Nature of Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2013 |
Accounting Policies [Abstract] | ' |
Nature of Operations | ' |
Nature of Operations |
Mitek Systems, Inc. (the “Company”) is a mobile solutions provider engaged in the development, sale and service of its proprietary software solutions. |
The Company applies its patented technology in image capture, correction and intelligent data extraction in the mobile financial and business services markets. The Company’s technology allows users to remotely deposit checks, pay bills, transfer credit card balances, open accounts and get insurance quotes by taking pictures of various documents with their camera-equipped smartphones and tablets instead of using the device keyboard. The Company’s products use advanced algorithms to correct image distortion, extract relevant data, route images to their desired location and process transactions through users’ financial institutions. As of November 21, 2013, the Company’s has been granted 18 patents and it has an additional 21 patent applications pending. |
The Company’s Mobile Deposit® product is software that allows users to remotely deposit a check using their camera-equipped smartphone or tablet. As of September 30, 2013, 1,420 financial institutions have signed agreements to deploy Mobile Deposit®, and 805 of these financial institutions have deployed Mobile Deposit® to their customers, including all of the top ten U.S. retail banks and more than two-thirds of the top 50 U.S. retail banks and payment processing companies, as ranked by SNL Financial for the second quarter of calendar 2013. Other mobile imaging software solutions offered by the Company include Mobile Photo Bill Pay®, a mobile bill payment product that allows users to pay their bills using their camera-equipped smartphone or tablet, Mobile Balance Transfer™, a product that allows credit card issuers to provide an offer to users and transfer an existing credit card balance by capturing an image of the user’s current credit card statement, Mobile Photo Account Opening™, a product that enables users to open a checking, savings or credit card account by capturing an image of the front and back of their driver’s license with their camera-equipped smartphone or tablet, and Mobile Photo Quoting™, a product that enables users to receive insurance quotes by using their camera-equipped smartphone or tablet to take a picture of their driver’s license and insurance card. The Company’s mobile imaging software solutions can be accessed by smartphones and tablets using iOS and Android operating systems. |
The Company markets and sells its mobile imaging software solutions through channel partners or directly to enterprise customers that typically purchase licenses based on of the number of transactions or subscribers that use our mobile software. The Company’s mobile imaging software solutions are often embedded in other mobile banking or enterprise applications developed by banks, insurance companies or their partners, and marketed under their own proprietary brands. |
Basis of Presentation | ' |
Basis of Presentation |
The financial statements are prepared under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 105-10, Generally Accepted Accounting Principles, in accordance with accounting principles generally accepted in the U.S. (“GAAP”). |
Reclassifications | ' |
Reclassifications |
Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications do not impact the reported net loss and do not have a material impact on the presentation of the overall financial statements. |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, management reviews its estimates based upon currently available information. Actual results could differ materially from those estimates. |
Net Loss Per Share | ' |
Net Loss Per Share |
The Company calculates net income (loss) per share in accordance with FASB ASC Topic 260, Earnings Per Share. Basic net income (loss) per share is based on the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share also gives effect to all potentially dilutive securities outstanding during the period, such as options, warrants and restricted stock units (“RSUs”), if dilutive. In a period with a net loss position, potentially dilutive securities are not included in the computation of diluted net loss because to do so would be antidilutive, and the number of shares used to calculate basic and diluted net loss is the same. |
At September 30, 2013, 2012 and 2011, the following potentially dilutive common shares were excluded from the net loss per share calculation, as they would have been antidilutive: |
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| | 2013 | | | 2012 | | | 2011 | |
Stock options | | | 2,824,964 | | | | 3,512,286 | | | | 4,553,904 | |
Warrants | | | 6,667 | | | | 6,667 | | | | 132,189 | |
Restricted stock units | | | 692,504 | | | | 515,834 | | | | 300,000 | |
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Total potentially dilutive common shares outstanding | | | 3,524,135 | | | | 4,034,787 | | | | 4,986,093 | |
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The computation of basic and diluted net loss per share for the fiscal years ended September 30, 2013, 2012 and 2011 is as follows: |
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| | 2013 | | | 2012 | | | 2011 | |
Net loss | | $ | (7,275,706 | ) | | $ | (7,839,996 | ) | | $ | (125,057 | ) |
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Weighted-average common shares and share equivalents outstanding—basic | | | 27,492,670 | | | | 25,124,179 | | | | 21,506,508 | |
Effect of dilutive stock options | | | — | | | | — | | | | — | |
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Weighted-average common shares and share equivalents outstanding—diluted | | | 27,492,670 | | | | 25,124,179 | | | | 21,506,508 | |
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Net loss per share: | | | | | | | | | | | | |
Basic | | $ | (0.26 | ) | | $ | (0.31 | ) | | $ | (0.01 | ) |
Diluted | | $ | (0.26 | ) | | $ | (0.31 | ) | | $ | (0.01 | ) |
Revenue Recognition | ' |
Revenue Recognition |
Revenue from sales of software licenses sold through direct and indirect channels is recognized upon shipment of the related product, if the requirements of FASB ASC Topic 985-605, Software Revenue Recognition (“ASC 985-605”) are met, including evidence of an arrangement, delivery, fixed or determinable fee, collectability and vendor specific objective evidence (“VSOE”) of the fair value of the undelivered element. If the requirements of ASC 985-605 are not met at the date of shipment, revenue is not recognized until such elements are known or resolved. Revenue from customer support services, or maintenance revenue, includes post-contract support and the rights to unspecified upgrades and enhancements. VSOE of fair value for customer support services is determined by reference to the price the customer pays for such element when sold separately; that is, the renewal rate offered to customers. In those instances when objective and reliable evidence of fair value exists for the undelivered items but not for the delivered items, the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items. Revenue from post-contract customer support is recognized ratably over the term of the contract. Certain customers have agreements that provide for usage fees above fixed minimums. Fixed minimum transaction fees are recognized as revenue ratably over the term of the arrangement. Usage fees above fixed minimums are recognized as revenue when such amounts are reasonably estimable and billable. Revenue from professional services is recognized when such services are delivered. When a software sales arrangement requires professional services related to significant production, modification or customization of software, or when a customer considers professional services essential to the functionality of the software product, revenue is recognized based on predetermined milestone objectives required to complete the project, as those milestone objectives are deemed to be substantive in relation to the work performed. Any expected losses on contracts in progress are recorded in the period in which the losses become probable and reasonably estimable. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
Cash and cash equivalents are defined as highly liquid financial instruments with original maturities of three months or less. A substantial portion of the Company’s cash is deposited with one financial institution. The Company monitors the financial condition of this financial institution and does not believe that funds on deposit are subject to a significant degree of risk. |
Investments | ' |
Investments |
Investments consist of corporate notes and bonds, and commercial paper. The Company classifies investments as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All investments are recorded at estimated fair value. Unrealized gains and losses for available-for-sale securities are included in accumulated other comprehensive income, a component of stockholders’ equity. The Company evaluates its investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered to be other-than-temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before the recovery of its cost basis. Realized gains and losses and declines in value judged to be other-than-temporary are determined based on the specific identification method and are reported in other income (expense), net in the Statements of Operations. No other-than-temporary impairment charges were recognized in the fiscal years ended September 30, 2013, 2012 and 2011. |
All investments whose maturity or sale is expected within one year are classified as “current” on the balance sheet. All other securities are classified as “long-term” on the balance sheet. |
Fair Value Measurements | ' |
Fair Value Measurements |
The carrying amounts of cash equivalents, investments, accounts receivable, accounts payable and other accrued liabilities are considered representative of their respective fair values because of the short-term nature of those instruments. |
Accounts Receivable and Allowance for Doubtful Accounts | ' |
Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable, net, is as follows (in thousands): |
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| | September 30, | | | September 30, | | | | | |
2013 | 2012 | | | | |
Accounts receivable | | $ | 1,506,627 | | | $ | 1,115,084 | | | | | |
Less: Allowance for doubtful accounts | | | (12,000 | ) | | | (17,773 | ) | | | | |
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Accounts receivable, net | | $ | 1,494,627 | | | $ | 1,097,311 | | | | | |
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Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the contractual payment terms. Allowances for doubtful accounts are established based on various factors including credit profiles of the Company’s customers, contractual terms and conditions, historical payments, and current economic trends. The Company reviews its allowances by assessing individual accounts receivable over a specific aging and amount. Accounts receivable are written off on a case-by-case basis, net of any amounts that may be collected. The Company had no write-offs of the allowance for doubtful accounts for the years ended September 30, 2013 and 2012, respectively. |
Deferred Maintenance Fees | ' |
Deferred Maintenance Fees |
Deferred maintenance fees consist of capitalized costs associated with software maintenance fees paid to vendors who supply licenses and maintenance for software embedded in the Company’s products that it sells to customers. These software maintenance fees, which are included in other current assets on the balance sheet, are typically billed annually to the Company and are amortized to cost of revenue-maintenance and professional services in the Statements of Operations over the maintenance period, which is typically one year. |
Property and Equipment | ' |
Property and Equipment |
Property and equipment are carried at cost. The following is a summary of property and equipment as of September 30, 2013 and 2012: |
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| | 2013 | | | 2012 | | | | | |
Property and equipment—at cost: | | | | | | | | | | | | |
Equipment | | $ | 1,054,868 | | | $ | 684,552 | | | | | |
Furniture and fixtures | | | 227,189 | | | | 130,559 | | | | | |
Leasehold improvements | | | 975,838 | | | | 65,227 | | | | | |
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| | | 2,257,895 | | | | 880,338 | | | | | |
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Less: accumulated depreciation and amortization | | | (628,231 | ) | | | (460,223 | ) | | | | |
Construction in progress | | | — | | | | 70,964 | | | | | |
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Total property and equipment, net | | $ | 1,629,664 | | | $ | 491,079 | | | | | |
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Depreciation and amortization of property and equipment are provided using the straight-line method over estimated useful lives ranging from three to five years. Leasehold improvements are amortized over the lease term. Depreciation and amortization of property and equipment totaled $323,383, $140,146 and $42,133 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. Included in property and equipment as of September 30, 2013 and 2012 in the table above is equipment of $95,388 purchased under a capital lease. There were no fixed assets acquired under capital leases at September 30, 2011. Depreciation expense related to the equipment purchased under the capital lease was $19,078 and $17,488 in the fiscal years ended September 30, 2013 and 2012, respectively, and accumulated depreciation was $36,566 and $17,488 at September 30, 2013 and 2012, respectively. The Company recorded no depreciation expense related to capital leases in the fiscal year ended September 30, 2011, nor was there any related accumulated depreciation at September 30, 2011. Expenditures for repairs and maintenance are charged to operations. Total repairs and maintenance expenses were $97,532, $57,815 and $43,115 for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. |
Long-Lived Assets | ' |
Long-Lived Assets |
The Company evaluates the carrying value of long-lived assets, including license agreements and other intangible assets, when events and circumstances indicate that these assets may be impaired or in order to determine whether any revision to the related amortization periods should be made. This evaluation is based on management’s projections of the undiscounted future cash flows associated with each product or asset. If management’s evaluation indicates that the carrying values of these intangible assets were impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company did not record any impairment for the fiscal years ended September 30, 2013, 2012 and 2011. |
Capitalized Software Development Costs | ' |
Capitalized Software Development Costs |
Costs incurred for the development of software that will be sold, leased, or otherwise marketed are capitalized when technological feasibility has been established. Software development costs consist primarily of compensation of development personnel and related overhead incurred to develop new products and upgrade and enhance the Company’s current products, as well as fees paid to outside consultants. Capitalization of software development costs ceases and amortization of capitalized software development costs commences when the products are available for general release. For the fiscal years ended September 30, 2013 and 2012, no software development costs were capitalized because the time period and cost incurred between technological feasibility and general release for all software product releases were not material. |
The Company evaluates its capitalized software development costs at each balance sheet date to determine if the unamortized balance related to any given product exceeds the estimated net realizable value of that product. Any such excess is written off through accelerated amortization in the quarter in which it is identified. Determining net realizable value, as defined by FASB ASC Topic 985-20, Accounting for the Costs of Software to Be Sold, Leased or Otherwise Marketed, requires making estimates and judgments in quantifying the appropriate amount to write off, if any. Actual amounts realized from the software products could differ from those estimates. Also, any future changes to the Company’s product portfolio could result in significant increases to its cost of license revenue as a result of the write-off of capitalized software development costs. |
The Company recorded no amortization of software development costs for the fiscal year ended September 30, 2013. The Company recorded amortization of software development costs of $91,438 and $137,157 for the fiscal years ended September 30, 2012 and 2011, respectively. The Company records amortization of software development costs as cost of revenue-software in the Statements of Operations. |
Deferred Revenue | ' |
Deferred Revenue |
Deferred revenues represent advance payments or billings for software licenses, professional services and maintenance billed in advance of the time we recognize the related revenues. Deferred maintenance revenue represents customer billings, paid up front, generally annually at the beginning of each maintenance period, with revenue recognized ratably over such period. For certain other licensing arrangements, revenue attributable to undelivered elements, including post-contract customer support which typically includes telephone support and the right to receive unspecified upgrades and enhancements of software on a when-and-if-available basis, is based upon the sales price of those elements when sold separately and is recognized ratably on a straight-line basis over the term of the arrangement. |
Guarantees | ' |
Guarantees |
In the ordinary course of business, the Company is not subject to potential obligations under guarantees that fall within the scope of FASB ASC Topic 460, Guarantees (“ASC 460”), except for standard indemnification and warranty provisions that are contained within many of the Company’s customer license and service agreements and certain supplier agreements, and give rise only to the disclosure requirements prescribed by ASC 460. Indemnification and warranty provisions contained within the Company’s customer license and service agreements and certain supplier agreements are generally consistent with those prevalent in the Company’s industry. The Company has not historically incurred significant obligations under customer indemnification or warranty provisions and does not expect to incur significant obligations in the future. Accordingly, the Company does not maintain accruals for potential customer indemnification or warranty-related obligations. |
Income Taxes | ' |
Income Taxes |
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. |
Management evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets. The valuation allowance reduces deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. See Note 5 for additional details. |
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to income tax matters in income tax expense. See Note 5 for additional details. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
The Company records stock-based compensation in accordance with FASB ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as an expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method. |
The Black-Scholes option pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the expected life of the grant effective as of the date of the grant. The expected volatility is based on the historical volatility of the Company’s stock price. These factors could change in the future, affecting the determination of stock-based compensation expense in future periods. |
Advertising Expense | ' |
Advertising Expense |
Advertising costs are expensed as incurred and totaled $123,905, $72,053 and $76,026 during the fiscal years ended September 30, 2013, 2012 and 2011, respectively. |
Research and Development | ' |
Research and Development |
Research and development costs are expensed in the period incurred. |
Leases | ' |
Leases |
Leases are reviewed and classified as capital or operating at their inception. For leases that contain rent escalations, the Company records the total rent payable on a straight-line basis over the term of the lease. The difference between rent payments and straight-line rent expense is recorded as deferred rent. |
Segment Reporting | ' |
Segment Reporting |
FASB ASC Topic 280, Segment Reporting, requires the use of a management approach in identifying segments of an enterprise. During the fiscal year ended September 30, 2013, management determined that the Company has only one operating segment: the development, sale and service of our proprietary software solutions related to mobile imaging. |
Comprehensive Loss | ' |
Comprehensive Loss |
Comprehensive loss consists of net loss and unrealized gains and losses on available-for-sale securities. The following table summarizes the components of comprehensive loss for the fiscal years ended September 30, 2013, 2012 and 2011: |
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| | 2013 | | | 2012 | | | 2011 | |
Net loss | | $ | (7,275,706 | ) | | $ | (7,839,996 | ) | | $ | (125,057 | ) |
Other comprehensive loss: | | | | | | | | | | | | |
Change in unrealized gains (losses) on marketable securities | | | 2,454 | | | | 9,239 | | | | (9,855 | ) |
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Total comprehensive loss | | $ | (7,273,252 | ) | | $ | (7,830,757 | ) | | $ | (134,912 | ) |
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Included on the balance sheet at September 30, 2013 is an accumulated other comprehensive gain of $1,838, compared to an accumulated other comprehensive loss $616 at September 30, 2012, related to the Company’s available-for-sale-securities. |