We alerted NASDAQ’s penny stock markets Mitek Systems, Inc. to our premium subscribers at the end of the trading session on Thursday, May 3rd. MITK‘s stock plunged for over 56% or to $2.55 at the time of alert exemplified the market reaction on the company’s earnings report that was badly short of forecasts.
We sold MITK at $3.10 on the Friday’s trading with the profit of 20% on this NASDAQ’s penny stock security. Keep in mind that MITK shares have a room to grow but some facts need to be taken under consideration for the “long” shareholders:
1. Mitek Systems (MITK) earnings
[note color=”#C1C5C9″]Total revenue for the second quarter of 2012 was $1.2 million compared to total revenue of $2.9 million for the second quarter of 2011. The decline in total revenue was primarily driven by the decrease in the number of licenses signed for the Company’s patented imaging software products. Total operating expenses for the second quarter of 2012 were $4.1 million compared to $2.3 million for the second quarter of 2011.
GAAP net loss for the second quarter of 2012 was $2.8 million, or $0.11 per diluted share, compared to net income of $570,000, or $0.02 per diluted share, in the second quarter of 2011.
Non-GAAP net loss for the second quarter of 2012 was $2.2 million, or $0.09 per diluted share, compared to net income of $865,000, or $0.04 per diluted share, in the second quarter of 2011. Please see page 7 of this news release for a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.[/note]
President and CEO James B. DeBello, commented:
[quote style=”1″]Mobile Deposit momentum continues with five of the top eight retail banks now commercially launched and all eight signed. We are focused on expanding our product offerings, with Mobile Photo Bill Pay(TM) and others, to satisfy customer demand. In parallel, we are pursuing partnerships in new market segments, such as the prepaid market, where we can leverage Mitek’s unique position to maximize value for our stakeholders.
Despite a challenging second quarter, Mitek has significant strengths that we will leverage to improve our financial performance. We have deep technology expertise, industry-leading market share for Mobile Deposit with 315 of the nation’s top financial institutions and a strong and growing patent portfolio.
2. Keep in mind that MITK’s stock has been traded in the $12th dollar range before the USAA has filed suit against Mitek Systems for misappropriation of USAA’s proprietary information, breach of contract and fraud, among other claims:
Filed on March 29, 2012 in the US Federal Court, Western District, in San Antonio, Texas.
- USAA is represented by Larry Macon of Akin, Gump, Strauss, Hauer & Feld, LLP.
- Mitek is currently a party to a software license agreement with USAA.
- USAA and Mitek have worked together since 2006.
- To implement its remote deposit capture technology, USAA says it selected Mitek to provide software capable of reading the dollar amount on check images.
- USAA sued Mitek after receiving what the lawsuit describes as “contentious emails” that accused USAA of infringing on Mitek’s patents.
- USAA is seeking, among other things, a declaratory judgment that USAA does not infringe certain patents of Mitek relating to Mobile Deposit and that such patents are not enforceable against USAA.
- The lawusit states Mitek’s purported ‘invention’ was derived from USAA.
- Mitek says USAA can use Mitek’s software for processing transactions but not mobile deposits, according to the lawsuit.
- Mitek owns several patents for mobile deposits, specifically relating to the use of portable devices to capture images of financial documents and then process the images.
- USSA states they’ve spent millions of dollars and thousands of man-hours in the development and implementation” of its remote deposit capture invention from 2005 through 2007.
- USAA declares they’ve filed numerous patents related to the technology.
- Mitek demanded new licensing terms requiring USAA to pay about $2.5 million. USAA claims that is substantially more than what it should pay.
- USAA is also seeking to prevent Mitek from using USAA’s proprietary information.
- USAA alleges a “breach of contract, fraud and fraudulent inducement and unjust enrichment” and seeks “injunctive relief” and a reimbursement for overpayments to Mitek in the amount of $381,000 for licensing fees.[/note]
3. Stock short interest is about 25%
Mitek Systems Inc.
8911 Balboa Avenue Suite B
San Diego, CA 92123
Mitek Systems, Inc. engages in the development, sale, and service of software solutions related to mobile imaging solutions and intelligent character recognition software. It provides Mobile Deposit, a software application that allows users to remotely deposit a check using their smartphone cameras; Mobile Photo Bill Pay, a mobile bill paying application that allows users to pay their bills; Mobile ACH Enrollment, an application that enables consumers to enroll their checking accounts as funding sources for mobile payments; and MitekONE, an enterprise platform that addresses various deposit types.