Restatement

6 Months Ended

Mar. 31, 2022

Accounting Changes and Error Corrections [Abstract]

RESTATEMENT

2. RESTATEMENT

The Company concluded it should restate its previously issued financial statements by amending its Quarterly Report on Form 10- Q for the quarterly period ended March 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on May 9, 2022, to record certain adjustments associated with its acquisition of HooYu Ltd (the “HooYu Acquisition”). The Company previously did not accrue for approximately $0.7 million of representations and warranty insurance, which should have been accrued for and fully expensed upon the effective date of the HooYu Acquisition, which was March 23, 2022. The Company also did not accrue for and expense $0.6 million of stamp duty tax related to the HooYu Acquisition during the quarterly period ended March 31, 2022. These two additional expenses during the quarter ended March 31, 2022 have a combined tax benefit of $0.4 million, which offsets these expenses and increases the Company’s deferred income tax asset by the same amount. Lastly, the Company incorrectly calculated the acquired deferred income tax liability and did not separately record $0.9 million of the acquired deferred income tax asset balance, which when netted with related deferred taxes resulted in an overstatement of deferred income tax liabilities by $1.4 million, which was previously improperly included in goodwill.

In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Form 10-Q for the quarterly period ended March 31, 2022 (the “Affected Quarterly Period”). Therefore, the Company, in consultation with the Audit Committee of the Company’s Board of Directors, concluded that the Affected Quarterly Period should be restated to present the identified adjustments discussed above. As such, the Company is reporting these restatements to the period in this Form 10-Q/A.

The impact of the restatement on the Company’s financial statements is reflected in the following tables (in thousands, except share and per share amounts):

MITEK SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(amounts in thousands except share data)

	As of March 31, 2022
	As Previously Reported		Total Adjustments		As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	23,984	$	—	$	23,984
Short-term investments	37,910		—		37,910
Accounts receivable, net	23,858		—		23,858
Contract assets	4,503		—		4,503
Prepaid expenses	2,409		—		2,409
Other current assets	1,849		—		1,849
Total current assets	94,513		—		94,513
Long-term investments	31,493		—		31,493
Property and equipment, net	3,938		—		3,938
Right-of-use assets	6,098		—		6,098
Intangible assets, net	96,364		—		96,364
Goodwill	136,889		(1,370)		135,519
Deferred income tax assets	10,572		431		11,003
Other non-current assets	5,292		—		5,292
Total assets	$	385,159	$	(939)	$	384,220
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,359	$	1,329	$	6,688
Accrued payroll and related taxes	8,271		—		8,271
Deferred revenue, current portion	9,700		—		9,700
Lease liabilities, current portion	1,944		—		1,944
Acquisition-related contingent consideration	10,790		—		10,790
Other current liabilities	3,469		—		3,469
Total current liabilities	39,533		1,329		40,862
Convertible senior notes	124,370		—		124,370
Deferred revenue, non-current portion	1,053		—		1,053
Lease liabilities, non-current portion	5,485		—		5,485
Deferred income tax liabilities	22,100		(1,370)		20,730
Other non-current liabilities	6,250		—		6,250
Total liabilities	198,791		(41)		198,750
Stockholders’ equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding	—		—		—
Common stock, $0.001 par value, 120,000,000 and 60,000,000 shares authorized, 44,344,361 and 44,168,745 issued and outstanding, as of March 31, 2022 and September 30, 2021, respectively	44		—		44
Additional paid-in capital	207,491		—		207,491
Accumulated other comprehensive loss	(5,170)		—		(5,170)
Accumulated deficit	(15,997)		(898)		(16,895)
Treasury stock, at cost, no shares and 7,773 shares as of March 31, 2022 and September 30, 2021, respectively	—		—		—
Total stockholders’ equity	186,368		(898)		185,470
Total liabilities and stockholders’ equity	$	385,159	$	(939)	$	384,220

MITEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)  

(Unaudited)

(amounts in thousands except per share data)

	Three Months Ended March 31, 2022
	As Previously Reported		Total Adjustments		As Restated
Revenue
Software and hardware	$	19,280	$	—	$	19,280
Services and other	15,434		—		15,434
Total revenue	34,714		—		34,714
Operating costs and expenses
Cost of revenue—software and hardware	310		—		310
Cost of revenue—services and other	3,000		—		3,000
Selling and marketing	9,206		—		9,206
Research and development	8,236		—		8,236
General and administrative	6,073		—		6,073
Acquisition-related costs and expenses	3,056		1,329		4,385
Total operating costs and expenses	29,881		1,329		31,210
Operating income	4,833		(1,329)		3,504
Interest expense	2,040		—		2,040
Other income, net	(231)		—		(231)
Income before income taxes	2,562		(1,329)		1,233
Income tax provision	(651)		431		(220)
Net income	$	1,911	$	(898)	$	1,013
Net income per share—basic	$	0.04	$	(0.02)	$	0.02
Net income per share—diluted	$	0.04	$	(0.02)	$	0.02
Shares used in calculating net income per share—basic	44,775		—		44,775
Shares used in calculating net income per share—diluted	46,097		—		46,097
Comprehensive loss
Net income	$	1,911	$	(898)	$	1,013
Foreign currency translation adjustment	(1,862)		—		(1,862)
Unrealized loss on investments	(828)		—		(828)
Comprehensive loss	$	(779)	$	(898)	$	(1,677)

	Six Months Ended March 31, 2022
	As Previously Reported		Total Adjustments		As Restated
Revenue
Software and hardware	$	34,725	$	—	$	34,725
Services and other	32,461		—		32,461
Total revenue	67,186		—		67,186
Operating costs and expenses
Cost of revenue—software and hardware	688		—		688
Cost of revenue—services and other	5,978		—		5,978
Selling and marketing	17,644		—		17,644
Research and development	15,842		—		15,842
General and administrative	12,037		—		12,037
Acquisition-related costs and expenses	5,335		1,329		6,664
Total operating costs and expenses	57,524		1,329		58,853
Operating income	9,662		(1,329)		8,333
Interest expense	4,048		—		4,048
Other income, net	(96)		—		(96)
Income before income taxes	5,518		(1,329)		4,189
Income tax provision	(483)		431		(52)
Net income	$	5,035	$	(898)	$	4,137
Net income per share—basic	$	0.11	$	(0.02)	$	0.09
Net income per share—diluted	$	0.11	$	(0.02)	$	0.09
Shares used in calculating net income per share—basic	44,795		—		44,795
Shares used in calculating net income per share—diluted	46,206		—		46,206
Comprehensive income (loss)
Net income	$	5,035	$	(898)	$	4,137
Foreign currency translation adjustment	(3,129)		—		(3,129)
Unrealized loss on investments	(1,098)		—		(1,098)
Comprehensive income (loss)	$	808	$	(898)	$	(90)

MITEK SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

	Six Months Ended March 31,
	As Previously Reported		Total Adjustments		2022 As Restated
Operating activities:
Net income	$	5,035	$	(898)	$	4,137
Adjustments to reconcile net income to net cash provided by operating activities:			—
Stock-based compensation expense	6,429		—		6,429
Amortization of intangible assets	4,525		—		4,525
Depreciation and amortization	555		—		555
Amortization of investment premiums & other	1,109		—		1,109
Accretion and amortization on debt securities	3,453		—		3,453
Net changes in estimated fair value of acquisition-related contingent consideration	(780)		—		(780)
Deferred taxes	(92)		(431)		(523)
Changes in assets and liabilities:			—
Accounts receivable	(6,171)		—		(6,171)
Contract assets	345		—		345
Other assets	498		—		498
Accounts payable	2,440		1,329		3,769
Accrued payroll and related taxes	(4,693)		—		(4,693)
Deferred revenue	(3,126)		—		(3,126)
Other liabilities	159		—		159
Net cash provided by operating activities	9,686		—		9,686
Investing activities:
Purchases of investments	(47,818)		—		(47,818)
Sales and maturities of investments	173,316		—		173,316
Acquisitions, net of cash acquired	(126,607)		—		(126,607)
Purchases of property and equipment	(634)		—		(634)
Net cash used in investing activities	(1,743)		—		(1,743)
Financing activities:
Proceeds from the issuance of equity plan common stock	1,128		—		1,128
Repurchases and retirements of common stock	(14,828)		—		(14,828)
Principal payments on other borrowings	(36)		—		(36)
Net cash provided by (used in) financing activities	(13,736)		—		(13,736)
Foreign currency effect on cash and cash equivalents	(535)		—		(535)
Net increase (decrease) in cash and cash equivalents	(6,328)		—		(6,328)
Cash and cash equivalents at beginning of period	30,312		—		30,312
Cash and cash equivalents at end of period	$	23,984	$	—	$	23,984
Supplemental disclosures of cash flow information:
Cash paid for interest	$	582	$	—	$	582
Cash paid for income taxes	$	597	$	—	$	597
Supplemental disclosures of non-cash investing and financing activities:
Reclassification of convertible senior notes hedge and embedded conversion derivative to additional paid-in capital	$	42,821	$	—	$	42,821
Unrealized holding gain (loss) on available-for-sale investments	$	(1,098)	$	—	$	(1,098)