to 32% for the three-month period ended June
30,
2005, compared to 65% for the same period in 2004. The decrease in expenses
for
the three-month period is primarily the result of the elimination of four full
time engineers associated with the CheckQuest product line, which was sold
to
Harland Financial Solutions last year. The decrease in expenses as a percentage
of net sales is primarily attributable to reduced costs, as discussed
above.
Research
and development expenses for the nine-month period ended June 30, 2005 were
$1,194,000, compared to $1,812,000 for the same period in 2004, a decrease
of
$618,000 or 34%. Stated as a percentage of net sales, research and development
expenses decreased to 26% for the nine-month period ended June 30, 2005,
compared to 39% for the same period in 2004. The decrease in expenses for the
nine-month period is primarily the result of the elimination of four full time
engineers associated with the CheckQuest product line, which was sold to Harland
Financial Solutions last year. The decrease in expenses as a percentage of
net
sales is primarily attributable to reduced costs, as discussed
above
General
and Administrative Expenses. General
and administrative expenses for the three-month period ended June 30, 2005
were
$623,000 compared to $614,000 for the same period in 2004, an increase of $9,000
or 1%. Stated as a percentage of net sales, general and administrative expenses
decreased to 42% for the three-month period ended June 30, 2005, compared to
62%
for the same period in 2004.
General
and administrative expenses for the nine-month period ended June 30, 2005 were
$2,634,000 compared to $1,674,000 for the same period in 2004, an increase
of
$960,000 or 57%. Stated as a percentage of net sales, general and administrative
expenses increased to 58% for the nine-month period ended June 30, 2005,
compared to 36% for the same period in 2004. The dollar increase in expenses
for
the nine month period is primarily attributable to increased legal costs
primarily relating to litigation with BSM and auditing expenses. The increase
in
expenses as a percentage of net sales is primarily attributable to the increased
spending discussed above.
Interest
and Other Income (Expense) - Net.
Interest
and other income (expense) for the three-month period ended June 30, 2005 was
($241,000), compared to interest and other income (expense) of ($26,000) for
the
same period in 2004, a change of $215,000. The primary reason for the change
is
the cash interest and liquidated damages for failure to achieve an effective
registration statement paid to Laurus Master Fund during the quarter of
$142,000, as well as amortization of the deferred loan costs related to the
warrants issued and the beneficial conversion feature of the convertible
note.
LIQUIDITY
AND CAPITAL
At
June
30, 2005 the Company had $1,970,000 in cash as compared to $2,607,000 at
September 30, 2004. Accounts receivable totaled $1,063,000, an increase of
$493,000 over the September 30, 2004, balance of $570,000. This decrease was
primarily a result of its operations.
The
Company has financed its cash needs during the first nine months of fiscal
2005
primarily from financing and investing activities. During fiscal 2004, the
Company financed its cash needs primarily from financing and investing
activities.
Net
cash
used in operating activities during the three months ended June, 2005 was
$1,602,000. The primary use of cash from operating activities was the loss
during the nine months of $1,486,000 and an increase in accounts receivable
of
$493,000. The primary source of cash from operating activities was an increase
to deferred revenue of $119,000 and decrease in accounts payable and other
accrued liabilities of $327,000. The Company used part of the cash provided
from
financing activities to finance its operation.
During
the nine months ended June 30, 2005, the Company also received cash of
$1,500,000 from financing activities in the form of proceeds from the equity
investment from John Harland as discussed in Note 6 of the accompanying
financial statements.
The
Company's working capital and current ratio were $992,000 and 1.45,
respectively, at June 30, 2005, and $847,000 and 1.32, respectively, at
September 30, 2004. At June 30, 2005, total liabilities to equity ratio was
73
to 1 compared to (7.81) to 1 at September 30, 2004. As of June 30, 2005, total
liabilities were $3,291,000 compared to $4,154,000 as of September 30,
2004.
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 financing activities.
Although the Company’s strategy for fiscal 2005 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 observed change in
liquidity or future cash requirements as a result of losses from its operation..
Cash requirements over the next twelve months are principally to fund
operations, including spending on research and development. The Company believes
that it will have sufficient liquidity to finance its operations for the next
twelve months.
NEW
ACCOUNTING PRONOUNCEMENTS
In
December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based
Payment”. Statement 123(R) will provide investors and other users of financial
statements with more complete and neutral financial information by requiring
that the compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based on the
fair
value of the equity or liability instruments issued. Statement 123(R) covers
a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights,
and
employee share purchase plans. Statement 123(R) replaces FASB Statement No.
123,
Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees. Statement 123, as originally issued
in
1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that Statement
permitted entities the option of continuing to apply the guidance in Opinion
25,
as long as the footnotes to financial statements disclosed what net income
would
have been had the preferable fair-value-based method been used. Public entities
(other than those filing as small business issuers) will be required to apply
Statement 123(R) as of the first interim or annual reporting period that begins
after June 15, 2005. The Company is evaluating the impact of the adoption
of SFAS 123(R), and currently believes the impact will be significant to the
Company's overall results of operations or financial position.
In
March
2004, the FASB approved the consensus reached on the Emerging Issues Task Force
(EITF) Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments.” The objective of this Issue is to
provide guidance for identifying impaired investments. EITF 03-1 also
provides new disclosure requirements for investments that are deemed to be
temporarily impaired. In September 2004, the FASB issued a FASB Staff
Position (FSP) EITF 03-1-1 that delays the effective date of the measurement
and
recognition guidance in EITF 03-1 until after further deliberations by the
FASB. The disclosure requirements are effective only for annual periods
ending after June 15, 2004. The Company has evaluated the impact of
the
adoption of the disclosure requirements of EITF 03-1 and does not believe it
will have an impact to the Company's overall consolidated results of operations
or consolidated financial position. Once the FASB reaches a final decision
on the measurement and recognition provisions, the Company will evaluate the
impact of the adoption of EITF 03-1.
In
September 2004, the EITF delayed the effective date for the recognition and
measurement guidance previously discussed under EITF Issue No. 03-01, “The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments” (“EITF 03-01”) as included in paragraphs 10-20 of the proposed
statement. The proposed statement will clarify the meaning of
other-than-temporary impairment and its application to investments in debt
and
equity securities, in particular investments within the scope of FASB Statement
No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and
investments accounted for under the cost method. The Company is currently
evaluating the effect of this proposed statement on its financial position
and
results of operations.
Effective
April 1, 2004, the SEC adopted Staff Accounting Bulletin No. 105, “Application
of Accounting Principles to Loan Commitments” (“SAB 105”). SAB 105
clarifies the requirements for the valuation of loan commitments that are
accounted for as derivatives in accordance with SFAS 133. Management
does
not expect the implementation of this new bulletin to have any impact on our
financial position, results of operations and cash flows. The Company
does
not have any loan commitments.
In
July
2004, the EITF issued a draft abstract for EITF Issue No. 04-08, “The Effect of
Contingently Convertible Debt on Diluted Earnings per Share” (“EITF
04-08”). EITF 04-08 reflects the Task Force's tentative conclusion that
contingently convertible debt should be included in diluted earnings per share
computations regardless of whether the market price trigger has been met.
If adopted, the consensus reached by the Task Force in this Issue will be
effective for reporting periods ending after December 15, 2004. Prior
period earnings per share amounts presented for comparative purposes would
be
required to be restated to conform to this consensus and the Company would
be
required to include the shares issuable upon the conversion of the Notes in
the
diluted earnings per share computation for all periods during which the Notes
are outstanding. Management does not expect the implementation
of this new standard to have a material impact on its computation of diluted
earnings per share.
In
December 2004, the FASB issued a revision to SFAS 123, “Share-Based Payment, an
amendment of FASB Statements Nos. 123 and 95,” that addresses the accounting for
share-based payment transactions in which a Company receives employee services
in exchange for either equity instruments of the Company or liabilities that
are
based on the fair value of the Company's equity instruments or that may be
settled by the issuance of such equity instruments. This statement
would
eliminate the ability to account for share-based compensation transactions
using
the intrinsic method that the Company currently uses and generally would require
that such transactions be accounted for using a fair-value-based method and
recognized as expense in the consolidated statement of operations.
The
effective date of this standard is for periods beginning after December 15,
2005. The Company has determined that the adoption of SFAS 123R will
result in the Company having to recognize additional compensation expense
related to the options or warrants granted to employees, and it will have an
impact on the Company’s net earnings in the future. This standard requires
expensing the fair value of stock option grants and stock purchases under
In
December 2004, the FASB issued two Staff Positions (FSP) that provide accounting
guidance on how companies should account for the effect of the American Jobs
Creation Act of 2004 that was signed into law on October 22, 2004. In FSP FAS
109-1, "Application of FASB Statement No. 109, Accounting for Income Taxes,
to
the Tax Deduction on Qualified Production Activities Provided by the American
Jobs Creation Act of 2004", the FASB concluded that the special tax deduction
for domestic manufacturing, created by the new legislation, should be accounted
for as a "special deduction" instead of a tax rate reduction. As such, the
special tax deduction for domestic manufacturing is recognized no earlier than
the year in which the deduction is taken on the tax return. FSP FAS 109-2,
"Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004", allows additional
time
to evaluate the effects of the new legislation on any plan for reinvestment
or
repatriation of foreign earnings for purposes of applying FASB Statement No.
109. The Company does not anticipate that this legislation will impact its
results of operations or financial condition. Accordingly, FSP FAS 109-1 and
FSP
FAS 109-2 are not currently expected to have any material impact on its
consolidated financial statements. These FSPs were effective December 21,
2004.
In
December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 154, Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No.
3. SFAS No. 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. SFAS No. 154 also requires that retrospective
application of a change in accounting principle be limited to the direct effects
of the change. Indirect effects of a change in accounting principle,
such
as a change in nondiscretionary profit-sharing payments resulting from an
accounting change, should be recognized in the period of the accounting
change. SFAS No. 154 also requires that a change in depreciation,
amortization or depletion method for long-lived, non-financial assets be
accounted for as a change in accounting estimate effected by a change in
accounting principle. SFAS No. 154 is effective for accounting changes
and
corrections of errors made in fiscal years beginning after December 15,
2005. Early adoption is permitted for accounting changes and corrections
of errors made in fiscal years beginning after the date this Statement is
issued. Management does not expect the implementation of this new standard
to have a material impact on the Company’s financial position, results of
operations and cash flows.
In
March
2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based
Payment”(“SAB 107”), which provides interpretive guidance related to the
interaction between SFAS 123(R) and certain SEC rules and regulations.
It
also provides the SEC staff's views regarding valuation of share-based payment
arrangements. In April 2005, the SEC amended the compliance dates for
SFAS
123(R), to allow companies to implement the standard at the beginning of their
next fiscal year, instead of the next reporting period beginning after June
15,
2005. Management is currently evaluating the impact SAB 107 will have
on
the Company’s consolidated financial statements.
ITEM
3
CONTROLS
AND PROCEDURES
Under
the
supervision and with the participation of the Company's management, including
the Chief Executive Officer and Chief Financial Officer, the Company has
evaluated the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 as
of
the end of the period covered by this report. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures were effective as of the end of the quarter
ended June 30, 2005.
During
the quarter ended June 30, 2005, the Company made no changes to its internal
control over financial reporting (as such term is defined in Rules 13a-15(f)
and
15d - 15(f) under the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, the Company's internal controls over
financial reporting .
PART
II -
OTHER INFORMATION
Item
1. Legal
Proceedings
There
are
no additional material legal proceedings pending against the Company not
previously reported by the Company in Item 3 of its Form 10-K for the year
ended
September 30, 2004, as amended, which Item 3 is incorporated herein by
reference.
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
As
previously reported by the Company, on May 4, 2005, John H. Harland Company
("John Harland") acquired 1,071,428 shares of unregistered common stock for
an
aggregate purchase price of $750,000, or $.70 per share. As part of
the
acquisition of shares on May 4, John Harland received warrants to purchase
160,714 additional shares of common stock at an exercise price of $0.70 per
share. These warrants are valid until May 4, 2012. This sale was the
second sale of securities pursuant to the terms of a Securities Purchase
Agreement between the Company and John Harland dated February 22, 2005, under
which, on February 22, 2005, John Harland acquired 1,071,428 shares of
unregistered common stock for an aggregate purchase price of $750,000, or $.70
per share. As part of the acquisition of shares on February 22, John
Harland received warrants to purchase 160,714 additional shares of common stock
at $0.70 per share. These warrants are valid until February 22,
2012. The sales under the Securities Purchase Agreement were
conducted in reliance upon Rule 506 of Regulation D, as promulgated under
Section 4(2) of the Securites Act of 1933, as amended. The sales were
transactions not involving any public offering of securities to a single
accredited investor.
Under
the
terms of the Securities Purchase Agreement, John Harland had the right to make
the second investment of $750,000 in the event the Company was able to increase
the Company's authorized shares of common stock. On May 4, 2005, the
Shareholders of the Company approved a resolution which increased the authorized
Common Shares of the Company from 20,000,000 to 40,000,000 and John Harland
completed the second investment of $750,000. In connection with the
sale,
the Company granted John Harland board observation rights for as long as John
Harland continues to hold at least 20% of the shares of common stock it
purchased under the Securities Purchase Agreement together with the shares
of
common stock issuable upon exercise of the warrants.
Item
4.
Submission of Matters to a Vote of Security Holders
On
May 4,
2005, the Company held a special meeting of shareholders to approve the
amendment of the Company's Certificate of Incorporation to increase the
Company's number of authorized shares of common stock from 20,000,000 to
40,000,000. 11,565,181 votes were voted in favor of the proposal.
340,195 votes were voted against the proposal. 29,830 votes abstained
from
voting on the proposal. There were no broker "non-votes" regarding
the
proposal.
Item
6. Exhibits
Exhibits:
The
following exhibits are filed herewith:
Exhibit
Number
|
Exhibit
Title
|
31.1
|
Certification
of Periodic Report by the Chief Executive Officer Pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934
|
31.2
|
Certification
of Periodic Report by the Chief Financial Officer Pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934
|
32.1
|
Certification
of Periodic Report by the Chief Executive Officer Pursuant to Section
906
of the Sarbanes Oxley Act of 2002
|
32.2
|
Certification
of Periodic Report by the Chief Financial Officer Pursuant to Section
906
of the Sarbanes Oxley Act of 2002
|
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:
August
2, 2005 |
By: |
s/
James B. Debello |
|
James
B. DeBello, President and
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Date:
August
2, 2005 |
By: |
/s/
Tesfaye Hailemichael |
|
Tesfaye
Hailemichael
Chief
Financial Officer
|
|
|