Nature of Operations and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Mar. 31, 2014 |
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 related to mobile imaging. |
The Company applies its patented technology in image capture, correction and intelligent data extraction in the mobile financial and business applications 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 March 31, 2014, the Company has been granted 19 patents and has an additional 23 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 March 31, 2014, 2,222 financial institutions have signed agreements to deploy Mobile Deposit® and 1,759 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 fourth quarter of calendar year 2013. Other mobile imaging software solutions the Company offers include Mobile Photo Bill Pay®, a mobile bill payment product that allows users to pay their bills using their bank account and any camera-equipped smartphone or tablet, Mobile Photo Payments™, a product that allows users to pay their bills directly to the biller 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 any smartphone or tablet 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 the number of transactions or subscribers that use the Company’s 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. In February 2014, the Company launched the Mitek Developers Network. The program will extend use of the Company’s Mobile Imaging Platform™ to developers interested in creating new mobile applications using camera-equipped smartphones and tablets. |
Basis of Presentation | ' |
Basis of Presentation |
The accompanying unaudited financial statements of the Company as of March 31, 2014 have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, they do not include all information and footnote disclosures required by accounting principles generally accepted in the U.S. (“GAAP”). The Company believes the footnotes and other disclosures made in the financial statements are adequate for a fair presentation of the results of the interim periods presented. The financial statements include all adjustments (solely of a normal recurring nature) which are, in the opinion of management, necessary to make the information presented not misleading. You should read these financial statements and the accompanying notes in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 12, 2013 (the “Form 10-K”). |
Results for the three and six months ended March 31, 2014 are not necessarily indicative of results for any other interim period or for a full year. |
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 for such periods 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 and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, management reviews its estimates based upon currently available information. Actual future results could differ materially from those estimates. |
Net Loss Per Share | ' |
Net Loss Per Share |
The Company calculates net loss per share in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. Basic and diluted net loss per share are based on the weighted-average number of common shares outstanding during the period, without giving effect to potentially dilutive securities. In a period with a net loss position, potentially dilutive securities, such as options, warrants and restricted stock units (“RSUs”), are not included in the calculation 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. |
For the three and six months ended March 31, 2014 and 2013, the following potentially dilutive common shares were excluded from the calculation of net loss per share, as they would have been antidilutive: |
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| | Three and six months ended | | | | | | | | | |
March 31, | | | | | | | | |
| | 2014 | | | 2013 | | | | | | | | | |
Stock options | | | 2,708,063 | | | | 2,672,758 | | | | | | | | | |
Restricted stock units | | | 1,155,472 | | | | 680,004 | | | | | | | | | |
Warrants | | | 6,667 | | | | 6,667 | | | | | | | | | |
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Total potentially dilutive common shares outstanding | | | 3,870,202 | | | | 3,359,429 | | | | | | | | | |
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The calculation of basic and diluted net loss per share is as follows: |
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| | Three Months Ended | | | Six Months Ended | |
March 31, | March 31, |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Net loss | | $ | (2,193,017 | ) | | $ | (2,393,275 | ) | | $ | (3,661,317 | ) | | $ | (3,752,917 | ) |
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Weighted-average common shares outstanding - basic | | | 30,453,455 | | | | 26,473,938 | | | | 30,427,646 | | | | 26,246,642 | |
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Effect of dilutive common share equivalents | | | — | | | | — | | | | — | | | | — | |
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Weighted-average common shares and share equivalents outstanding - diluted | | | 30,453,455 | | | | 26,473,938 | | | | 30,427,646 | | | | 26,246,642 | |
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Net loss per share - basic | | $ | (0.07 | ) | | $ | (0.09 | ) | | $ | (0.12 | ) | | $ | (0.14 | ) |
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Net loss per share - diluted | | $ | (0.07 | ) | | $ | (0.09 | ) | | $ | (0.12 | ) | | $ | (0.14 | ) |
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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. Revenue derived from professional services primarily includes consulting, implementation, and training. Revenue from fixed fee service engagements is recognized after the services are performed using the completed performance method. Revenue from time and materials service engagements is generally recognized as the services are performed. |
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. |
Accounts Receivable and Allowance for Doubtful Accounts | ' |
Accounts Receivable and Allowance for Doubtful Accounts |
Accounts receivable, net, is as follows: |
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| | March 31, | | | September 30, | | | | | | | | | |
2014 | 2013 | | | | | | | | |
Accounts receivable | | $ | 3,122,819 | | | $ | 1,506,627 | | | | | | | | | |
Less: Allowance for doubtful accounts | | | (7,500 | ) | | | (12,000 | ) | | | | | | | | |
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Accounts receivable, net | | $ | 3,115,319 | | | $ | 1,494,627 | | | | | | | | | |
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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. |
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 three and six months ended March 31, 2014 and 2013, 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. |
Fair Value of Equity Instruments | ' |
Fair Value of Equity Instruments |
The fair value of equity instruments involves significant estimates based on underlying assumptions made by management. The fair value for purchase rights under the Company’s equity plans is measured at the grant date using a Black-Scholes valuation model, which involves estimates of stock volatility, expected life of the instruments and other assumptions, and using the closing price of the Company’s common stock on the grant date for RSUs. The fair value of stock-based awards is recognized as an expense over the respective terms of the awards. |
Deferred Income Taxes | ' |
Deferred Income Taxes |
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax basis of such assets and liabilities. The Company maintains a valuation allowance against its deferred tax assets due to the uncertainty regarding the future realization of such assets, which is 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, it could be required to maintain the valuation allowance against its deferred tax assets. |
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: |
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| | Three months ended | | | Six months ended | |
March 31, | March 31, |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Net loss | | $ | (2,193,017 | ) | | $ | (2,393,275 | ) | | $ | (3,661,317 | ) | | $ | (3,752,917 | ) |
Other comprehensive loss: | | | | | | | | | | | | | | | | |
Change in unrealized gains (losses) on marketable securities | | | 6,686 | | | | (1,842 | ) | | | 5,845 | | | | 2,536 | |
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Total comprehensive loss | | $ | (2,186,331 | ) | | $ | (2,395,117 | ) | | $ | (3,655,472 | ) | | $ | (3,750,381 | ) |
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Included on the balance sheet at March 31, 2014 is an accumulated other comprehensive gain of $7,683, compared to an accumulated other comprehensive gain of $1,838 at September 30, 2013, related to the Company’s available-for-sale securities. |