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Mitek Systems Announces Second Fiscal Quarter 2005 Results With Improvements in Revenue and Gross Margin POWAY, Calif., May 20 /PRNewswire-FirstCall/ -- Mitek Systems, Inc. (OTC:MITK) (BULLETIN BOARD: MITK) (http://www.miteksystems.com/), a leading provider of automated identity verification and intelligent recognition software, today announced financial results for the second quarter and first six months of fiscal 2005 ended March 31, 2005. (Photo: http://www.newscom.com/cgi-bin/prnh/20041117/LAW022LOGO) Net sales for the second quarter of fiscal 2005 were $1.8 million, compared with $2.0 million in the same quarter last year, or $1.5 million on an adjusted basis after the CheckQuest product line divestiture for the same quarter last year. Net sales for the first quarter of fiscal 2005 were $1.3 million. Gross margin for the second quarter of fiscal 2005 was 87 percent, compared with 61 percent for the same quarter last year, or 85 percent on an adjusted basis after the CheckQuest product line divestiture for the same quarter last year. Gross margin for the first quarter of fiscal 2005 was 86 percent. Operating loss for the second quarter of fiscal 2005 was $548,000 compared with a loss of $813,000 for the same quarter last year and a loss of $800,000 for the first quarter of fiscal 2005. Included in the operating loss are additional legal and expert witness expenses of approximately $450,000 associated with the resolution of the dispute with BSM Software, Inc., as reported by the Company on April 19, 2005, and further described below. Net loss for the second quarter of fiscal 2005 was $799,000, or $0.07 per basic and diluted share, compared with a net loss of $816,000 or $0.07 per basic and diluted share, for the same fiscal quarter last year and a net loss of $917,000, or $0.08 per basic and diluted share, for the first quarter of fiscal 2005. The difference in net loss from the operating loss was due primarily to expenses associated with registering the securities underlying the previously disclosed convertible debt instrument agreement entered into between the Company and Laurus Master Fund, LLC on June 11, 2004. The Company's filing for registration of these securities was declared effective on May 13, 2005. Net sales for the first six months of fiscal 2005 were $3.1 million, compared with $3.7 million in the same period last year, or $2.4 million on an adjusted basis after the CheckQuest product line divestiture in the same period last year. Gross margin for the first six months of fiscal 2005 was 87 percent, compared with 59 percent for the same period last year, or 82 percent on an adjusted basis after the divestiture of the CheckQuest product line in the same period last year. Operating loss for the first six months of fiscal 2005 was $1.3 million, compared with a loss of $1.9 million for the same period last year. The improvement in the operating loss was primarily due to cost cutting measures and the divestiture of the CheckQuest product line prior to the end of the 2004 fiscal year. Net loss for the first six months of fiscal 2005 was $1.7 million, or $0.15 per basic and diluted share, compared with a net loss of $1.9 million, or $0.17 per basic and diluted share, for the same period of last year. On April 19, 2005, the Company announced that it had received a final payment of $1.0 million from Harland Financial Solutions, Inc., a subsidiary of John H. Harland Company (NYSE:JH) related to the sale last July of the Company's CheckQuest product line to Harland. A recent arbitration ruling on the Company's dispute with BSM Inc. over the use of the Company's products and intellectual property allowed the Company to complete the assignment of CheckQuest software license rights to Harland and collect this final payment. This gain will be reflected in the company's third quarter operating results. Additionally, Mitek announced on May 10, 2005 that the Company and John H. Harland Company closed the second and final round of a sale of Mitek's common stock and warrants pursuant to the previously-disclosed Securities Purchase Agreement entered into between the Company and Harland on February 22, 2005. In this second round, Harland acquired 1,071,428 shares of Mitek's common stock and 160,714 Mitek warrants for a purchase price of $750,000. "Our second quarter and first half of 2005 results indicate the success of our efforts to grow our revenues, improve our gross margins, and increase our working capital for the launch of our new identity verification and intelligent recognition products," Mitek's President and CEO James B. DeBello said. "The results from the execution of our growth plan are encouraging." About Mitek Systems Mitek Systems (OTC:MITK) (BULLETIN BOARD: MITK) is an established global leader in advanced image recognition software used by financial institutions for identity verification and document processing. Sold to partners and directly to end users, the Company's software is used in the processing of over 8 billion transactions per year. For more information about Mitek Systems, contact the company at 14145 Danielson Street, Suite B, Poway, CA 92064; 858-513-4600 or visit http://www.miteksystems.com/. Forward-Looking Statement Disclosure With the exception of historical matters, the matters discussed in this news release are forward-looking statements that involve risks and uncertainty. Forward-looking statements include, but are not limited to, statements relating to the launch of new products and future prospects of Mitek's growth. Actual results could differ from such forward-looking statements. There can be no assurance that Mitek will achieve results set forth herein. Mitek and Mitek Systems are registered trademarks of Mitek Systems, Inc. Contacts: John R. Shaw Andrew McCaskill Vice President, Marketing Media Contact for Mitek 858.513.4600 678.781.7210 Mitek Systems, Inc. Statements of Operations (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED March 31, March 31, 2005 2004 2005 2004 NET SALES $1,772,000 $2,018,000 $3,072,000 $3,713,000 OPERATING COSTS AND EXPENSES Cost of sales 229,000 780,000 413,000 1,522,000 Operations 36,000 378,000 76,000 739,000 Selling and Marketing 623,000 495,000 1,203,000 1,122,000 Research and Development 347,000 658,000 717,000 1,167,000 General and administrative 1,085,000 520,000 2,011,000 1,060,000 Total costs and expenses 2,320,000 2,831,000 4,420,000 5,610,000 OPERATING LOSS (548,000) (813,000) (1,348,000) (1,897,000) Interest and other income (expense) - net (251,000) (3,000) (368,000) 7,000 LOSS BEFORE INCOME TAXES (799,000) (816,000) (1,716,000) (1,890,000) INCOME TAX (EXPENSE) BENEFIT -- -- -- (3,000) NET LOSS ($799,000) ($816,000)($1,716,000)($1,893,000) LOSS PER SHARE -- BASIC AND DILUTED ($0.07) ($0.07) ($0.15) ($0.17) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED 11,841,862 11,369,942 11,613,186 11,316,861 Mitek Systems, Inc. Condensed Balance Sheets March 31, 2005 Sept 30, 2004 (unaudited) (audited) ASSETS Current assets $3,077,000 $3,503,000 Property and equipment -- net 106,000 119,000 Other assets 70,000 0 TOTAL ASSETS $3,253,000 $3,622,000 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities $3,291,000 $2,657,000 Long term liabilities 1,322,000 1,497,000 Total liabilities 4,613,000 4,154,000 Stockholders' deficit: Common stock 12,000 11,000 Additional paid-in capital 10,956,000 10,070,000 Accumulated deficit (12,328,000) (10,613,000) Total stockholder's deficit (1,360,000) (532,000) TOTAL LIABILITIES AND SHAREHOLDER'S DEFICIT $3,253,000 $3,622,000 http://www.newscom.com/cgi-bin/prnh/20041117/LAW022LOGO http://photoarchive.ap.org/ DATASOURCE: Mitek Systems, Inc. CONTACT: John R. Shaw, Vice President, Marketing of Mitek Systems, Inc., +1-858-513-4600, ; or Andrew McCaskill, +1-678-781-7210, , for Mitek Web site: http://www.miteksystems.com/

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