UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-35231

MITEK SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


Delaware						87-0418827
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

600 B Street, Suite 100
San Diego, California						92101
(Address of principal executive offices)						(Zip Code)

(619) 269-6800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	MITK	The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~44,680,429~~45,589,575 shares of the registrant’s common stock outstanding as of September 30, ~~2022.~~2023.

MITEK SYSTEMS, INC.

FORM 10-Q

For The Quarterly Period Ended June 30, ~~2022~~2023

INDEX


	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets at June 30, ~~2022~~2023 (Unaudited) and September 30, ~~2021~~2022	1
	Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	2
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Nine Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3132
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4140
Item 4.	Controls and Procedures	4241
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4443
Item 1A.	Risk Factors	4443
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4643
Item 3.	Defaults Upon Senior Securities	4643
Item 4.	Mine Safety Disclosures	4643
Item 5.	Other Information	4643
Item 6.	Exhibits	4944
	Signatures	5045

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands except share data)


		June 30, 2022 (Unaudited)		September 30, 2021			June 30, 2023 (Unaudited)		September 30, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	21,543	$	30,312	Cash and cash equivalents	$	87,490	$	32,059
Short-term investments	Short-term investments	49,531		149,057		Short-term investments	40,651		58,268
Accounts receivable, net	Accounts receivable, net	29,618		16,602		Accounts receivable, net	37,616		27,874
Contract assets		5,125		4,080
Contract assets, current portion						Contract assets, current portion	7,420		6,273
Prepaid expenses	Prepaid expenses	3,078		1,920		Prepaid expenses	2,227		2,000
Other current assets	Other current assets	3,194		2,085		Other current assets	2,828		2,622
Total current assets	Total current assets	112,089		204,056		Total current assets	178,232		129,096
Long-term investments	Long-term investments	19,534		48,051		Long-term investments	2,815		10,633
Property and equipment, net	Property and equipment, net	3,802		3,671		Property and equipment, net	3,010		3,493
Right-of-use assets	Right-of-use assets	5,484		7,056		Right-of-use assets	4,335		5,155
Intangible assets, net	Intangible assets, net	85,743		28,734		Intangible assets, net	70,414		75,756
Goodwill	Goodwill	127,992		63,096		Goodwill	131,535		120,186
Deferred income tax assets	Deferred income tax assets	12,993		10,511		Deferred income tax assets	18,553		10,245
Convertible senior notes hedge		—		48,208

Contract assets, non-current portion						Contract assets, non-current portion	7,050		4,218
Other non-current assets	Other non-current assets	6,959		6,310		Other non-current assets	1,533		1,628
Total assets	Total assets	$	374,596	$	419,693	Total assets	$	417,477	$	360,410
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	3,981	$	2,507	Accounts payable	$	7,733	$	4,974
Accrued payroll and related taxes	Accrued payroll and related taxes	10,276		11,776		Accrued payroll and related taxes	9,548		10,393
Accrued liabilities(1)		4,432		480
Accrued liabilities						Accrued liabilities	1,231		1,155
Accrued interest payable(1)						Accrued interest payable(1)	673		202
Income tax payables(1)						Income tax payables(1)	10,059		194
Deferred revenue, current portion	Deferred revenue, current portion	13,220		10,381		Deferred revenue, current portion	12,786		13,394
Lease liabilities, current portion	Lease liabilities, current portion	1,902		1,943		Lease liabilities, current portion	2,123		2,110
Acquisition-related contingent consideration	Acquisition-related contingent consideration	4,980		11,050		Acquisition-related contingent consideration	8,013		5,920
Restructuring accrual	Restructuring accrual	1,807		—		Restructuring accrual	—		901
Income taxes payable(1)		1,332		—
Other current liabilities(1)	Other current liabilities(1)	1,858		1,072		Other current liabilities(1)	1,521		1,254
Total current liabilities	Total current liabilities	43,788		39,209		Total current liabilities	53,687		40,497
Convertible senior notes	Convertible senior notes	126,157		120,918		Convertible senior notes	133,579		127,970
Embedded conversion derivative		—		48,208

Deferred revenue, non-current portion	Deferred revenue, non-current portion	1,409		955		Deferred revenue, non-current portion	2,056		1,775
Lease liabilities, non-current portion	Lease liabilities, non-current portion	4,776		6,588		Lease liabilities, non-current portion	2,968		4,106
Deferred income tax liabilities, non current portion	Deferred income tax liabilities, non current portion	19,227		4,117		Deferred income tax liabilities, non current portion	15,970		14,132
Other non-current liabilities	Other non-current liabilities	1,923		6,868		Other non-current liabilities	1,573		1,613
Total liabilities	Total liabilities	197,280		226,863		Total liabilities	209,833		190,093
Commitments and contingencies (Note 10)

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding	Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding	—		—		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, 44,396,263 and 44,168,745 issued and outstanding, as of June 30, 2022 and September 30, 2021, respectively		44		44
Common stock, $0.001 par value, 120,000,000 and 120,000,000 shares authorized, 45,507,401 and 44,680,429 issued and outstanding, as of June 30, 2023 and September 30, 2022, respectively						Common stock, $0.001 par value, 120,000,000 and 120,000,000 shares authorized, 45,507,401 and 44,680,429 issued and outstanding, as of June 30, 2023 and September 30, 2022, respectively	45		44
Additional paid-in capital	Additional paid-in capital	211,212		199,935		Additional paid-in capital	225,633		216,493
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(17,856)		(943)		Accumulated other comprehensive loss	(9,504)		(28,219)
Accumulated deficit	Accumulated deficit	(16,084)		(6,066)		Accumulated deficit	(8,530)		(18,001)
Treasury stock, at cost, no shares and 7,773 shares as of June 30, 2022 and September 30, 2021, respectively		—		(140)

Total stockholders’ equity	Total stockholders’ equity	177,316		192,830		Total stockholders’ equity	207,644		170,317
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	374,596	$	419,693	Total liabilities and stockholders’ equity	$	417,477	$	360,410

(1) September 30, ~~2021~~2022 condensed consolidated balance sheet reflects reclassifications to conform to the current year presentation.

See accompanying notes to condensed consolidated financial statements.

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

OTHER COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(amounts in thousands except per share data)


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2023		2022 As Restated		2023		2022 As Restated
Revenue	Revenue									Revenue
Software and hardware	Software and hardware	$	19,820	$	16,973	$	54,545	$	42,288	Software and hardware	$	21,447	$	19,515	$	73,083	$	53,110
Services and other	Services and other	19,513		14,805		51,975		44,238		Services and other	21,623		19,680		61,813		52,068
Total revenue	Total revenue	39,333		31,778		106,520		86,526		Total revenue	43,070		39,195		134,896		105,178
Operating costs and expenses	Operating costs and expenses									Operating costs and expenses
Cost of revenue—software and hardware		508		293		1,196		2,208
Cost of revenue—services and other		4,073		3,117		10,051		9,132
Cost of revenue—software and hardware (exclusive of depreciation & amortization)										Cost of revenue—software and hardware (exclusive of depreciation & amortization)	428		508		816		1,196
Cost of revenue—services and other (exclusive of depreciation & amortization)										Cost of revenue—services and other (exclusive of depreciation & amortization)	5,284		5,276		15,863		13,594
Selling and marketing	Selling and marketing	11,216		8,133		28,859		24,048		Selling and marketing	10,296		11,216		29,434		28,859
Research and development	Research and development	9,614		6,946		25,457		19,801		Research and development	7,461		8,411		22,504		21,914
General and administrative	General and administrative	6,589		5,633		18,626		16,409		General and administrative	11,588		6,591		30,126		18,628
Amortization and acquisition-related costs	Amortization and acquisition-related costs	3,283		2,224		9,947		5,576		Amortization and acquisition-related costs	6,207		4,493		15,302		10,777
Restructuring costs	Restructuring costs	1,807		—		1,807		—		Restructuring costs	14		1,807		2,000		1,807
Total operating costs and expenses	Total operating costs and expenses	37,090		26,346		95,943		77,174		Total operating costs and expenses	41,278		38,302		116,045		96,775
Operating income	Operating income	2,243		5,432		10,577		9,352		Operating income	1,792		893		18,851		8,403
Interest expense	Interest expense	2,077		2,223		6,125		3,543		Interest expense	2,362		2,077		6,662		6,125
Other income (expense), net	Other income (expense), net	89		80		(8)		549		Other income (expense), net	925		89		1,719		(2)
Income before income taxes		255		3,289		4,444		6,358
Income (loss) before income taxes										Income (loss) before income taxes	355		(1,095)		13,908		2,276
Income tax benefit (provision)	Income tax benefit (provision)	556		(304)		504		(187)		Income tax benefit (provision)	(783)		880		(4,437)		1,068
Net income		$	811	$	2,985	$	4,948	$	6,171
Net income per share—basic		$	0.02	$	0.07	$	0.11	$	0.14
Net income per share—diluted		$	0.02	$	0.07	$	0.11	$	0.14
Shares used in calculating net income per share—basic		44,669		43,773		44,721		43,145
Shares used in calculating net income per share—diluted		45,224		45,194		45,793		44,646
Comprehensive income (loss)
Net income		$	811	$	2,985	$	4,948	$	6,171
Net income (loss)										Net income (loss)	$	(428)	$	(215)	$	9,471	$	3,344
Net income (loss) per share—basic										Net income (loss) per share—basic	$	(0.01)	$	(0.00)	$	0.21	$	0.07
Net income (loss) per share—diluted										Net income (loss) per share—diluted	$	(0.01)	$	(0.00)	$	0.20	$	0.07
Shares used in calculating net income (loss) per share—basic										Shares used in calculating net income (loss) per share—basic	46,002		44,669		45,625		44,721
Shares used in calculating net income (loss) per share—diluted										Shares used in calculating net income (loss) per share—diluted	46,473		45,224		46,210		45,793
Other comprehensive income (loss)										Other comprehensive income (loss)
Net income (loss)										Net income (loss)	$	(428)	$	(215)	$	9,471	$	3,344
Foreign currency translation adjustment	Foreign currency translation adjustment	(13,595)		747		(16,724)		859		Foreign currency translation adjustment	2,219		(13,595)		17,944		(16,724)
Unrealized gain (loss) on investments	Unrealized gain (loss) on investments	909		11		(189)		(175)		Unrealized gain (loss) on investments	123		909		771		(189)
Comprehensive income (loss)		$	(11,875)	$	3,743	$	(11,965)	$	6,855
Other comprehensive income (loss)										Other comprehensive income (loss)	$	1,914	$	(12,901)	$	28,186	$	(13,569)

See accompanying notes to condensed consolidated financial statements.

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(amounts in thousands)


		Three Months Ended June 30, 2022												Three Months Ended June 30, 2023
		Common Stock			Additional Paid-In Capital				Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)					Total Stockholders’ Equity			Common Stock								Additional Paid-In Capital									Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)	Total Stockholders’ Equity
		Shares	Amount											Shares							Additional Paid-In Capital											Total Stockholders’ Equity
Balance, March 31, 2022		44,344	$	44			$	207,491				$	(16,895)					$	(5,170)				$	185,470
Balance, March 31, 2023																						Balance, March 31, 2023		45,410				$	45				$	222,933							$	(8,102)		$	(11,846)	$	203,030
Exercise of stock options	Exercise of stock options	10	—		33							—					—				33		Exercise of stock options		13					—						56					—			—		56
Settlement of restricted stock units	Settlement of restricted stock units	42	—		—					—					—				—		Settlement of restricted stock units	84				—					—							—		—			—

Stock-based compensation expense	Stock-based compensation expense	—	—		3,688					—					—				3,688		Stock-based compensation expense	—				—					2,644							—		—			2,644

Net income		—	—		—					811					—				811
Components of other comprehensive loss:
Components of other comprehensive income:																					Components of other comprehensive income:
Net loss																					Net loss	—				—					—							(428)		—			(428)
Currency translation adjustment	Currency translation adjustment	—	—		—					—					(13,595)				(13,595)		Currency translation adjustment	—				—					—							—		2,219			2,219
Change in unrealized gain (loss) on investments	Change in unrealized gain (loss) on investments	—	—		—					—					909				909		Change in unrealized gain (loss) on investments	—				—					—							—		123			123

Balance, June 30, 2022		44,396	$	44	$	211,212				$	(16,084)				$	(17,856)			$	177,316
Total other comprehensive income																					Total other comprehensive income																						1,914
Balance, June 30, 2023																					Balance, June 30, 2023	45,507				$	45				$	225,633						$	(8,530)	$	(9,504)		$	207,644


		Three Months Ended June 30, 2021																	Three Months Ended June 30, 2022
		Common Stock			Additional Paid-In Capital					Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Common Stock				Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
		Shares	Amount						Shares											Amount
Balance, March 31, 2021		43,052	$	43			$	178,891				$	(10,808)		$	(397)			$	167,729
Balance, March 31, 2022																		Balance, March 31, 2022	44,344		$	44	$	207,491	$	(17,473)	$	(5,170)	$	184,892
Exercise of stock options	Exercise of stock options	27	—		241					—			—			241		Exercise of stock options	10		—		33		—		—		33
Settlement of restricted stock units	Settlement of restricted stock units	73	—		—					—			—			—		Settlement of restricted stock units	42		—		—		—		—		—

Acquisition-related shares issued		867	1		13,943					—			—			13,944

Stock-based compensation expense	Stock-based compensation expense	—	—		2,867					—			—			2,867		Stock-based compensation expense	—		—		3,688		—		—		3,688

Net income		—	—		—					2,985			—			2,985
Components of other comprehensive income:
Components of other comprehensive loss:																		Components of other comprehensive loss:
Net loss																		Net loss	—		—		—		(215)		—		(215)
Currency translation adjustment	Currency translation adjustment	—	—		—					—			747			747		Currency translation adjustment	—		—		—		—		(13,595)		(13,595)
Change in unrealized gain (loss) on investments	Change in unrealized gain (loss) on investments	—	—		—					—			11			11		Change in unrealized gain (loss) on investments	—		—		—		—		909		909

Balance, June 30, 2021		44,019	$	44	$	195,942				$	(7,823)		$	361		$	188,524
Total other comprehensive income																		Total other comprehensive income											(12,901)
Balance, June 30, 2022																		Balance, June 30, 2022	44,396		$	44	$	211,212	$	(17,688)	$	(17,856)	$	175,712

See accompanying notes to condensed consolidated financial statements.

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY CONTINUED

(Unaudited)

(amounts in thousands)


		Nine Months Ended June 30, 2022																									Nine Months Ended June 30, 2023
		Common Stock			Additional Paid-In Capital				Treasury Stock				Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity						Common Stock				Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
		Shares	Amount				Shares			Amount															Shares			Amount
Balance, September 30, 2021		44,169	$	44			$	199,935		(8)			$	(140)	$	(6,066)			$	(943)			$	192,830
Balance, September 30, 2022																										Balance, September 30, 2022	44,680		$	44	$	216,493	$	(18,001)	$	(28,219)	$	170,317
Exercise of stock options	Exercise of stock options	35	—		239				—		—		—				—				239					Exercise of stock options	99		—		732		—		—		732
Settlement of restricted stock units	Settlement of restricted stock units	1,015	1		(1)				—		—		—				—				—					Settlement of restricted stock units	656		1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	Issuance of common stock under employee stock purchase plan	71	—		923				—		—		—				—				923					Issuance of common stock under employee stock purchase plan	72		—		619		—		—		619

Stock-based compensation expense	Stock-based compensation expense	—	—		10,117								—				—				10,117					Stock-based compensation expense	—		—		7,790		—		—		7,790

Repurchases and retirements of common stock		(894)	(1)		(1)				8		140		(14,966)				—				(14,828)

Components of other comprehensive income:																										Components of other comprehensive income:
Net income	Net income	—	—		—				—		—		4,948				—				4,948					Net income	—		—		—		9,471		—		9,471
Components of other comprehensive loss:
Currency translation adjustment	Currency translation adjustment	—	—		—				—		—		—				(16,724)				(16,724)					Currency translation adjustment	—		—		—		—		17,944		17,944
Change in unrealized gain (loss) on investments	Change in unrealized gain (loss) on investments	—	—		—				—		—		—				(189)				(189)					Change in unrealized gain (loss) on investments	—		—		—		—		771		771

Balance, June 30, 2022		44,396	$	44	$	211,212			—		$	—	$	(16,084)			$	(17,856)			$	177,316
Total other comprehensive income																										Total other comprehensive income											28,186
Balance, June 30, 2023																										Balance, June 30, 2023	45,507		$	45	$	225,633	$	(8,530)	$	(9,504)	$	207,644

Nine Months Ended June 30, 2021
Common Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated Other Comprehensive Income (Loss) Total
Stockholders’
Equity
Shares Amount
Balance, September 30, 2020 41,780 $ 42 $ 146,518 $ (13,994) $ (323) $ 132,243
Exercise of stock options 287 — 2,198 — — 2,198
Settlement of restricted stock units 1,008 1 (1) — — —
Issuance of common stock under employee stock purchase plan 77 — 794 — — 794
Acquisition-related shares issued 867 1 13,942 — — 13,943
Stock-based compensation expense — — 8,582 — — 8,582
Sale of convertible senior notes warrants — — 23,909 — — 23,909
Net income — — — 6,171 — 6,171
Components of other comprehensive income:
Currency translation adjustment — — — — 859 859
Change in unrealized gain (loss) on investments — — — — (175) (175)
Balance, June 30, 2021 44,019 $ 44 $ 195,942 $ (7,823) $ 361 $ 188,524


	Nine Months Ended June 30, 2022
	Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance, September 30, 2021	44,169	$	44	$	199,935	(8)	$	(140)	$	(6,066)	$	(943)	$	192,830
Exercise of stock options	35	—		239		—	—		—		—		239
Settlement of restricted stock units	1,015	1		(1)		—	—		—		—		—
Issuance of common stock under employee stock purchase plan	71	—		923		—	—		—		—		923

Stock-based compensation expense	—	—		10,117		—	—		—		—		10,117

Repurchases and retirements of common stock	(894)	(1)		(1)		8	140		(14,966)		—		(14,828)
Components of other comprehensive loss:
Net income	—	—		—		—	—		3,344		—		3,344
Currency translation adjustment	—	—		—		—	—		—		(16,724)		(16,724)
Change in unrealized gain (loss) on investments	—	—		—		—	—		—		(189)		(189)
Total other comprehensive loss													(13,569)
Balance, June 30, 2022	44,396	$	44	$	211,212	—	$	—	$	(17,688)	$	(17,856)	$	175,712

See accompanying notes to condensed consolidated financial statements.

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)


		Nine Months Ended June 30,					Nine Months Ended June 30,
		2022		2021			2023		2022 As Restated
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	4,948	$	6,171	Net income	$	9,471	$	3,344
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	Stock-based compensation expense	10,117		8,582		Stock-based compensation expense	7,790		10,117

Amortization of intangible assets	Amortization of intangible assets	9,176		5,241		Amortization of intangible assets	13,270		9,176
Depreciation and amortization	Depreciation and amortization	1,064		1,120		Depreciation and amortization	1,187		1,064
Amortization of investment premiums & other	Amortization of investment premiums & other	1,348		774		Amortization of investment premiums & other	(64)		1,348
Accretion and amortization on debt securities	Accretion and amortization on debt securities	5,239		3,080		Accretion and amortization on debt securities	5,609		5,239
Net changes in estimated fair value of acquisition-related contingent consideration	Net changes in estimated fair value of acquisition-related contingent consideration	(2,198)		—		Net changes in estimated fair value of acquisition-related contingent consideration	2,093		(1,278)
Deferred taxes	Deferred taxes	(1,141)		(263)		Deferred taxes	(8,246)		(1,705)
Changes in assets and liabilities, net of acquisitions:	Changes in assets and liabilities, net of acquisitions:					Changes in assets and liabilities, net of acquisitions:
Accounts receivable	Accounts receivable	(12,298)		(2,681)		Accounts receivable	(9,014)		(12,233)
Contract assets	Contract assets	(1,737)		2,326		Contract assets	(3,758)		(1,737)
Other assets	Other assets	(1,090)		(1,468)		Other assets	(73)		(848)
Accounts payable	Accounts payable	1,147		(1,397)		Accounts payable	2,633		1,147
Accrued payroll and related taxes	Accrued payroll and related taxes	(2,643)		428		Accrued payroll and related taxes	(1,099)		(2,643)
Income taxes payable(1)						Income taxes payable(1)	9,865		85
Deferred revenue	Deferred revenue	1,077		2,928		Deferred revenue	(752)		1,917
Restructuring accrual	Restructuring accrual	1,900		—		Restructuring accrual	(971)		1,900
Other liabilities		1,104		175
Other liabilities(1)						Other liabilities(1)	172		1,120
Net cash provided by operating activities	Net cash provided by operating activities	16,013		25,016		Net cash provided by operating activities	28,113		16,013
Investing activities:	Investing activities:					Investing activities:
Purchases of investments	Purchases of investments	(47,818)		(186,444)		Purchases of investments	(23,723)		(47,818)
Sales and maturities of investments	Sales and maturities of investments	173,198		52,536		Sales and maturities of investments	50,000		173,198
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(126,607)		(12,549)		Acquisitions, net of cash acquired	—		(126,607)
Purchases of property and equipment		(929)		(966)
Net cash used in investing activities		(2,156)		(147,423)
Purchases of property and equipment, net						Purchases of property and equipment, net	(656)		(929)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	25,621		(2,156)
Financing activities:	Financing activities:					Financing activities:
Proceeds from the issuance of convertible senior notes		—		155,250
Payment for convertible senior notes issuance costs		—		(5,513)
Purchase of 2026 convertible senior notes hedge		—		(33,192)
Proceeds from issuance of convertible senior notes warrants		—		23,909

Proceeds from the issuance of equity plan common stock	Proceeds from the issuance of equity plan common stock	1,162		2,992		Proceeds from the issuance of equity plan common stock	1,351		1,162
Repurchases and retirements of common stock	Repurchases and retirements of common stock	(14,828)		—		Repurchases and retirements of common stock	—		(14,828)
Payment of acquisition-related contingent consideration	Payment of acquisition-related contingent consideration	(6,770)		(783)		Payment of acquisition-related contingent consideration	—		(6,770)
Loans made to non-executive employees		(1,041)		—
Proceeds from other borrowings		—		251
Acquisition-related shares issued						Acquisition-related shares issued	—		(1,041)

Principal payments on other borrowings	Principal payments on other borrowings	(36)		(68)		Principal payments on other borrowings	(36)		(36)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(21,513)		142,846		Net cash provided by (used in) financing activities	1,315		(21,513)
Foreign currency effect on cash and cash equivalents	Foreign currency effect on cash and cash equivalents	(1,113)		124		Foreign currency effect on cash and cash equivalents	382		(1,113)
Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	(8,769)		20,563		Net increase (decrease) in cash and cash equivalents	55,431		(8,769)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	30,312		19,986		Cash and cash equivalents at beginning of period	32,059		30,312
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	21,543	$	40,549	Cash and cash equivalents at end of period	$	87,490	$	21,543
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Issuance of common stock for acquisition-related contingent consideration	Issuance of common stock for acquisition-related contingent consideration	$	2,722	$	—	Issuance of common stock for acquisition-related contingent consideration	$	—	$	2722
Cash paid for interest	Cash paid for interest	$	597	$	—	Cash paid for interest	$	829	$	597
Cash paid for income taxes	Cash paid for income taxes	$	819	$	556	Cash paid for income taxes	$	3,074	$	819
Supplemental disclosures of non-cash investing and financing activities:	Supplemental disclosures of non-cash investing and financing activities:					Supplemental disclosures of non-cash investing and financing activities:
Reclassification of convertible senior notes hedge and embedded conversion derivative to additional paid-in capital	Reclassification of convertible senior notes hedge and embedded conversion derivative to additional paid-in capital	$	42,821	$	—	Reclassification of convertible senior notes hedge and embedded conversion derivative to additional paid-in capital	$	—	$	42,821
Unrealized holding loss on available for sale investments		$	(189)	$	(175)
Unrealized holding gain (loss) on available for sale investments						Unrealized holding gain (loss) on available for sale investments	$	771	$	(189)

(1) March 31, 2022 condensed consolidated statement of cash flows reflects reclassifications to conform to the current year presentation.

See accompanying notes to condensed consolidated financial statements... ..

MITEK SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Mitek Systems, Inc. (“~~Mitek” or~~Mitek,” the ~~“Company”~~“Company,” “we,” “us,” and “our”) is a leading innovator of mobile image capture and digital identity verification solutions. ~~Our~~We are a software development company with expertise in artificial intelligence and machine learning. We currently serve more than 7,900 financial services organizations and leading marketplace and financial technology (“fintech”) brands around the globe. Customers count on Mitek to deliver trusted and convenient online experiences, detect and reduce fraud, and document Know Your Customer (“KYC”) and Anti-Money Laundering (“AML”) regulatory compliance. The Company’s solutions are embedded in native mobile apps and web browsers to facilitate digital consumer experiences. Mitek’s identity verification and authentication technologies and services make it possible for banks, financial services organizations and the world’s leading marketplace and sharing platforms to verify an individual’s identity during digital transactions, allowing them to reduce risk and meet regulatory requirements. ~~Our~~The Company’s advanced mobile deposit system enables secure, fast and convenient deposit services. Thousands of organizations use Mitek solutions to optimize the security of mobile check deposits, new account openings and more.

To ensure a high level of security against evolving digital fraud threats, in May 2021, Mitek acquired ID R&D, Inc. (“ID R&D”), an award-winning provider of artificial intelligence-based voice and face biometrics and liveness detection. With a strong research and development team, ID R&D consistently delivers innovative, best-in-class biometric capabilities that raise the bar on usability and performance. In March 2022, Mitek acquired HooYu Ltd. (“HooYu”), a leading KYC technology provider in the United Kingdom. The acquisition helps to ensure businesses know the true identity of their customers by linking biometric verification with real-time bureau and sanction database checks.

Mitek markets and sells its products and services worldwide through internal, direct sales teams located in the U.S., Europe, and Latin America as well as through channel partners. Our partner sales strategy includes channel partners who are financial services technology providers and identity verification providers. These partners integrate our products into their solutions to meet the needs of their ~~customers.~~customers, typically provisioning Mitek services through their respective platforms.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company as of June 30, ~~2022~~2023 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021,~~2022, filed with the U.S. Securities and Exchange Commission (“SEC”) on ~~December 13, 2021.~~July 31, 2023.

In connection with the preparation of the Company’s financial statements for the fiscal year ended September 30, 2022, the Company noted that certain revenue contracts and other items were improperly accounted for during three and six months ended March 31, 2022 and the three and nine months ended June 30, 2022. Specifically, the Company (a) did not appropriately (i) recognize revenue on its multiyear term licenses; (ii) recognize revenue related to guaranteed minimums and overages for software as a service (“SaaS”) product sales; (iii) cut off revenue related to term license sales; (iv) capitalize certain commissions paid to the HooYu Ltd (“HooYu”) sales team subsequent to the acquisition of HooYu in March 2022; (v) recognize a lease liability and right-of-use asset related to the office lease assumed in the HooYu acquisition; and (vi) recognize certain liabilities upon the acquisition of HooYu that were not valid liabilities; and (b) misclassified certain employee costs related to cloud operations as research and development expense instead of cost of revenue. Refer to Note 13. Restatement of Previously Reported Unaudited Interim Consolidated Financial Statements for further details.

Results for the nine months ended June 30, ~~2022~~2023 are not necessarily indicative of results for any other interim period or for a full fiscal year.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

~~Foreign Currency~~

The Company has foreign subsidiaries that operate and sell products and services in various countries and jurisdictions around the world. As a result, the Company is exposed to foreign currency exchange risks. For those subsidiaries whose functional currency is not the U.S. dollar, assets and liabilities are translated into U.S. dollars equivalents at the exchange rate in effect on the balance sheet date and revenues and expenses are translated into U.S. dollars using the average exchange rate over the period. Resulting currency translation adjustments are recorded in accumulated other comprehensive loss in the consolidated balance sheets. The Company recorded a net loss resulting from foreign exchange translation of $13.6 million and a net gain of $0.7 million for the three months ended June 30, 2022 and 2021, respectively. The Company recorded a net loss resulting from foreign exchange translation of $16.7 million and net gain of $0.9 million for the nine months ended June 30, 2022 and 2021, respectively.

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, deferred taxes, 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. These estimates include, but are not limited to, assessing the collectability of accounts receivable, estimation of the value of stock-based compensation awards, fair value of assets and liabilities acquired, impairment of goodwill, useful lives of intangible assets, fair value of debt derivatives, standalone selling price related to revenue recognition, contingent consideration, and income taxes.

~~Revenue Recognition~~Reclassifications

~~The Company recognizes revenue~~A reclassification has been made to the prior periods’ condensed consolidated financial statements in ~~accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606,~~ ~~Revenue from Contracts with Customers~~,order to conform to the current period presentation. Accrued interest payable and ~~its related amendments (collectively known~~income tax payables were included in the other current liabilities line in the condensed consolidated balance sheet as ~~“ASC 606”). ASC 606 outlines a single comprehensive model to be used~~of September 30, 2022, however, they have been presented separately in ~~accounting for revenue arising from contracts with customers. The core principle, involving a five-step process,~~the condensed consolidated balance sheet as of June 30, 2023 so that the total of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company generates revenue primarily from the delivery of licenses and related services to customers (for both on-premise and software as a service (“SaaS”) products), as well as the delivery of hardware and professional services. Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer which may be at a point in time or over time.

~~Contract Assets and Liabilities~~

The Company recognizes revenue when control of the license is transferred to the customer. The Company records a contract asset when the revenue is recognized prior to the date payments become due. Contract assets that are expected to be paid within one year are recorded in current assets on the consolidated balance sheets. All other contract assets are recorded in other non-current assets in the consolidated balance sheet. Contract liabilities consist of deferred revenue. When the performance obligation is expected to be fulfilled within one year, the deferred revenue is recorded in current liabilities ~~in the consolidated balance sheet. When the performance obligation~~line is expected to be fulfilled beyond one year, the deferred revenue is recorded in non-current liabilities in the consolidated balance sheet. The Company reports net contract asset or liability positions on a customer-by-customer basis at the endless than five percent of ~~each reporting period.~~

~~Contract Costs~~

The Company incurs incremental costs to obtain a contract, consisting primarily of sales commissions incurred only if a contract is obtained. When the commission rate for a customer renewal is not commensurate with the commission rate for a new contract, the commission is capitalized if expected to be recovered. Such costs are capitalized and amortized using a portfolio approach consistent with the pattern of transfer of the good or service to which the asset relates. Contract costs are recorded in othertotal current ~~and non-current assets in the consolidated balance sheets.~~liabilities.

Net Income (Loss) Per Share

~~The Company calculates net income per share in accordance with FASB ASC Topic 260,~~ ~~Earnings per Share~~. Basic net income per share is based on the weighted-average number of common shares outstanding during the period. Diluted net income per share also gives effect to all potentially dilutive securities outstanding during the period, such as restricted stock units (“RSUs”), stock options, and shares issued under the Company’s Employee Stock Purchase Plan (“ESPP”), and convertible senior notes and warrants, if dilutive. In a period with a net loss position, potentially dilutive securities are not included in the computation of diluted net loss per share because to do so would be antidilutive, and the number of shares used to calculate basic and diluted net loss per share is the same.

For the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the following potentially dilutive common shares were excluded from the calculation of net income (loss) per share, as they would have been antidilutive (amounts in thousands):


		Three Months Ended June 30,		Nine Months Ended June 30,			Three Months Ended June 30,		Nine Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Stock options	Stock options	540	524	484	593	Stock options	443	540	453	484
RSUs	RSUs	853	1,248	861	1,177	RSUs	1,256	853	1,138	861
ESPP common stock equivalents	ESPP common stock equivalents	148	73	36	27	ESPP common stock equivalents	295	148	89	36
Performance options	Performance options	678	263	550	224	Performance options	783	678	772	550
Performance RSUs	Performance RSUs	492	98	279	109	Performance RSUs	728	492	228	279
Convertible senior notes	Convertible senior notes	7,448	7,448	7,448	3,983	Convertible senior notes	7,448	7,448	7,448	7,448
Warrants	Warrants	7,448	7,448	7,448	3,983	Warrants	7,448	7,448	7,448	7,448
Total potentially dilutive common shares outstanding	Total potentially dilutive common shares outstanding	17,607	17,102	17,106	10,096	Total potentially dilutive common shares outstanding	18,401	17,607	17,576	17,106

The calculation of basic and diluted net income (loss) per share is as follows (amounts in thousands, except per share data):
Three Months Ended June 30, Nine Months Ended June 30,
2022 2021 2022 2021
Net income $ 811 $ 2,985 $ 4,948 $ 6,171
Weighted-average shares outstanding—basic 44,669 43,773 44,721 43,145
Common stock equivalents 555 1,421 1,072 1,501
Weighted-average shares outstanding—diluted 45,224 45,194 45,793 44,646
Net income per share:
Basic $ 0.02 $ 0.07 $ 0.11 $ 0.14
Diluted $ 0.02 $ 0.07 $ 0.11 $ 0.14

~~Investments~~

Investments consist of corporate notes and bonds, commercial paper, U.S. Treasury securities, and asset-backed securities. 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 loss, 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 consolidated statements of operations and comprehensive income (loss). No other-than-temporary impairment charges were recognized in the three and nine months ended June 30, 2022 and 2021.

All investments whose maturity or sale is expected within one year are classified as “current” on the consolidated balance sheets. All other securities are classified as “long-term” on the consolidated balance sheets.

~~Convertible Senior Notes Hedge and Embedded Conversion Derivative~~

In February 2021, the Company issued $155.3 million aggregate principal amount of 0.75% convertible notes due 2026 (the “2026 Notes”). Concurrently with the issuance of the 2026 Notes, the Company entered into privately-negotiated convertible senior note hedge (the “Notes Hedge”) and warrant transactions (the “Warrant Transactions”) which, in combination, are intended to reduce the potential dilution from the conversion of the 2026 Notes. Prior to the Company increasing the number of authorized shares of its common stock, par value $0.001 per share (“Common Stock”), the Company could not elect to issue shares of its Common Stock upon settlement of the 2026 Notes due to insufficient authorized share capital. As a result, the embedded conversion option (the “embedded conversion derivative”) was accounted for as a derivative liability and the Notes Hedge as a derivative asset with the resulting gain (or loss) reported in other income, net, in the consolidated statement of operations to the extent the valuation changed from the date of issuance of the 2026 Notes. The Company increased its authorized shares of Common Stock in the second quarter of fiscal 2022 and as such can issue shares of its Common Stock upon settlement of the 2026 Notes. As a result, the embedded conversion option (the “embedded conversion derivative”) and the Notes Hedge are now recorded in additional paid-in-capital in the consolidated balance sheet and are not remeasured as long as they continue to meet the conditions for equity classification. The Warrant Transactions were recorded in additional paid-in-capital in the consolidated balance sheet and are not remeasured as long as

they continue to meet the conditions for equity classification. See Note 9. “Convertible Senior Notes” of the consolidated financial statements for additional information related to these transactions.

~~Accounts Receivable and Allowance for Credit Losses~~

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. The Company calculates expected credit losses for its trade accounts receivable and contract assets. Expected credit losses include losses expected based on known credit issues with certain customers as well as a general expected credit loss allowance based on relevant information, including historical loss rates, current conditions, and reasonable economic forecasts that affect collectability. The Company updates its allowance for credit losses on a quarterly basis with changes in the allowance recognized in income from operations. The Company had $29,000 of recoveries and no write-offs to the allowance for doubtful accounts for the three months ended June 30, 2022 and 2021, respectively. The Company had $21,000 and $35,000 of write-offs to the allowance for doubtful accounts for the nine months ended June 30, 2022 and 2021, respectively. The Company maintained an allowance for doubtful accounts of $0.5 million as of June 30, 2022 and $0.4 million as of September 30, 2021.

~~Capitalized Software Development Costs~~

Costs related to software acquired, developed, or modified solely to meet our internal requirements, with no substantive plans to market such software at the time of development, are capitalized. Costs incurred during the preliminary planning and evaluation stage of the project and during the post-implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. The Company defines the design, configuration, and coding process as the application development stage. The Company capitalized $0.2 million of costs related to computer software developed for internal use during each of the three months ended June 30, 2022 and 2021. The Company capitalized $0.6 million of costs related to computer software developed for internal use during each of the nine months ended June 30, 2022 and 2021. The Company had $0.1 million in amortization expense from internal use software during each of the three months ended June 30, 2022 and 2021. The Company had $0.2 million and $0.3 million in amortization expense from internal use software during the nine months ended June 30, 2022 and 2021, respectively.

~~Goodwill and Purchased Intangible Assets~~

The Company’s goodwill and intangible assets resulted from prior acquisitions. Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually or as circumstances indicate that their value may no longer be recoverable. In accordance with ASC Topic 350, ~~Intangibles—Goodwill and Other~~ (“ASC 350”), the Company reviews its goodwill and indefinite-lived intangible assets for impairment at least annually in its fiscal fourth quarter and more frequently if events or changes in circumstances occur that indicate a potential reduction in the fair value of its reporting unit and/or its indefinite-lived intangible asset below their respective carrying values. Examples of such events or circumstances include: a significant adverse change in legal factors or in the business climate, a significant decline in the Company’s stock price, a significant decline in the Company’s projected revenue or cash flows, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, or the presence of other indicators that would indicate a reduction in the fair value of a reporting unit. No such events or circumstances have occurred since the last impairment assessment was performed.

The Company’s goodwill is considered to be impaired if management determines that the carrying value of the reporting unit to which the goodwill has been assigned exceeds management’s estimate of its fair value. Based on the guidance provided by ASC 350 and ASC Topic 280, ~~Segment Reporting~~, management has determined that the Company operates in one segment and consists of one reporting unit given the similarities in economic characteristics between its operations and the common nature of its products, services and customers. Because the Company has only one reporting unit, and because the Company is publicly traded, the Company determines the fair value of the reporting unit based on the market price of its common stock as it believes this represents the best evidence of fair value. In the fourth quarter of the fiscal year ended September 30, 2021, management completed its annual goodwill impairment test and concluded that the Company’s goodwill was not impaired. The Company’s conclusion that goodwill was not impaired was based on a comparison of its net assets to its market capitalization. There was no impairment of goodwill during the three and nine months ended June 30, 2022 and 2021.

Because the Company determines the fair value of its reporting unit based on its market capitalization, the Company’s future reviews of goodwill for impairment may be impacted by changes in the price of the Common Stock. For example, a significant decline in the price of the Common Stock may cause the fair value of its goodwill to fall below its carrying value. Therefore, the Company cannot assure that when it completes its future reviews of goodwill for impairment a material impairment charge will not be recorded.

Intangible assets are amortized over their useful lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. The carrying amounts of these assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. The carrying amount of such assets is reduced to fair value if the undiscounted cash flows used in the test for recoverability are less than the carrying amount of such assets.

~~No impairment charge related to the impairment of intangible assets was recorded during the nine months ended June 30, 2022 and 2021.~~


	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022 As Restated		2023		2022 As Restated
Net income (loss)	$	(428)	$	(215)	$	9,471	$	3,344
Weighted-average shares outstanding—basic	46,002		44,669		45,625		44,721
Common stock equivalents	471		555		585		1,072
Weighted-average shares outstanding—diluted	46,473		45,224		46,210		45,793
Net income (loss) per share:
Basic	$	(0.01)	$	(0.00)	$	0.21	$	0.07
Diluted	$	(0.01)	$	(0.00)	$	0.20	$	0.07

Other Borrowings

The Company has certain loan agreements with Spanish government agencies which were assumed when the Company acquired ICAR Vision Systems, S.L. ("ICAR") in 2017. These agreements have repayment periods of five to twelve years and bear no interest. As of June 30, ~~2022, $1.4~~2023, $1.3 million was outstanding under these agreements and $0.1 million and ~~$1.3~~$1.2 million is recorded in other current liabilities and other non-current liabilities, respectively, in the condensed consolidated balance sheets. As of September 30, ~~2021, $0.8~~2022, $1.3 million was outstanding under these agreements and approximately $0.1 million and ~~$0.7~~$1.2 million is recorded in other current liabilities and other non-current liabilities, respectively, in the condensed consolidated balance sheets.

~~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~~

~~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 8. “Income Taxes” of the consolidated financial statements 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 position 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 8. “Income Taxes” of the consolidated financial statements for additional details.

~~Stock-Based Compensation~~

The Company issues RSUs, stock options, performance options, and performance RSUs as awards to its employees. Additionally, eligible employees may participate in the ESPP. Employee stock awards are measured at fair value on the date of grant and expense is recognized using the straight-line single-option method in accordance with FASB ASC Topic 718, ~~Compensation—Stock Compensation. Forfeitures are recorded as they occur.~~

~~The Company assigns fair value to RSUs based on the closing stock price of its Common Stock on the date of grant.~~

The Company estimates the fair value of stock options and ESPP shares using the Black-Scholes option pricing model. 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.

The Company estimates the fair value of performance options, senior executive performance restricted stock units, and similar awards using the Monte-Carlo simulation. The Monte-Carlo simulation requires subjective assumptions, including the Company’s valuation date stock price, the annual risk-free interest rate, expected volatility, the probability of reaching the stock performance targets, and a 20-trading-day average stock price.

~~Comprehensive Income (Loss)~~

Comprehensive income (loss) consists of net income, unrealized gains and losses on available-for-sale securities, and foreign currency translation adjustments. Included on the consolidated balance sheets is accumulated other comprehensive loss of $17.9 million and $0.9 million at June 30, 2022 and September 30, 2021, respectively. The components of accumulated other comprehensive loss consist of $16.3 million of cumulative translation adjustment and $1.6 million of unrealized gains and losses on available for sale securities and $0.7 million of cumulative translation adjustment and $0.2 million other unrealized gains and losses on available for sale securities at June 30, 2022 and September 30, 2021, respectively.

Recently Adopted Accounting Pronouncements

~~In October 2021, the FASB issued ASU 2021-08,~~ ~~Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~ (“ASU 2021-08”), which is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and the payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 will improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination and improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. ASU 2021-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted, including adoption in an interim period. The Company ~~early adopted the guidance~~did not adopt any new accounting pronouncements in the ~~second~~ quarter ~~of fiscal 2022 and it did not have a material impact on its consolidated financial statements.~~ended June 30, 2023.

In August 2020, the FASB issued Accounting Standards Update 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features through equity. Without an initial allocation of proceeds to the conversion option, the debt will likely have a lower discount, thereby resulting in less noncash interest expense through accretion. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for such exception. ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas. ASU 2020-06 is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This update permits the use of either the modified retrospective or fully retrospective method of transition. The Company adopted ASU 2020-06 in the first quarter of fiscal 2022, however, it had no impact to the financial statements.

~~In December 2019, the FASB issued ASU 2019-12,~~
~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~ (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The Company prospectively adopted this ASU 2019-12 in the first quarter of fiscal 2022 and it did not have a material impact on its consolidated financial statements.

Change in Significant Accounting Policy

The ~~Company has consistently applied the~~Company’s significant accounting policies ~~to all periods presented~~are disclosed in ~~its~~the Company’s audited condensed consolidated financial ~~statements.~~statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2022, filed with the SEC on July 31, 2023. There have been no changes to these accounting policies through June 30, 2023.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference

Rate Reform on Financial Reporting (ASU 2020-04) and also issued subsequent amendments to the initial guidance (collectively, Topic 848). Topic 848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. The Company will adopt Topic 848 when the relevant contracts are modified upon transition to alternative reference rates. The Company does not expect the adoption of Topic 848 will have a material impact on the condensed consolidated financial statements.

No other new accounting pronouncement issued or effective during the ~~nine~~three months ended June 30, ~~2022~~2023 had, or isare expected to have, a material impact on the Company’s condensed consolidated financial statements.

2. REVENUE RECOGNITION

Nature of Goods and Services

The following is a description of principal activities from which the Company generates its revenue. Contracts with customers are evaluated on a contract-by-contract basis as contracts may include multiple types of goods and services as described below.

Software and Hardware

Software and hardware revenue is generated from ~~on-premise~~on premise software license sales, as well as sales of hardware scanner boxes and ~~on-premise~~on premise appliance products. Software is typically sold as a time-based license with a term of one to three years. For software license agreements that are distinct, the Company recognizes software license revenue upon delivery and after evidence of a contract exists. Hardware revenue is recognized at a point in time upon shipment and after evidence of a contract exists.

Services and Other

Services and other revenue is generated from the sale of ~~SaaS~~software as a service (“SaaS”) products and services, maintenance associated with the sale of ~~on-premise~~on premise software licenses and consulting and professional services. The ~~Company recognizes services revenue over the period in which such services are performed. The~~ Company’s SaaS offerings ~~gives~~give customers the option to be charged upon their incurred usage in arrears (“Pay as You Go”), or ~~they may~~ commit to a minimum spend over their contracted ~~period.~~period, with the ability to purchase unlimited additional transactions above the minimum during the contract term. Revenue related to Pay as You Go contracts are recognized based on the ~~customers’~~customer’s actual usage, in the period of usage. ~~Revenue related~~For contracts which include a minimum commitment, the Company is standing ready to ~~commitment contracts are~~provide as many transactions as desired by the customer throughout the contract term, and revenue is recognized on a ratable basis over the contract period including an estimate of usage above the minimum commitment. Usage above minimum commitment is estimated by looking at historical usage, ~~in previous months~~expected volume, and other factors ~~and projecting~~to project out for the ~~rest~~remainder of the ~~contract.~~contract term. The estimated usage-based revenues are constrained to the amount the Company expects to be entitled to receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. If the up-front fee is not distinct, revenue is deferred until the date the customer commences use of the Company’s services, at which point it is recognized ratably over the life of the customer arrangement. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.

Significant Judgments in Application of the Guidance

The Company uses the following methods, inputs, and assumptions in determining amounts of revenue to recognize:

Identification of Performance Obligations

For contracts that contain multiple performance obligations, which include combinations of software licenses, maintenance, and services, the Company accounts for individual goods or services as a separate performance obligation if they are distinct. The good or service is distinct if the good or service is separately identifiable from other items in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

Determination of Transaction Price

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products or services to the customer. The Company includes any fixed charges within its contracts as part of the total transaction price. To the extent that variable consideration is not constrained, the Company includes an estimate of the variable

amount, as appropriate, within the total transaction price and updates its assumptions over the duration of the contract. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

Assessment of Estimates of Variable Consideration

Many of the Company’s contracts with customers contain some component of variable consideration; however, variable consideration will only be included in the transaction price to the extent it is probable that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company may constrain the estimated transaction price in the event of a high degree of uncertainty as to the final consideration amount owed because of an extended length of time over which the fees may be adjusted or due to uncertainty surrounding collectability. The Company estimates variable consideration in its contracts primarily using the expected value method as the Company believes this method represents the most appropriate estimate for this consideration, based on historical usage trends, the individual contract considerations, and its best judgment at the time.

Allocation of Transaction Price

The transaction price, including any discounts, is allocated between separate goods and services in a contract that contains multiple performance obligations based on their relative standalone selling prices. The standalone selling prices are based on the prices at which the Company separately sells each good or service. For items that are not sold separately, the Company estimates the standalone selling prices using available information such as market conditions and internally approved pricing guidelines. In certain situations, primarily transactional SaaS revenue described above, the Company allocates variable consideration to a series of distinct goods or services within a contract. The Company allocates variable payments to one or more, but not all, of the distinct goods or services or to a series of distinct goods or services in a contract when (i) the variable payment relates specifically to the Company’s efforts to transfer the distinct good or service and (ii) the variable payment is for an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to its customer.

129

Disaggregation of Revenue

The following table presents the Company's revenue disaggregated by major product category (amounts in thousands):
Three Months Ended June 30, Nine Months Ended June 30,
2022 2021 2022 2021
Major product category
Deposits software and hardware $ 16,910 $ 15,817 $ 46,605 $ 38,705
Deposits services and other 5,010 4,963 15,670 14,887
Deposits revenue 21,920 20,780 62,275 53,592
Identity verification software and hardware 2,910 1,156 7,940 3,583
Identity verification services and other 14,503 9,842 36,305 29,351
Identity verification revenue 17,413 10,998 44,245 32,934
Total revenue $ 39,333 $ 31,778 $ 106,520 $ 86,526

Software and hardware revenue is generated from on-premise software license sales, as well as sales of hardware scanner boxes and on-premise appliance products. Services and other revenue is generated from the sale of SaaS products and services, maintenance associated with the sale of software and hardware, and consulting and professional services. 50.4% and 51.2% of revenue was recognized at a point in time versus over time for the three and nine months ended June 30, 2022, respectively. 53.4% and 48.9% of revenue was recognized at a point in time versus over time for the three and nine months ended June 30, 2021, respectively.


	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022 As Restated		2023		2022 As Restated
Major product category
Deposits software and hardware	$	18,300	$	16,955	$	64,979	$	46,574
Deposits services and other	6,504		5,010		18,866		15,670
Deposits revenue	24,804		21,965		83,845		62,244
Identity verification software and hardware	3,147		2,560		8,104		6,536
Identity verification services and other	15,119		14,670		42,947		36,398
Identity verification revenue	18,266		17,230		51,051		42,934
Total revenue	$	43,070	$	39,195	$	134,896	$	105,178

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers (amounts in thousands) ~~as of:~~:


		June 30, 2022		September 30, 2021			June 30, 2023		September 30, 2022
Contract assets, current	Contract assets, current	$	5,125	$	4,080	Contract assets, current	$	7,420	$	6,273
Contract assets, non-current	Contract assets, non-current	4,922		4,409		Contract assets, non-current	7,050		4,218
Contract liabilities (deferred revenue), current	Contract liabilities (deferred revenue), current	13,220		10,381		Contract liabilities (deferred revenue), current	12,786		13,394
Contract liabilities (deferred revenue), non-current	Contract liabilities (deferred revenue), non-current	1,409		955		Contract liabilities (deferred revenue), non-current	2,056		1,775

Contract assets, reported within a separate line in current assets and the other non-current assets line in the condensed consolidated balance sheets, primarily result from when the right to consideration is conditional upon factors other than the passage of time. Contract liabilities primarily relate to advance consideration received from customers (deferred revenue), for which transfer of control occurs, and therefore revenue is recognized as services are provided. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period. The Company recognized ~~$1.1~~$1.8 million and ~~$0.6~~$1.2 million of revenue during ~~each of~~ the three months ended June 30, 2023 and 2022, respectively, and ~~2021,~~$11.7 million and $11.1 million during the nine months ended June 30, 2023 and 2022, respectively, which was included in the contract liability balance at the beginning of each such period. ~~The Company recognized $11.1~~Unbilled receivables are included within contract assets on the condensed consolidated balance sheets and were $6.1 million and ~~$8.5~~$1.9 million as of ~~revenue during the nine months ended~~ June 30, 2023 and September 30, 2022, ~~and 2021, respectively, which was included in the contract liability balance at the beginning of each such period.~~respectively.

Contract Costs

Contract costs included in other current and non-current assets on the condensed consolidated balance sheets totaled ~~$2.4~~$2.3 million and ~~$2.3~~$2.4 million as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. Contract costs are amortized based on the transfer of goods or services to which the asset relates. The amortization period also considers expected customer lives and whether the asset relates to goods or services transferred under a specific anticipated contract. These costs are included in selling and marketing expenses in the condensed consolidated statement of operations and other comprehensive income (loss) and totaled $0.4 million and $0.3 million during ~~each of~~ the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$1.0~~$1.1 million and ~~$0.8~~$1.0 million during the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. There were no impairment losses recognized during both the nine months ended June 30, ~~2022~~2023 and ~~2021~~2022 related to capitalized contract costs.

3. BUSINESS COMBINATIONS

Acquisition of ~~ID R&D, Inc.~~

1310

~~subsidiary of the Company. ID R&D is an award-winning provider of artificial intelligence-based voice and face biometrics and liveness detection.~~

As consideration for the ID R&D Acquisition, the Company agreed to pay an aggregate purchase price of up to $49.0 million. On the Closing Date, the equityholders of ID R&D received from the Company: (i) $13.0 million in cash, subject to adjustments for transaction expenses, escrow amounts, indebtedness and working capital adjustments (the “Initial Cash Payment”); and (ii) 867,226 shares or $13.9 million of Common Stock. In addition to the foregoing, the equityholders of ID R&D may become entitled to receive additional consideration from the Company upon achievement of certain milestones as follows (collectively, the “Earnout Payments”): subject to ID R&D’s achievement of target revenue for the period commencing on the Closing Date and ending on the one year anniversary thereof and the period commencing on the one year anniversary of the Closing Date and ending on the one year anniversary thereof (each such period, an “Earnout Period”): (i) an aggregate maximum amount of approximately $12.3 million with respect to the first Earnout Period and (ii) approximately $9.8 million with respect to the second Earnout Period, with 15% of the first Earnout Period’s payment to be deposited (as additional funds) into an escrow fund described below. The Company will

make the Earnout Payments in the form of cash and shares of Common Stock as set forth in the Merger Agreement. The Company has granted the Representative an option to shift the Earnout Period(s) out by one year, pursuant to the terms of the Merger Agreement. Moreover, in the event actual revenue for an Earnout Period exceeds the target revenue for such period, the amount of such excess will be credited towards the achievement of the subsequent Earnout Period’s Earnout Payment. In May and June of 2022, the Company paid the first of the Earnout Payments of $9.5 million which consisted of $6.8 million paid in cash and $2.7 million in shares of Common Stock to the equityholders of ID R&D. As indicated above, 15% of the Earnout Payment with respect to the first Earnout Period, will be deposited into the escrow fund.

The Company estimated the fair value of the consideration for the Earnout Periods to be $15.7 million on the Closing Date, which was determined using a discounted cash flow methodology based on financial forecasts determined by management that included assumptions about revenue growth and discount rates, and is included in level three of the fair value hierarchy. Each quarter the Company revises the estimated fair value of the consideration for the Earnout Periods and changes in the fair value are included in amortization and acquisition-related costs in the consolidated statements of operations and comprehensive income (loss). See Note 5. “Investments,” of the notes to consolidated financial statements for more information relating to the consideration for the Earnout Periods.

The Company incurred $0.6 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, and travel expense, which are included in amortization and acquisition-related costs in the consolidated statements of operations and comprehensive income (loss).

On the Closing Date, the Company deposited a portion of the Initial Cash Payment and a number of shares of Common Stock having a collective value of approximately $4.0 million into an escrow fund to serve as collateral and partial security for working capital adjustments and certain indemnification rights of the Company. The escrow fund will be maintained for up to 24 months following the completion of the ID R&D Acquisition or until such earlier time as the escrow fund is exhausted. The Company used cash on hand for the Initial Cash Payment.

~~Acquisition of HooYu Ltd~~

On March 23, 2022, the Company completed the acquisition (the “HooYu Acquisition”) of HooYu Ltd ~~(the “HooYu Acquisition”~~(“HooYu”) pursuant to the Purchase Agreement (the “Purchase Agreement”) dated March 23, 2022, by and among the Company and certain persons identified in the Purchase Agreement (the “Sellers”). Pursuant to the Purchase Agreement, the Company, among other things, acquired 100% of the outstanding share capital of HooYu, ~~Ltd (“HooYu”),~~ a leading global customer onboarding platform designed to increase the integrity of KYC and maximize the success of customer onboarding. As consideration for the HooYu Acquisition, the Company paid aggregate consideration in the amount of $129.1 million ~~in cash~~ (the “Closing Consideration”), as such amount may be adjusted for transaction expenses and indebtedness. Pursuant to the Purchase Agreement, $1.6 million was withheld as a reduction to the Closing Consideration and ~~is being~~was retained by the Company for the final working capital adjustments and indemnification of certain tax matters under the Purchase Agreement.

The Company incurred $3.2 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, foreign currency and realized losses on investments, and travel expense, which are included in amortization and acquisition-related costs in the condensed consolidated statements of operations and other comprehensive income (loss).

On March 23, 2022, using cash on hand, the Company transferred an aggregate of $127.5 million to the Sellers and its third-party legal and investment ~~advisors. The~~advisors, net of cash acquired of $0.5 million. In July 2022 the Company ~~used cash on hand for the cash~~ paid ~~on March 23, 2022.~~

~~Acquisitions are accounted for using the acquisition method of accounting in accordance with ASC Topic 805,~~ ~~Business Combinations~~. Accordingly, the results of operations of ID R&D and HooYu have been included in the accompanying consolidated financial statements since the date of such acquisition. The purchase price has been allocatedan additional $0.4 million to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the ID R&D Acquisition and are based on assumptions that the Company’s management believes are reasonable. The Company isSellers in ~~the process of completing its valuation of the acquired deferred income taxes related to the HooYu Acquisition and will complete the evaluation once the fiscal~~

~~2021 tax return has been completed. The~~settling final ~~allocations of the purchase price to deferred income taxes may differ materially from the information presented in these unaudited consolidated financial statements.~~working capital.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from the ~~ID R&D Acquisition and~~ HooYu Acquisition as of ~~their respective closing dates~~June 30, 2023 (amounts ~~shown~~ in thousands):
ID R&D HooYu
Accounts receivable $ 173 $ 1,234
Property, plant, and equipment 114 243
Other current assets 147 630
Intangible assets 16,930 73,100
Goodwill 27,748 74,312
Current liabilities (425) (2,456)
Deferred revenue — (2,612)
Deferred income tax liabilities (2,355) (16,896)
Net assets acquired $ 42,332 $ 127,555


	HooYu
Accounts receivable	$	1,234
Property, plant, and equipment	504
Other current assets	630
Intangible assets	73,100
Goodwill	74,206

Current liabilities	(2,264)
Deferred revenue	(2,612)
Deferred income tax liabilities	(16,896)
Net assets acquired	$	127,902

The goodwill recognized is due to expected market participant synergies and other factors and is not expected to be deductible for income tax purposes. The Company estimated the fair value of identifiable acquisition-related intangible assets with definite lives primarily based on discounted cash flow projections that ~~will~~were estimated to arise from these assets. The Company exercised significant judgment with regard to assumptions used in the determination of fair value such as with respect to discount rates and the determination of the estimated useful lives of the intangible assets. The following table summarizes the estimated fair values and estimated useful lives of intangible assets with definite lives acquired from the ~~ID R&D Acquisition and the~~ HooYu Acquisition as of ~~their respective closing dates~~June 30, 2023 (amounts ~~shown~~ in thousands, except for years):

~~ID R&D~~


	Amortization Period	Amount assigned

Completed technologies	~~7.0 years~~	$	~~14,020~~
~~Customer relationships~~	~~3.0 years~~	~~2,540~~
~~Trade name~~	~~5.0 years~~	~~370~~
~~Total intangible assets acquired~~		$	~~16,930~~

~~HooYu~~


	~~Amortization Period~~	~~Amount assigned~~

~~Completed technologies~~	~~7.0~~7 years	$	61,400
Customer relationships	~~5.0~~5 years	5,000
Trade name	~~5.0~~5 years	6,100
Covenants not to compete	~~3.0~~3 years	$	600
Total intangible assets acquired		$	73,100

The following unaudited pro forma financial information should not be taken as representative of the Company’s future consolidated results of operations and includes adjustments for the amortization expense related to the identified intangible assets. The following table summarizes the Company’s unaudited pro forma financial information and is presented as if the ~~ID R&D Acquisition and the~~ HooYu Acquisition occurred ~~as of the beginning of the fiscal year preceding the acquisition~~on October 1, 2021 (amounts shown in thousands):
Three months ended June 30, Nine months ended June 30,
2022 2021 2022 2021
Pro forma revenue $ 39,333 $ 34,191 $ 112,256 $ 94,661
Pro forma net income (loss) $ 812 $ (1,344) $ (4,766) $ (6,669)

~~Revenue and net loss from~~


	Three months ended June 30, 2022 As Restated		Nine months ended June 30, 2022 As Restated

Pro forma revenue	$	39,195	$	110,915
Pro forma net income (loss)	$	(215)	$	(6,311)

The following table summarizes the results of HooYu that are included in the Company’s consolidated results ~~of operations from the date of the HooYu acquisition through June 30, 2022 were $2.7 million and $0.8 million, respectively.~~(amounts shown in thousands):


	Three Months Ended June 30,				Nine Months Ended June 30,
	2023		2022 As Restated		2023		2022 As Restated
Revenue	$	4,100	$	2,653	$	10,124	$	2,958
Net income (loss)	$	(3,028)	$	(3,764)	$	(10,798)	$	(4,015)

4. RESTRUCTURING

In order to streamline the organization and focus resources going forward, the Company undertook a strategic restructuring in June and November 2022, which included a reduction in workforce. Restructuring costs consist of employee severance obligations and other related ~~costs and are expected to be paid over the next twelve months.~~costs. The following table summarizes changes in the restructuring accrual during the nine months ended June 30, ~~2022~~2023 (amounts ~~shown~~ in thousands):


Balance at September 30, ~~2021~~2022	$	901
Additional costs incurred	1,986
Payments	(2,942)
Foreign currency effect on the restructuring accrual	55
Balance at June 30, 2023	$	—
~~Costs incurred~~	~~1,807~~


~~Balance at June 30, 2022~~	$	~~1,807~~

5. INVESTMENTS

The following tables summarize investments by type of security as of June 30, ~~2022~~2023 and September 30, ~~2021~~2022 (amounts ~~shown~~ in thousands):


June 30, 2022:		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
June 30, 2023:										June 30, 2023:	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
U.S. Treasury, short-term	U.S. Treasury, short-term	$	4,024	$	—	$	(71)	$	3,953	U.S. Treasury, short-term	$	22,135	$	—	$	(96)	$	22,039
Foreign government and agency securities, short-term		2,877		—		(45)		2,832

Commercial paper, short-term										Commercial paper, short-term	6,200		—		(45)		6,155
Corporate debt securities, short-term	Corporate debt securities, short-term	43,346		—		(600)		42,746		Corporate debt securities, short-term	12,534		—		(77)		12,457
U.S. Treasury, long-term	U.S. Treasury, long-term	5,440		—		(212)		5,228		U.S. Treasury, long-term	1,375		—		(79)		1,296

Corporate debt securities, long-term	Corporate debt securities, long-term	14,750		—		(444)		14,306		Corporate debt securities, long-term	1,594		—		(75)		1,519
Total	Total	$	70,437	$	—	$	(1,372)	$	69,065	Total	$	43,838	$	—	$	(372)	$	43,466


September 30, 2021:		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
September 30, 2022:										September 30, 2022:	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Market Value
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
U.S. Treasury, short-term	U.S. Treasury, short-term	$	4,222	$	1	$	—	$	4,223	U.S. Treasury, short-term	$	6,016	$	—	$	(134)	$	5,882
Asset-backed securities, short-term		4,812		1		(2)		4,811
Foreign government and agency securities, short-term										Foreign government and agency securities, short-term	2,865		—		(38)		$	2,827
Commercial paper, short-term										Commercial paper, short-term	18,245		—		(223)		18,022
Corporate debt securities, short-term	Corporate debt securities, short-term	140,042		6		(25)		140,023		Corporate debt securities, short-term	32,065		—		(528)		31,537
U.S. Treasury, long-term	U.S. Treasury, long-term	6,996		1		(2)		6,995		U.S. Treasury, long-term	3,431		—		(210)		3,221
Foreign government and agency securities, long-term		2,909		—		(1)		2,908

Corporate debt securities, long-term	Corporate debt securities, long-term	38,184		3		(39)		38,148		Corporate debt securities, long-term	7,692		—		(280)		7,412
Total	Total	$	197,165	$	12	$	(69)	$	197,108	Total	$	70,314	$	—	$	(1,413)	$	68,901

The cost of securities sold is based on the specific identification method. Amortization of premiums, accretion of discounts, interest, dividend income and realized gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive income (loss).

~~The Company determines the appropriate designation of investments at the time of purchase and reevaluates such designation as of each balance sheet date.~~ All of the Company’s investments are designated as available-for-sale debt securities. As of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, the Company’s short-term investments have maturity dates of less than one year from the balance sheet date and the Company’s long-term investments have maturity dates of greater than one year from the balance sheet date. The contractual maturities of the available-for-sale securities held at June 30, ~~2022~~2023 are as follows: ~~$49.5~~$40.7 million within one year and ~~$19.5~~$2.8 million beyond one year to five years. As of September 30, 2022, the contractual maturities of the available-for-sale securities were $58.3 million within one year and $10.6 million beyond one year to five years.

Available-for-sale marketable securities are carried at fair value as determined by quoted market prices for identical or similar assets, with unrealized gains and losses, net of taxes, and are reported as a separate component of stockholders’ equity. Management reviews the fair value of the portfolio at least monthly and evaluates individual securities with fair value below amortized cost at the balance sheet date. For debt securities, in order to determine whether impairment is other-than-temporary, management must conclude whether the Company intends to sell the impaired security and whether it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. If management intends to sell an impaired debt security or it is more likely than not that the Company will be required to sell the security prior to recovering its amortized cost basis, an other-than-temporary impairment is deemed to have occurred. The amount of an other-than-temporary impairment on debt securities related to a credit loss, or securities that management intends to sell before recovery, is recognized in earnings. The amount of an other-than-temporary impairment on debt securities related to other factors is recorded consistent with changes in the fair value of all other available-for-sale securities as a component of stockholders’ equity in comprehensive income. No other-than-temporary impairment charges were recognized in each of the three and nine months ended June 30, 2022 and 2021. There were no realized gains or losses during the three

months ended June 30, 2022 and $0.3 million of realized losses during the nine months ended June 30, 2022, from the sale of available-for-sale securities. There were no realized gains or losses from the sale of available-for-sale securities during each of the three and nine months ended June 30, 2021.

~~Fair Value Measurements and Disclosures~~

~~FASB ASC Topic 820,~~ ~~Fair Value Measurements~~ (“ASC 820”) defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last, unobservable:

•~~Level 1—Quoted prices in active markets for identical assets or liabilities;~~

•Level 2—Inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•~~Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.~~

1712

The following tables represent the fair value hierarchy of the Company’s investments ~~convertible senior notes hedge,~~and acquisition-related contingent consideration ~~and embedded conversion derivative~~ as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively (amounts ~~shown~~ in thousands):


June 30, 2022:		Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2023:										June 30, 2023:	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Short-term investments:	Short-term investments:									Short-term investments:
U.S. Treasury	U.S. Treasury	$	3,953	$	3,953	$	—	$	—	U.S. Treasury	$	22,039	$	22,039	$	—	$	—
Commercial paper										Commercial paper	6,155		—		6,155		—

Foreign government and agency securities		2,832		—		2,832		—
Corporate debt securities	Corporate debt securities	42,746		—		42,746		—		Corporate debt securities	12,457		—		12,457		—
Total short-term investments at fair value	Total short-term investments at fair value	49,531		3,953		45,578		—		Total short-term investments at fair value	40,651		22,039		18,612		—
Long-term investments:	Long-term investments:									Long-term investments:
U.S. Treasury	U.S. Treasury	5,228		5,228		—		—		U.S. Treasury	1,296		1,296		—		—

Corporate debt securities	Corporate debt securities	14,306		—		14,306		—		Corporate debt securities	1,519		—		1,519		—
Total long-term investments at fair value	Total long-term investments at fair value	19,534		5,228		14,306		—		Total long-term investments at fair value	2,815		1,296		1,519		—

Total assets at fair value	Total assets at fair value	$	69,065	$	9,181	$	59,884	$	—	Total assets at fair value	$	43,466	$	23,335	$	20,131	$	—
Liabilities:	Liabilities:									Liabilities:
Current liabilities:
Acquisition-related contingent consideration		$	4,980	$	—	$	—	$	4,980
Non-current liabilities:

Acquisition-related contingent consideration	Acquisition-related contingent consideration	100		—		—		100		Acquisition-related contingent consideration	$	8,013	$	—	$	8,013	$	—

Total liabilities at fair value	Total liabilities at fair value	$	5,080	$	—	$	—	$	5,080	Total liabilities at fair value	$	8,013	$	—	$	8,013	$	—


September 30, 2021:		Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2022:										September 30, 2022:	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Short-term investments:	Short-term investments:									Short-term investments:
U.S. Treasury	U.S. Treasury	$	4,223	$	4,223	$	—	$	—	U.S. Treasury	$	5,882	$	5,882	$	—	$	—
Asset-backed securities, short-term		4,811		—		4,811		—
Commercial paper										Commercial paper	18,022		—		18,022		—
Foreign government and agency securities										Foreign government and agency securities	2,827		—		2,827		—
Corporate debt securities	Corporate debt securities	140,023		—		140,023		—		Corporate debt securities	31,537		—		31,537		—
Total short-term investments at fair value	Total short-term investments at fair value	149,057		4,223		144,834		—		Total short-term investments at fair value	58,268		5,882		52,386		—
Long-term investments:	Long-term investments:									Long-term investments:
U.S. Treasury	U.S. Treasury	6,995		6,995		—		—		U.S. Treasury	3,221		3,221		—		—
Foreign government and agency securities		2,908		—		2,908		—

Corporate debt securities	Corporate debt securities	38,148		—		38,148		—		Corporate debt securities	7,412		—		7,412		—
Total long-term investments at fair value	Total long-term investments at fair value	48,051		6,995		41,056		—		Total long-term investments at fair value	10,633		3,221		7,412		—

Convertible senior notes hedge		48,208		—		48,208		—

Total assets at fair value	Total assets at fair value	$	245,316	$	11,218	$	234,098	$	—	Total assets at fair value	$	68,901	$	9,103	$	59,798	$	—
Liabilities:	Liabilities:									Liabilities:
Current liabilities:

Acquisition-related contingent consideration	Acquisition-related contingent consideration	$	11,050	$	—	$	—	$	11,050	Acquisition-related contingent consideration	$	5,920	$	—	$	—	$	5,920
Non-current liabilities:
Acquisition-related contingent consideration		5,720		—		—		5,720
Embedded conversion derivative		48,208		—		48,208		—

Total liabilities at fair value	Total liabilities at fair value	$	64,978	$	—	$	48,208	$	16,770	Total liabilities at fair value	$	5,920	$	—	$	—	$	5,920

•Level 1: Includes investments in U.S. Government and agency securities, which are valued based on recently executed transactions in the same or similar securities.

•Level 2: Convertible Senior Notes and corporate debt securities. Corporate debt securities are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. On February 5, 2021, the Company issued the 2026 Notes as further described in Note 9. ~~“Convertible Senior Notes.”~~ Concurrently with the issuance of the 2026 Notes, the Company entered into the Notes Hedge and Warrant Transactions which in combination are intended to reduce the potential dilution from the conversion of the 2026 ~~Notes. Initially, conversion of the 2026~~ Notes could only be settled in cash; however, following the increase in the Company’s authorized shares of Common Stock in the second quarter of fiscal 2022, which satisfied certain share reservation conditions, conversion of the 2026 Notes may be settled in cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election. The embedded conversion derivative associated with the 2026 Notes previously meet the criteria for an embedded derivative liability which required bifurcation and separate accounting. The Notes Hedge was previously classified as a derivative asset on the Company’s consolidated balance sheet. Following the increase in the Company’s authorized shares of Common Stock in the second quarter of fiscal 2022, the Notes Hedge and embedded conversion derivative were reclassified to additional paid-in capital as the equity classification criteria is met. Changes in the fair value of these derivatives prior to being classified in equity were reflected in Other income (expense), net, in the Company’s consolidated statement of operations and comprehensive income (loss)(see Note 9).

The fair value of the Notes Hedge and the embedded conversion derivative were estimated using a Black-Scholes model. Based on the fair value hierarchy, the Company classified the Notes Hedge and the embedded conversion derivative as Level

2 as significant inputs are observable, either directly or indirectly. The significant inputs and assumptions used in the models to calculate the fair value of the derivatives include the Common Stock price, exercise price of the derivatives, risk-free interest rate, volatility, annual coupon rate and remaining contractual term.

•~~Level 3:~~ As of June 30, ~~2022,~~2023, total acquisition-related contingent consideration of ~~$5.0 million and $0.1~~$8.0 million is recorded in acquisition-related contingent consideration, ~~and other non-current liabilities, respectively,~~ in the condensed consolidated balance sheets. The Company recorded the acquisition date fair value based on the likelihood of contingent earnout payments related to the Company’s acquisition of ID R&D Inc., as part of the consideration transferred. The earnout payments consist of cash payments and issuances of Common Stock and are subsequently remeasured to fair value each reporting date. The Company used a Monte Carlo Simulation to estimate fair value of total contingent consideration. Additionally, for contingent consideration to be settled in a variable number of shares of Common Stock, the Company used the most recent Mitek share price as reported by the Nasdaq Capital Market to determine the fair value of the shares expected to be issued. The Company previously classified the contingent consideration as Level 3, due to the lack of relevant observable inputs and market activity. The second earnout period ended on May 28, 2023 and the valued recorded as of June 30, 2023 is based on the calculated final payout and the Company reclassified the contingent consideration as Level 2 during the third quarter of fiscal 2023. The following table includes a ~~summary~~roll-forward of the contingent consideration ~~measured at fair value using significant unobservable inputs (Level 3)~~liability during the nine months ended June 30, ~~2022~~2023 (amounts ~~shown~~ in thousands):


Balance at September 30, ~~2021~~2022	$	~~16,770~~5,920

~~Reduction of expense~~Expenses recorded due to changes in fair value	~~(2,198)~~2,093


~~Payment and issuance of stock as contingent consideration associated with the ID R&D acquisition~~	~~(9,492)~~
Balance at June 30, ~~2022~~2023	$	~~5,080~~8,013

The following tables summarize the quantitative information including the unobservable inputs related to our acquisition-related contingent consideration as follows (amounts in thousands):


Fair Value at September 30, 2022		Valuation Technique	Unobservable Input	Input Used
$	5,920	Monte Carlo simulation	Weighted-average cost of capital	14.80	%
			Revenue weight-average cost of capital	4.40	%
			Revenue volatility	0.20

6. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The Company had a goodwill balance of ~~$128.0~~$131.5 million at June 30, ~~2022,~~2023, representing the excess of costs over fair value of assets of businesses acquired. ~~Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but instead is tested for impairment at least annually in accordance with ASC 350.~~ The following table summarizes changes in the balance of goodwill during the nine months ended June 30, ~~2022~~2023 (amounts shown in thousands):


Balance at September 30, ~~2021~~2022	$	~~63,096~~
~~Acquisition of HooYu~~	~~74,312~~120,186
Foreign currency effect on goodwill	~~(9,416)~~11,349
Balance at June 30, ~~2022~~2023	$	~~127,992~~131,535

Intangible Assets

Intangible assets include the value assigned to purchased completed technology, customer relationships, trade names and covenants not to compete. The estimated useful lives for all of these intangible assets range from three to seven years and they are amortized on a straight-line basis. Intangible assets as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively, are summarized as follows (amounts ~~shown~~ in thousands, except for years):


June 30, 2022:		Weighted Average Amortization Period	Cost		Accumulated Amortization		Net
June 30, 2023:									June 30, 2023:	Weighted Average Amortization Period (in years)	Cost		Accumulated Amortization		Net
Completed technologies	Completed technologies	6.9 years	$	95,761	$	24,635	$	71,126	Completed technologies	6.9	$	95,761	$	34,585	$	61,176
Customer relationships	Customer relationships	4.7 years	25,168		16,683		8,485		Customer relationships	4.7	25,168		20,832		4,336
Trade names	Trade names	5.0 years	7,088		1,458		5,630		Trade names	5.0	7,088		2,518		4,570
Covenants not to compete	Covenants not to compete	3.0 years	600		98		502		Covenants not to compete	3.0	600		268		332
Total intangible assets	Total intangible assets		$	128,617	$	42,874	$	85,743	Total intangible assets		$	128,617	$	58,203	$	70,414


September 30, 2021:		Weighted Average Amortization Period	Cost		Accumulated Amortization		Net
September 30, 2022:									September 30, 2022:	Weighted Average Amortization Period (in years)	Cost		Accumulated Amortization		Net
Completed technologies	Completed technologies	6.6 years	$	34,361	$	13,311	$	21,050	Completed technologies	6.9	$	95,761	$	32,265	$	63,496
Customer relationships	Customer relationships	4.6 years	20,168		12,905		7,263		Customer relationships	4.7	25,168		18,241		6,927
Trade names	Trade names	4.7 years	988		567		421		Trade names	5.0	7,088		2,174		4,914
Covenants not to compete									Covenants not to compete	3.0	600		181		419
Total intangible assets	Total intangible assets		$	55,517	$	26,783	$	28,734	Total intangible assets		$	128,617	$	52,861	$	75,756

Amortization expense related to acquired intangible assets was ~~$4.7~~$4.3 million and ~~$1.9~~$4.7 million for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$9.2~~$13.3 million and ~~$5.2~~$9.2 million during the nine months ended June 30, ~~2022~~2023 and, ~~2021,~~2022, respectively, and is recorded within amortization and acquisition-related costs on the condensed consolidated statements of operations and other comprehensive income (loss).

The estimated future amortization expense related to intangible assets for each of the five succeeding fiscal years is expected to be as follows (amounts ~~shown~~ in thousands):


		Estimated Future Amortization Expense			Estimated Future Amortization Expense
2022—remaining		$	4,649
2023		16,744
2023 - remaining				2023 - remaining	3,835
2024	2024	14,570		2024	15,050
2025	2025	13,333		2025	13,787
2026	2026	12,151		2026	12,560
2027				2027	11,410
Thereafter	Thereafter	24,296		Thereafter	13,772
Total	Total	$	85,743	Total	$	70,414

7. STOCKHOLDERS’ EQUITY

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to ~~RSUs,~~restricted stock units (“RSUs”), stock options, and ~~ESPP~~Employee Stock Purchase Plan (“ESPP”) shares, which was allocated as follows (amounts ~~shown~~ in thousands):


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Cost of revenue	Cost of revenue	$	82	$	89	$	249	$	258	Cost of revenue	$	124	$	82	$	316	$	249
Selling and marketing	Selling and marketing	1,273		857		3,351		2,537		Selling and marketing	885		1,273		2,423		3,351
Research and development	Research and development	1,071		797		2,875		2,313		Research and development	644		1,071		2,097		2,875
General and administrative	General and administrative	1,262		1,124		3,642		3,474		General and administrative	991		1,262		2,954		3,642
Stock-based compensation expense included in expenses	Stock-based compensation expense included in expenses	$	3,688	$	2,867	$	10,117	$	8,582	Stock-based compensation expense included in expenses	$	2,644	$	3,688	$	7,790	$	10,117

No options were granted in either of the nine months ended June 30, 2023 or 2022. As of June 30, ~~2022,~~2023, the Company had ~~$32.6~~$22.7 million of unrecognized compensation expense related to outstanding stock options and RSUs expected to be recognized over a weighted-average period of approximately ~~2.5~~2.4 years.

2020 Incentive Plan

In January 2020, the Company’s ~~board~~Board of ~~directors~~Directors (the “Board”) adopted the Mitek Systems, Inc. 2020 Incentive Plan (the “2020 Plan”) upon the recommendation of the ~~compensation committee~~Compensation Committee of the Board. On March 4, 2020, the Company’s stockholders approved the 2020 Plan. The total number of shares of Common Stock reserved for issuance under the 2020 Plan is 4,500,000 shares plus such number of shares, not to exceed 107,903, as remained available for issuance under the 2002 Stock Option Plan, 2006 Stock Option Plan, 2010 Stock Option Plan, and 2012 Incentive Plan (collectively, the “Prior Plans”) as of January 17, 2020, plus any shares underlying awards under the Prior Plans that are terminated, forfeited, cancelled, expire unexercised or are settled in cash after January 17, 2020. As of June 30, ~~2022,~~2023, (i) ~~1,495,347~~2,503,543 RSUs and ~~755,533~~ 808,446 performance-based restricted stock unit awards (“Performance ~~RSUs~~RSUs”) were outstanding under the 2020 Plan, (ii) ~~1,406,785~~1,193,194 shares of Common Stock were reserved for future grants under the 2020 Plan, and (iii) stock options to purchase an aggregate of ~~471,303~~435,240 shares of Common Stock and ~~471,988~~102,900 RSUs were outstanding under the Prior Plans.

On October 2, 2023, the Company held an annual meeting of its stockholders (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders approved an amendment and restatement of the 2020 Plan to increase the number of shares authorized for issuance thereunder by 5,108,000 shares (the 2020 Plan as so amended and restated, the “A&R 2020 Plan”).

The A&R 2020 Plan had been previously approved, subject to stockholder approval, by the Company’s Board of Directors (the “Board”), upon recommendation of the Compensation Committee of the Board, on August 9, 2023. A summary of the A&R 2020 Plan was included in the Company’s definitive proxy statement for the Annual Meeting filed with the U.S. Securities and Exchange Commission on August 22, 2023, as supplemented and amended on September 19, 2023 (the “Proxy Statement”).

Employee Stock Purchase Plan

In January 2018, the Board adopted the ESPP. On March 7, 2018, the Company’s stockholders approved the ESPP. The total number of shares of Common Stock reserved for issuance thereunder is 1,000,000 shares. As of June 30, ~~2022,~~2023, (i) ~~549,849~~679,364 shares have been issued to participants pursuant to the ESPP and (ii) ~~450,151~~320,636 shares of Common Stock were reserved for future purchases under the ESPP. The Company commenced the initial offering period on April 2, 2018. ~~Subsequent offering periods commence semi-annually in February and August each year.~~

The ESPP enables eligible employees to purchase shares of Common Stock at a discount from the market price through payroll deductions, subject to certain limitations. Eligible employees may elect to participate in the ESPP only during an open enrollment period. The offering period immediately follows the open enrollment window, at which time ESPP contributions are withheld from the participant's regular paycheck. The ESPP provides for a 15% discount on the market value of the stock at the lower of the grant date price (first day of the offering period) and the purchase date price (last day of the offering period). The Company recognized $0.1 million in stock-based compensation expense related to the ESPP in each of the three months ended June 30, ~~2022~~2023 and ~~2021.~~2022. The Company recognized $0.2 million and $0.4 million in stock-based compensation expense related to the ESPP in ~~each of~~ the nine months ended June 30, 2023 and 2022, ~~and 2021.~~respectively.

Director Restricted Stock Unit Plan

In January 2011, the Board adopted the Mitek Systems, Inc. Director Restricted Stock Unit Plan, as amended and restated (the “Director Plan”). On March 10, 2017, the Company’s stockholders approved an amendment to the Director Plan to increase the number of shares of Common Stock available for future grants. The total number of shares of Common Stock reserved for issuance

thereunder is 1,500,000 shares. The Director Plan expired on December 31, 2022. As of June 30, ~~2022,~~2023, (i) 259,513 RSUs were outstanding under the Director Plan and (ii) ~~144,412~~no shares of Common Stock were reserved for future grants under the Director Plan.

Stock Options

The following table summarizes stock option activity under the Company’s equity plans during the nine months ended June 30, ~~2022:~~2023:
Number of
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
(in years)
Aggregate Intrinsic Value
(in thousands)
Outstanding at September 30, 2021 816,717 $ 7.42 5.8 $ 9,046
Granted — $ —
Exercised (35,625) $ 6.68
Canceled — $ —
Outstanding at June 30, 2022 781,092 $ 7.49 4.3 1,505
Vested and Expected to Vest at June 30, 2022 781,092 $ 7.49 4.3 1,505
Exercisable at June 30, 2022 748,942 $ 7.42 4.2 1,505


	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at September 30, 2022	781,092	$	7.46	3.7	$	1,512
Granted	—	$	—
Exercised	(97,802)	$	7.49
Canceled	(30,871)	$	9.49
Outstanding at June 30, 2023	652,419	$	7.36	4.5	2,273
Vested and Expected to Vest at June 30, 2023	652,419	$	7.36	4.5	2,273
Exercisable at June 30, 2023	643,018	$	7.32	4.5	2,261

The Company recognized ~~$0.1 million~~$29,000 and ~~$0.2~~$0.1 million in stock-based compensation expense related to outstanding stock options during the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recognized ~~$0.4~~$0.1 million and ~~$0.5~~$0.4 million in stock-based compensation expense related to outstanding stock options during the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. As of June 30, ~~2022,~~2023, the Company had ~~$0.4 million of~~no unrecognized compensation expense related to outstanding stock ~~options expected to be recognized over a weighted-average period of approximately 0.5 years.~~

options.

Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted-average exercise price, multiplied by the number of options outstanding and exercisable. The total intrinsic value of options exercised during the nine months ended June 30, 2023 and 2022 ~~and 2021~~ was ~~$0.3~~$0.7 million and ~~$2.0~~$0.3 million, respectively. There were no options granted during ~~each~~either of the nine months ended June 30, ~~2022~~2023 or ~~2021.~~2022.

Restricted Stock Units

The following table summarizes RSU activity under the Company’s equity plans during the nine months ended June 30, ~~2022:~~2023:


		Number of Shares	Weighted-Average Fair Market Value Per Share			Number of Shares	Weighted-Average Fair Market Value Per Share
Outstanding at September 30, 2021		2,411,267	$	9.99
Outstanding at September 30, 2022					Outstanding at September 30, 2022	2,441,677	$	12.29
Granted	Granted	1,185,481	14.80		Granted	929,268	10.04
Settled	Settled	(838,292)	9.38		Settled	(633,364)	11.37
Canceled	Canceled	(228,480)	10.90		Canceled	(610,230)	12.57
Outstanding at June 30, 2022		2,529,976	12.37
Outstanding at June 30, 2023					Outstanding at June 30, 2023	2,127,351	11.50

The cost of RSUs is determined using the fair value of Common Stock on the award date, and the compensation expense is recognized ratably over the vesting period. The Company recognized ~~$2.5~~$1.9 million and ~~$2.0~~$2.5 million in stock-based compensation expense related to outstanding RSUs in the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recognized ~~$7.1~~$5.4 million and ~~$6.0~~$7.1 million in stock-based compensation expense related to outstanding RSUs during the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. As of June 30, ~~2022,~~2023, the Company had ~~$24.0~~$17.5 million of unrecognized compensation expense related to outstanding RSUs expected to be recognized over a weighted-average period of approximately 2.6 years.

Performance Restricted Stock Units

The following table summarizes Performance RSU activity under the Company’s equity plans during the nine months ended June 30, ~~2022:~~2023:


		Number of Shares	Weighted-Average Fair Market Value Per Share			Number of Shares	Weighted-Average Fair Market Value Per Share
Outstanding at September 30, 2021		528,724	$	9.17
Outstanding at September 30, 2022					Outstanding at September 30, 2022	919,456	$	13.43
Granted	Granted	629,279	15.60		Granted	325,837	10.23
Settled	Settled	(176,864)	8.42		Settled	(24,723)	9.21
Canceled	Canceled	(18,952)	12.84		Canceled	(241,008)	13.20
Outstanding at June 30, 2022		962,187	13.44
Outstanding at June 30, 2023					Outstanding at June 30, 2023	979,562	12.53

The cost of Performance RSUs is determined using a Monte Carlo simulation to estimate the fair value on the award date, and the compensation expense is recognized ratably over the vesting period. The Company recognized ~~$0.9~~$0.6 million and ~~$0.3~~$0.9 million in stock-based compensation expense related to outstanding Performance RSUs in the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company recognized ~~$2.1~~$2.0 million and ~~$1.0~~$2.1 million in stock-based compensation expense related to outstanding Performance RSUs during the nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. As of June 30, ~~2022,~~2023, the Company had ~~$8.2~~$5.0 million of unrecognized compensation expense related to outstanding RSUs expected to be recognized over a weighted-average period of approximately ~~2.4~~1.9 years.

Performance Options

On November 6, 2018, as an inducement grant pursuant to Nasdaq Listing Rule 5635(c)(4), the Company’s Chief Executive Officer was granted performance options (the “Performance Options”) to purchase up to 800,000 shares of Common Stock at an exercise price of $9.50 per share, the closing market price for a share of Common Stock on the date of the grant. During the fiscal year ended September 30, 2021, the performance conditions were ~~achieved and in~~achieved. In November 2021, the time vesting condition was met and the performance options vested in full. The Company did not recognize any stock-based compensation expense related to outstanding Performance Options in either of the three months ended June 30, ~~2022, and recognized $0.2 million in three months ended June 30, 2021.~~2023 or 2022. The Company ~~recognized $0.1 million and $0.6 million in~~did not recognize any stock-based compensation expense related to outstanding ~~Performance Options~~performance options for the nine months ended June 30, 2023 and recognized $0.1 million during the nine months ended June 30, ~~2022 and 2021, respectively.~~2022.

Share Repurchase Program

~~the share repurchase program were $1.0 million or approximately 137,000 shares at an average price of $7.33. The purchases under the share repurchase program were made through open market trades.~~

On June 15, 2021, the Board authorized and approved a share repurchase program for up to $15 million of the currently outstanding shares of our Common Stock. The share repurchase program was completed during the second quarter of fiscal 2022 and as such the Company made no purchases during the three months ended June 30, 2023. The Company made purchases of $14.8 million, or approximately 886,204 shares, during the nine months ended June 30, 2022 at an average price of $16.73 per share and subsequently retired the shares. The share repurchase program expired on June 30, ~~2022.~~2022 and as such no purchases were made after this date. The timing, price and volume of repurchases were based on market conditions, relevant securities laws and other factors. The repurchases were made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a share repurchase trading plan.

The Company made no purchases during the three months ended June 30, 2022. The Company made purchases of $14.8 million, or approximately 886,204 shares, during the nine months ended June 30, 2022 at an average price of $16.73 per share and subsequently retired the shares. The share repurchase plan was completed during the second quarter of fiscal 2022.

~~Rights Agreement~~

On October 23, 2018, the Company entered into the Section 382 Rights Agreement (the “Rights Agreement”) and issued a dividend of one preferred share purchase right (a “Right”) for each share of Common Stock payable on November 2, 2018 to the stockholders of record of such shares on that date. Each Right entitles the registered holder, under certain circumstances, to purchase from the Company one one-thousandth of a share of Series B Junior Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of the Company, at a price of $35.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement.

The Rights are not exercisable until the Distribution Date (as defined in the Rights Agreement). Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

At any time prior to the time any person becomes an Acquiring Person (as defined in the Rights Agreement), the Board may redeem the Rights in whole, but not in part, at a price of $0.0001 per Right (the “Redemption Price”). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

On February 28, 2019, the Company entered into an Amendment No. 1 to the Rights Agreement for the purpose of (i) modifying the definitions of “Beneficial Owner,” “Beneficially Own,” and “Beneficial Ownership” under the Rights Agreement to more closely align such definitions to the actual and constructive ownership rules under Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”) or such similar provisions of the Tax Cuts and Jobs Act of 2017 and the rules and regulations promulgated thereunder, and (ii) adding an exemption request process for persons to seek an exemption from becoming an “Acquiring Person” under the Rights Agreement in the event such person wishes to acquire 4.9% or more of the Common Stock then outstanding.

~~The Rights expired on October 22, 2021 and no Rights were redeemed or exchanged.~~

8. INCOME TAXES

The Company’s tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, management updates the estimate of the annual effective tax rate, and any changes ~~in the annual effective tax rate~~ are recorded in a cumulative adjustment in that quarter. The quarterly tax provision and quarterly estimate of the annual effective tax rate are subject to significant volatility due to several factors, including management’s ability to accurately predict the portion of income (loss) before income taxes in multiple jurisdictions, the tax effects of our stock-based compensation awards, and the effects of acquisitions and the integration of those acquisitions. ~~The annual~~

For the three and nine months ended June 30, 2023, the Company recorded an income tax provision of $0.8 million and $4.4 million, respectively, which yielded an effective tax rate ~~differs from the U.S. statutory rate primarily due to foreign~~of 221% and ~~state taxes.~~

32%, respectively. For the three and nine months ended June 30, 2022, the Company recorded an income tax benefit of ~~$0.6~~$0.9 million and ~~$0.5~~$1.1 million, respectively, which yielded an effective tax rate of 80% and negative 218% and 11%, respectively. For the three and nine months ended June 30, 2021, the Company recorded an income tax provision of $0.3 million and $0.2 million, respectively, which yielded an effective tax rate of 9% and 3%47%, respectively. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate for the three and nine months ended June 30, 2023 was primarily due to a mix of worldwide income, the impact of non-deductible executive compensation, the impact of state taxes, and federal and state research and development credits on the tax provision. The difference between the U.S. federal statutory tax rate and the Company’s effective tax rate for the three and nine months ended June 30, 2022 was primarily due to excess tax benefits ~~resulting from the vesting of restricted stock and the exercise~~ of stock ~~options~~compensation as well as the impact of foreign and state ~~taxes, and the impact of federal and state research and development credits on its tax provision.~~taxes.

9. CONVERTIBLE SENIOR NOTES

The carrying values of the ~~Company’s~~0.75% convertible notes due 2026 ~~Notes~~issued by the Company in an initial aggregate principal amount of $155.3 million (the “2026 Notes”) are as follows (amounts in thousands):
2026 Notes: June 30, 2022 September 30, 2021
Principal amount $ 155,250 $ 155,250
Less: unamortized discount and issuance costs, net of amortization (29,093) (34,332)
Carrying amount $ 126,157 $ 120,918
2026 Notes embedded conversion derivative $ — $ 48,208


2026 Notes:	June 30, 2023		September 30, 2022
Principal amount	$	155,250	$	155,250
Less: unamortized discount and issuance costs, net of amortization	(21,671)		(27,280)
Carrying amount	$	133,579	$	127,970

In February 2021, the Company issued $155.3 million aggregate principal amount of the 2026 Notes (including the Additional

Notes, as defined below). The 2026 Notes are senior unsecured obligations of the Company. The 2026 Notes were issued pursuant to an Indenture, dated February 5, 2021 (the “Indenture”), between the Company and UMB Bank, National Association, as trustee. The Indenture includes customary covenants and sets forth certain events of default after which the 2026 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the 2026 Notes become automatically due and payable. The Company ~~is in compliance with these covenants as of June 30, 2022. The Company~~ granted the initial purchasers of the 2026 Notes (collectively, the “Initial Purchasers”) a 13-day option to purchase up to an additional $20.25 million aggregate principal amount of the 2026 Notes (the “Additional Notes”), which was exercised in full. The 2026 Notes were purchased in a transaction that was completed on February 5, 2021. As of January 13, 2023 (“Date of Noncompliance”), the Company was not in compliance with certain of the covenants in the Indenture as a result of the Company not timely filing its Form 10-K for the fiscal year ended September 30, 2022 (“Form 10-K”) and the Form 10-Q for the quarter ended December 31, 2022 (“Q1 Form 10-Q”) with the SEC. As a result of not being in compliance, the 2026 Notes began to accrue additional special interest of 0.25% of the outstanding principal of the 2026 Notes for the 90 days after the Date of Noncompliance and 0.50% of the outstanding principal of the 2026 Notes for the 91st through 180th day after the Date of Noncompliance. The Company subsequently did not timely file its Form 10-Q for the quarter ended March 31, 2023 (“Q2 Form 10-Q”) and its Form 10-Q for the quarter ended June 30, 2023 (“Q3 Form 10-Q”). The Company filed its Form 10-K with the SEC on July 31, 2023, its Q1 Form 10-Q with the SEC on September 6, 2023, and its Q2 Form 10-Q with the SEC on September 29, 2023. As of June 30, 2023, the Company was not in compliance with certain covenants in the Indenture as a result of not timely filing its Form 10-K, Q1 Form 10-Q, Q2 Form 10-Q, and Q3 Form 10-Q. As of October 26, 2023, the Company is in compliance with the covenants in the Indenture as all of its required annual and quarterly reports have been filed with the SEC.

The 2026 Notes will mature on February 1, 2026, unless earlier redeemed, repurchased or converted. The 2026 Notes ~~will~~ bear interest from February 5, 2021 at a rate of 0.750% per year payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, 2021. The 2026 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding August 1, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of Common Stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Common Stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on the Common Stock. On or after August 1, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2026 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash and, if applicable at the Company’s election, shares of the Common Stock, based on the applicable conversion rate(s); provided that the Company will be required to settle conversions solely in cash unless and until the Company (i) receives stockholder approval to increase the number of authorized shares of the Common Stock and (ii) reserves such amount of shares of the Common Stock for future issuance as required pursuant to the Indenture that governs the 2026 Notes. The conversion rate for the 2026 Notes will initially be 47.9731 shares of the Common Stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $20.85 per share of the Common Stock. The initial conversion price of the 2026 Notes represents a premium of approximately 37.5% to the $15.16 per share last reported sale price of the Common Stock on February 2, 2021. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

The net proceeds from this offering were approximately $149.7 million, after deducting the Initial Purchasers’ discounts and commissions and the Company’s estimated offering expenses related to the offering. The Company used approximately $9.3 million of the net proceeds from the offering to pay the cost of the Notes Hedge, ~~(as defined below) (after~~after such cost is partially offset by the proceeds from the Warrant Transactions described ~~below).~~below. The Initial Purchasers exercised their option to purchase Additional Notes in full ~~in February 2021and~~and the Company used a portion of the net proceeds from the sale of such Additional Notes to enter into additional Notes Hedges, ~~(after~~after such cost is partially offset by the proceeds from the additional Warrant ~~Transactions)~~Transactions, with the Option Counterparties (as defined below). The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes, which may include working capital, capital expenditures, and potential acquisitions and strategic transactions.

As of June 30, ~~2022,~~2023, the number of authorized and unissued shares of Common Stock that are not reserved for other purposes is sufficient to settle the 2026 Notes into equity. Accordingly, the Company may settle conversions of notes through payment or delivery, as the case may be, of cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election.

In accounting for the issuance of the 2026 Notes, the conversion option of the 2026 Notes was deemed an embedded derivative requiring bifurcation from the 2026 Notes (“host contract”) and separate accounting as an embedded derivative liability, as a result of the Company not having the necessary number of authorized but unissued shares of its Common Stock available to settle the conversion option of the 2026 Notes in shares. The proceeds from the 2026 Notes ~~are~~were first allocated to the embedded derivative liability and the remaining proceeds ~~are~~were then allocated to the host contract. On February 5, 2021, the fair value of the embedded derivative liability representing the conversion option was $33.2 million and the remaining $116.5 million was allocated to the host

contract. The difference between the principal amount of the 2026 Notes and the fair value of the host contract (the “debt discount”) is amortized to interest expense using the effective interest method over the term of the 2026 Notes.

In the second quarter of fiscal 2022, the stockholders of the Company approved an increase to the number of authorized shares of Common Stock, to an amount sufficient to settle the conversion of the 2026 Notes. As a result of the increase to the number of authorized shares of Common Stock, the Company reclassified the embedded conversion derivative to additional paid-in capital.

As of June 30, ~~2022,~~2023, the embedded conversion derivative is included in additional paid-in capital in the condensed consolidated balance sheets and will not be remeasured provided the requirements to qualify for the scope exception in ~~ASC~~Accounting Standards Codification (“ASC”) 815-10-15-74(a) - ~~Derivatives and Hedging~~, continue to be met.

~~The following table presents the fair value and the change in fair value for the embedded conversion derivative (in thousands~~):


~~Embedded conversion derivative~~
~~Fair value as of September 30, 2021~~	$	~~48,208~~
~~Remeasurement to fair value on March 3, 2022~~	~~(19,692)~~
~~Impact of increase of authorized shares of common stock on convertible senior notes hedge~~	~~(28,516)~~
~~Fair value as of June 30, 2022~~	$	—

~~The remeasurement of the embedded conversion derivative to fair value on March 3, 2022 was offset by the remeasurement of the Notes Hedge. See details of the remeasurement of the Notes Hedge below.~~

Debt issuance costs for the issuance of the 2026 Notes were approximately $5.5 million, consisting of initial purchasers' discount and other issuance costs. In accounting for the transaction costs, the Company allocated the total amount incurred to the 2026 Notes. Transaction costs were recorded as debt issuance cost (presented as contra debt in the condensed consolidated balance sheet) and are being amortized using the effective interest method to interest expense over the term of the 2026 Notes.

The following table presents the total amount of interest cost recognized relating to the 2026 Notes (amounts in thousands):


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Contractual interest expense	Contractual interest expense	$	290	$	290	$	886	$	463	Contractual interest expense	$	453	$	290	$	1,054	$	886
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	1,787		1,933		5,239		3,080		Amortization of debt discount and issuance costs	1,908		1,787		5,609		5,239
Total interest expense recognized	Total interest expense recognized	$	2,077	$	2,223	$	6,125	$	3,543	Total interest expense recognized	$	2,361	$	2,077	$	6,663	$	6,125

The derived effective interest rate on the 2026 Notes host contract was determined to be 6.71%, which remains unchanged from

the date of issuance. The remaining unamortized debt discount was ~~$29.1~~$21.7 million as of June 30, ~~2022,~~2023, and will be amortized over approximately ~~3.6~~2.6 years.

Convertible Senior Notes Hedge and Warrants

In connection with the pricing of the 2026 Notes, the Company entered into the Notes Hedge with Bank of America, N.A., Jefferies International Limited and Goldman Sachs & Co. LLC (the “Option Counterparties”). The Notes Hedge provided the Company with the option to acquire, on a net settlement basis, approximately 7.4 million shares of Common Stock at a strike price of $20.85, which is equal to the number of shares of Common Stock that notionally underlie and ~~corresponds~~correspond to the conversion price of the 2026 Notes. The Company also entered into Warrant Transactions with the Option Counterparties relating to the same number of shares of the Common Stock, subject to customary anti-dilution adjustments. The strike price of the Warrant Transactions is $26.53 per share, which represents a 75.0% premium to the last reported sale price of the Common Stock on ~~The NASDAQ~~the Nasdaq Capital Market on February 2, 2021, and is subject to certain adjustments under the terms of the Warrant Transactions.

The Company was initially required to settle the Notes Hedge in cash, as they did not qualify for the scope exception for contracts involving an issuer’s own equity in ASC 815 and were accounted for as a derivative asset. Upon initial purchase, the Notes Hedge was recorded in ~~our consolidated balance sheets in~~ convertible senior notes hedge at $33.2 ~~million.~~million in our condensed consolidated balance sheets. In the second quarter of fiscal 2022, the stockholders of the Company approved an increase to the number of authorized shares of Common Stock, to an amount sufficient to settle the conversion of the 2026 Notes. As a result of the increase to the number of authorized shares of Common Stock, the Company reclassified the Notes Hedge to additional paid-in capital.

As of June 30, ~~2022,~~2023, the Notes Hedge is included in additional paid-in capital in the condensed consolidated balance sheet and will not be remeasured provided the requirements to qualify for the scope exception in ASC 815-10-15-74(a) continue to be met and the Company had not purchased any shares under the Notes Hedge.

As a result of the Warrant Transactions, the Company is required to recognize incremental dilution of earnings per share to the extent the average share price is over $26.53 for any fiscal quarter. During the three months ended June 30, ~~2022,~~2023, there was no

2520

dilution of earnings per share. The Warrant Transactions expire over a period of 80 trading days commencing on May 1, 2026 and may be settled in net shares of Common Stock or net cash at the Company’s election. Upon initial sale, the Warrant Transactions were recorded as an increase in additional paid-in capital within stockholders’ equity of $23.9 million. As of June 30, ~~2022,~~2023, the Warrant Transactions had not been exercised and remained outstanding.

10. COMMITMENTS AND CONTINGENCIES

~~Leases~~

The Company’s principal executive offices, as well as its research and development facility, are located in approximately 29,000 square feet of office space in San Diego, California and the term of the lease continues through June 30, 2024. The Company’s other offices are located in Paris, France; Amsterdam, The Netherlands; New York, New York; Barcelona, Spain; London, United Kingdom; and St. Petersburg, Russia.

~~The Company’s leases have remaining terms of~~ ~~one~~ to eight years. Certain leases contain renewal options for varying periods, which are at the Company’s sole discretion. For leases where the Company is reasonably certain to exercise a renewal option, such option periods have been included in the determination of the Company’s right-of-use (“ROU”) assets and lease liabilities. As of June 30, 2022, the weighted-average remaining lease term for the Company’s operating leases was 4.9 years and the weighted-average discount rate was 3.2%.

Lease liabilities expected to be paid within one year are recorded in current liabilities in the consolidated balance sheets. All other lease liabilities are recorded in non-current liabilities in the consolidated balance sheets. As of June 30, 2022, the Company had operating ROU assets of $5.5 million. As of June 30, 2022, total operating lease liabilities of $6.7 million were comprised of current lease liabilities of $1.9 million and non-current lease liabilities of $4.8 million. As of September 30, 2021, the Company had operating ROU assets of $7.1 million. As of September 30, 2021, total operating lease liabilities of $8.5 million were comprised of current lease liabilities of $1.9 million and non-current lease liabilities of $6.6 million.

The Company recognized $0.6 million of operating lease costs in each of the three months ended June 30, 2022 and 2021. The Company recognized $1.7 million and $1.6 million of operating lease costs in the nine months ended June 30, 2022 and 2021, respectively. Operating lease costs are included within cost of revenue, selling and marketing, research and development, and general and administrative expenses, dependent upon the nature and use of the ROU asset, in the Company’s consolidated statement of operations and comprehensive income (loss).

~~The Company paid $1.5 million in operating cash flows for operating leases in the nine months ended June 30, 2022.~~

~~Maturities of operating lease liabilities as of June 30, 2022 were as follows~~ ~~(amounts shown in thousands)~~:
Operating leases
2022—remaining $ 521
2023 2,029
2024 1,702
2025 613
2026 603
2027 608
Thereafter 974
Total lease payments 7,050
Less: amount representing interest (372)
Present value of future lease payments $ 6,678

Legal Proceedings

Claim Against ICAR

On June 11, 2018, a claim was filed before Court of First Instance 5 (Juzgado de Primera Instancia) of Barcelona, Spain, the first instance court in the Spanish civil procedure system, against ICAR. The claim, also directed towards Mr. Xavier Codó Grasa, the former controlling shareholder of ICAR and its current General Manager at the time the claim was filed, was brought by the Spanish company Global Equity & Corporate Consulting, S.L. for an alleged breach by ICAR of a services agreement entered into in the context of the sale of all of the shares in ICAR to Mitek Holding B.V., a wholly owned subsidiary of the Company. ICAR responded to the claim on September 7, 2018. After several postponements as a consequence of the COVID-19 pandemic, on March 3, 2022 the trial was held. On June 7, 2022, the Court of First Instance 5 of Barcelona issued a judgment which fully upheld the claim and declared that Mr. Xavier Codó Grasa and ICAR had to pay the amount and damages claimed by Global Equity & Corporate Consulting, S.L. equal to €0.8 million (or ~~$0.9 million)~~$0.8 million as of June 30, 2023), plus the interest accrued and the legal fees.

ICAR and Mr Xavier Codó Grasa submitted an appeal against this judgment on July 13, 2022. Global Equity & Corporate Consulting, S.L. filed an opposition to that appeal on September 2, 2022. The next procedural step will be the voting and issuing of the ruling on the appeal. Global Equity & Corporate Consulting, S.L. requested the provisional enforcement of the judgment, asking ICAR and Mr. Xavier Codó Grasa to deposit the damages awarded plus 30% to cover the possible interests that may continue to accrue during the appeal (€1.1 million in total) with the Court.

According to the terms of the sale and purchase agreement concerning the acquisition of the shares in ICAR, Mitek Holding B.V. is to be indemnified in respect of any damages suffered by ICAR and/or Mitek Holding B.V. in respect of this claim. As a consequence, the escrow (€0.9 million) was released pursuant to the provisional enforcement of the judgment, and Mr. Xavier Codó Grasa deposited the remaining €0.2 million. Global Equity & Corporate Consulting, S.L. also requested that ICAR and Mr. Xavier Codó Grasa bear the costs of the provisional enforcement. This amounted to €16,475 for the accrued interests and €10,995 as legal costs. ICAR and Mr. Xavier Codó Grasa have complied with this request, having such amounts charged to the damages deposited with the Court.

Third Party Claims Against ~~Our~~the Company’s Customers

The Company receives indemnification demands from end-user customers who received third party patentee offers to license patents and allegations of patent infringement. Some of the offers and allegations have resulted in ongoing litigation. The Company is not a party to any such litigation. License offers to and infringement allegations against the Company’s end-customers were made by Lighthouse Consulting Group, LLC; Lupercal, LLC; Pebble Tide, LLC; Dominion Harbor Group, LLC; and IP Edge, LLC, which appear to be non-practicing entities (“NPEs”)—often called “patent trolls”—and not the Company’s competitors. These NPEs may seek to extract settlements from our end-customers, resulting in new or renewed indemnification demands to the Company. At this time, the Company does not believe it is obligated to indemnify any customers or end-customers resulting from license offers or patent infringement allegations by the companies listed above. However, the Company could incur substantial costs if it is determined that it is required to indemnify any customers or end-customers in connection with these offers or allegations. Given the potential for impact to other customers and the industry, the Company is actively monitoring the offers, allegations and any resulting litigation.

On July 7, 2018, United Services Automobile Association (“USAA”) filed a lawsuit against Wells Fargo Bank, N.A. (“Wells Fargo”) in the Eastern District of Texas alleging that Wells Fargo’s remote deposit capture systems (which in part utilize technology provided by the Company to Wells Fargo through a partner) infringe four USAA owned patents related to mobile deposits (the “First Wells Lawsuit”). On August 17, 2018, USAA filed a second lawsuit (the “Second Wells Lawsuit” and together with the First Wells Lawsuit, the “Wells Lawsuits”) against Wells Fargo in the Eastern District of Texas asserting that an additional five patents owned by USAA were infringed by Wells Fargo’s remote deposit capture system. In neither lawsuit was the Company named in the Complaint as an infringer nor at any time did USAA allege specifically that the Company’s products by themselves infringed any of the asserted patents. Subsequently, on November 6, 2019, a jury in the First Wells Lawsuit found that Wells Fargo willfully infringed at least one of the Subject Patents (as defined below) and awarded USAA $200 million in damages. In the Second Wells Lawsuit, USAA dropped two of the patents from the litigation, and the judge in the case found that one of the remaining three patents was invalid. On January 10, 2020, a jury in the Second Wells Lawsuit found that Wells Fargo willfully infringed at least one of the patents at issue in that case and awarded USAA $102 million in damages. No Mitek product was accused of infringing either of the two patents in question in the Second Wells Lawsuit as the litigation involved broad banking processes and not the Company’s specific mobile deposit features.

USAA and Wells Fargo subsequently reached a settlement, and on April 1, 2021 the Court granted the parties’ joint motion and stipulation of dismissal of the Wells Lawsuits with prejudice.

Wells Fargo filed petitions for Inter Partes Review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) challenging the validity of the four patents in the First Wells Lawsuit. Three of those four petitions were instituted, while one (relating to U.S. Patent No. 9,818,090 (“the ‘090 Patent”)) was denied institution. On November 24, 2020, and January 26, 2021, the PTAB issued final written decisions determining that Wells Fargo had not demonstrated by a preponderance of the evidence that any claims of the U.S. Patent Nos. 8,977,571 (“the ~~’571~~‘571 Patent”), 8,699,779 (“the ~~’779~~‘779 Patent”), or ~~‘9,336,517~~9,336,517 (“the ~~’517~~‘517 Patent”) were unpatentable.

On September 30, 2020, USAA filed suit against PNC Bank (the “First PNC Lawsuit”) in the Eastern District of Texas alleging infringement of U.S. Patent Nos. 10,482,432 (“the ‘432 Patent”) and 10,621,559. These two patents are continuations of an asserted patent in the Second Wells Lawsuit and relate to similar subject matter. On October 19, 2020, PNC Bank’s integration partner, NCR Corporation, sent an indemnification demand to the Company requesting indemnification from all claims related to the First PNC Lawsuit. The complaint against PNC Bank does not claim that any Company product infringes any of the asserted patents. At this time, the Company does not believe it is obligated to indemnify NCR Corporation or end-users of NCR Corporation resulting from the patent infringement allegations by USAA. On December 4, 2020, USAA filed an amended complaint against PNC Bank also asserting two patents at issue in the First Wells Lawsuit—the ’779 Patent and the ’571 Patent. On February 2, 2021, NCR Corporation sent a

second indemnification demand to the Company requesting indemnification of the claims described in the amended complaint. On March 31, 2021, USAA filed another suit against PNC Bank in the Eastern District of Texas alleging infringement of two patents from the Second Wells Lawsuit, U.S. Patent Nos. 10,013,605 (“the ‘605 Patent”) and 10,013,681 (“the ‘681 Patent”) (the “Second PNC Lawsuit”). On July 7, 2021, USAA filed a third lawsuit against PNC Bank (the “Third PNC Lawsuit” and together with the First PNC Lawsuit and the Second PNC Lawsuit, the “PNC Lawsuits”) asserting infringement of U.S. Patents 10,769,598; 10,402,638; and 9,224,136. A jury trial was held in May 2022 on the consolidated First PNC Lawsuit and Second PNC Lawsuit. The jury found that PNC willfully infringed at least one patent claim and awarded USAA $218 million in damages. The Court denied PNC Bank’s equitable defenses and entered a Final Judgment in the consolidated First PNC Lawsuit and Second PNC Lawsuit on August 19, 2022. A jury trial was held in September 2022 on the Third PNC Lawsuit. The jury found that PNC infringed at least one patent claim and awarded USAA $4.3 million in damages. The Court ~~has not~~ entered a Final Judgment in the ~~Second~~Third PNC ~~Lawsuit.~~Lawsuit on February 16, 2023.

While neither the Wells Lawsuits nor the PNC Lawsuits name the Company as a defendant, given (among other factors) the Company’s prior history of litigation with USAA and the continued use of the Company’s products by its customers, on November 1, 2019, the Company filed a complaint in the U.S. District Court for the Northern District of California seeking declaratory judgment that its products do not infringe the ’779 Patent, the ’571 Patent, the ’517 Patent, and the ’090 Patent (collectively, the “Subject Patents”). On January 15, 2020, USAA filed motions requesting the dismissal of the declaratory judgement of the Subject Patents and transfer of the case to the Eastern District of Texas, both of which the Company opposed. On April 21, 2020, the Court in the Northern District of California transferred the Company’s declaratory judgement action to the Eastern District of Texas and did not rule on USAA’s motion to dismiss. On April 28, 2021, the Court in the Eastern District of Texas granted USAA’s motion to dismiss the Company’s declaratory judgment action on jurisdictional grounds. The Court’s ruling did not address the merits of the Company’s claim of non-infringement. The Company appealed the ruling on the motion to dismiss and the decision to transfer the declaratory judgment action from California to Texas to the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit heard oral argument on the Company’s appeal on April 4, 2022 and on May 20 2022, issued an opinion vacating and remanding the district court’s order granting USAA’s motion to dismiss. On August 1, 2022, the parties submitted additional briefing to the district court in light of Federal Circuit’s opinion. The court held another hearing on USAA’s motion to dismiss the Company’s declaratory judgment action on jurisdictional grounds, and once again granted USAA’s motion to dismiss on February 23, 2023. The Company timely filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit. The Company continues to believe that its products do not infringe the Subject Patents and will vigorously defend the right of its end-users to use its technology. In April, May, and June 2020, the Company filed petitions for IPR with the PTAB of the U.S. Patent & Trademark Office challenging the validity of the Subject Patents. On November 6 and 17, 2020, the PTAB decided to exercise its discretion and deny institution of the four petitions due to the alleged relationship between the Company and Wells Fargo, who previously filed petitions for IPR on the Subject Patents. The PTAB did not address the merits of the Company’s petitions or the prior art cited in those petitions. The Company continues to believe that the prior art cited in the petitions renders all the claims of the Subject Patents invalid. On each of December 6, 2020, December 17, 2020, and February 23, 2021, the Company filed requests for rehearing and Precedential Opinion Panel (“POP”) review of the four denied IPR petitions. The Patent Office denied the requests for rehearing and for POP review.

In September 2020, the Company filed an additional two petitions for IPR with the U.S. Patent & Trademark Office challenging the validity of the ‘681 Patent and the ~~‘605~~'605 Patent—two of the patents at issue in the Second Wells Lawsuit. In March 2021, the PTAB decided not to institute the two petitions.

On July 7, July 14, and July 21 2021, PNC Bank filed six additional petitions for IPR with the U.S. Patent & Trademark Office challenging the validity of the ’779 Patent, the ’571 Patent, the ‘559 Patent, and the ‘432 Patent. On August 27, 2021, PNC filed two additional petitions for IPR challenging the validity of the ‘681 Patent and the ‘605 Patent. In October and November of 2021, PNC Bank filed four more petitions for IPR challenging the validity of the ‘638 Patent, the ‘136 Patent, and the ‘598 Patent. The Patent Office denied institution with respect to the petitions challenging the ‘432 Patent, the ‘605 Patent, the ‘681 Patent, and the ‘638 Patent,

but instituted inter partes review on the petitions relating to the ‘779 Patent, the ‘571 Patent, the ‘559 Patent, and the ‘598 Patent—finding a reasonable likelihood that at least one challenged patent claim was invalid. ~~Final decisions from~~The U.S. Patent & Trademark Office issued a final written decision in each of the IPRs challenging the ‘779 Patent, ~~Office regarding~~ the ~~validity~~‘571 Patent, and the ‘559 Patent and found all challenged claims of ~~these patents are expected~~each patent unpatentable. USAA filed requests for rehearing a requests for POP review. The requests for POP review and rehearing were denied in ~~early~~March 2023.

On August 16, 2021, USAA filed suit against BBVA USA (“BBVA”) in the Eastern District of Texas alleging infringement of the same patents at issue in the PNC Lawsuits. While the Company’s IPR petitions were mentioned in the complaint, the Company was not named as a defendant or mentioned in connection with any alleged infringement. BBVA then sent the Company an indemnification demand on September 7, 2021. For the same reasons discussed above in connection with PNC Bank and the PNC Lawsuits, the Company does not believe it is obligated to indemnify BBVA.On June 6, 2022, the Court granted the parties’ request to administratively close the case and stay all deadlines in view of the pending appeal in the PNC Lawsuits.

On July 29, 2022, USAA filed another patent infringement lawsuit against Truist Bank (“Truist”) in the Eastern District of Texas. The lawsuit alleges infringement of the ’090 Patent, the ’432 Patent, and the U.S. Patent No. ~~11,182,753.~~11,182,753 (“the ’753 Patent”). The Company was not named as a defendant or mentioned in connection with any alleged infringement. On October 5, 2022, Truist’s integration partner, NCR Corporation, sent an indemnification demand to the Company requesting indemnification from all claims related to the lawsuit. For the same reasons discussed above in connection with the PNC Lawsuits, the Company does not believe it is obligated to indemnify NCR Corporation or end-users of NCR Corporation resulting from the patent infringement allegations by USAA. On October 7, 2022, Truist filed a motion to transfer venue to the Western District of North Carolina. The motion ~~is still pending.~~was denied on April 8, 2023. On December 30, 2022, Truist filed a motion for leave to file counterclaims against USAA alleging patent infringement of U.S. Patent Nos. 7,336,813; 7,519,214; 8,136,721; and 9,760,797, which was granted on April 8, 2023.On March 13, 2023, USAA moved for leave to file a First Amended Complaint, adding an additional allegation of patent infringement of U.S. Patent No. 11,544,944 (“the ’944 Patent”). On April 4, 2023, Truist sent another indemnification demand to the Company requesting indemnification related to the lawsuit.On May 3, 2023, USAA moved for leave to file a Second Amended Complaint, adding an additional allegation of patent infringement of U.S. Patent No. 11,625,770 (“the ’770 Patent”). On May 30, 2023, Truist sent another indemnification demand to the Company requesting indemnification related to the Second Amended Complaint. On October 6, 2023, the parties filed a Notice of Settlement and Joint Motion and Stipulation of Dismissal. All claims and causes of action between the parties were dismissed with prejudice on October 10, 2023 in view of the settlement.

In October and November of 2022, Truist filed a petition for IPR with the U.S. Patent & Trademark Office challenging the validity of the ’090 Patent, the ’432 Patent, and the ’753 Patent. The Patent Office instituted the petitions directed to the ’090 and ’753 Patents, but denied institution of the petition directed to the ’432 Patent. Final written decisions are expected in mid-2024.

The Company incurred legal fees of $0.4 million and $1.1 million in the three and nine months ended June 30, ~~2022~~2023, respectively, related to third party claims against our customers. Such fees are included in general and administrative expenses in the condensed consolidated statement of operations and other comprehensive income (loss).

Claim Against UrbanFT, Inc.

On July 31, 2019, the Company filed a lawsuit against one of its customers, UrbanFT, Inc. (“UrbanFT”) in the United States District Court for the Southern District of California (case No. 19-CV-1432-CAB-DEB). UrbanFT ~~was~~is delinquent in payment and attempted to justify its non-payment by asserting that the Company is or may be infringing on purported UrbanFT patents. The Company filed such lawsuit to collect the delinquent payments and to obtain a declaratory judgment of non-infringement of five purported UrbanFT patents. UrbanFT filed an answer and later asserted infringement of two of the five patents-at-issue in the Company’s lawsuit against UrbanFT. The Company thereafter filed counterclaims seeking a declaration that the two patents now asserted by UrbanFT ~~were~~are invalid in addition to being not ~~being~~ infringed. During the course of the litigation, the Company learned that a judgment had been entered against UrbanFT’s affiliates and its predecessor owner in which an Oregon court ordered that the patents in issue revert to a prior owner, Mr. Stevens, because UrbanFT’s affiliates did not pay the purchase price owed to the prior owner. On September 8, 2020, the Company filed a motion for summary judgment on its breach of contract ~~claim and the patent claims and counterclaims.~~claim. On September 15, 2020, the ~~District Court~~district court issued an order to show cause regarding jurisdiction over patent issues in light of the Oregon judgment. On December 17, 2020, the ~~District Court~~district court dismissed Mitek’s claims for declaratory judgment of non-infringement and UrbanFT’s counterclaims for patent infringement and related affirmative defenses based on infringement of the patents for lack of subject matter jurisdiction because UrbanFT does not own the patents. The ~~District Court~~district court then dismissed the remaining state law ~~collection~~ claims without prejudice to refiling in state court.

On December 18, 2020, the Company filed a new suit against UrbanFT in the Superior Court of the State of California, County of San Diego (case no. 37-2020-00046670-CU-BC-CTL) asserting claims for breach of contract, open book account, and monetary damages. UrbanFT filed an answer and did not assert any cross-claims. The Company filed a motion for summary judgment which was heard on April 15, 2022. The Court granted the Company’s motion and on June 2, 2022, entered a judgment in favor of the Company for $1.7 million in compensatory damages, plus costs, including attorney’s fees. The Court awarded the Company ~~filed a motion for recovery of its~~$2,600 in costs plus $0.6 million in attorneys’ fees for a total judgment of ~~$0.9~~$2.3 million. ~~The motion is set to be heard in January 2023.~~ The time for UrbanFT to appeal the $1.7 million in

compensatory damage judgment has ~~expired.~~expired but the time for UrbanFT ~~may~~to appeal ~~any~~the attorneys’ fee orand cost ~~award.~~award has not. No appeal has been filed.

On August 2, 2023, the Company filed a separate lawsuit against Richard Steggall, UFT (North America), LLC fka Urban FT LLC; Urban FT Group, Inc; Urban FT Client Solutions, LLC; UFT Professional Services, LLC; and X-35 Financial Technologies, in the San Diego Superior Court, (case No. 37-2023-00033005-CU-FR-CTL) (“Fraud Conveyance Action”). The Fraud Conveyance Action alleges that the Mr. Steggall orchestrated a scheme to strip UFT (North America), LLC of any assets and effectively transfer the Urban FT business to other entities he owns and controls, all to avoid the Company’s collection efforts. The Fraud Conveyance Action also alleges that Mr. Steggall funnels Urban FT’s revenues through a web of other entities he owns and controls, all to ensure that creditors, including the Company, cannot collect their debts.

Claim Against Maplebear, Inc (dba Instacart):

On December 13, 2021, Mitek filed a lawsuit against ~~Mapleabear~~Maplebear Inc., d/b/a Instacart (“~~Maplebear”~~Instacart”), in California Superior Court – San Diego County (Case No, 37-2021-00052089-CU-BC-CTL). Mitek is alleging breach of contract, breach of the implied covenant, and requesting over $2.0 million in damages.

On August 3, 2018 ~~Maplebear~~Instacart entered into a Master Services Agreement (the “Master Services Agreement”) with Mitek agreeing to purchase a subscription to Mitek’s Mobile Verify Advanced service. On June 19, 2020, the parties entered into a second Order Form in connection with the Master Services Agreement. The Order Form has a term of June 18, 2020 to December 31, 2023 and calls for an annual commitment of $1.2 million. On September 23, 2021, ~~Maplebear~~Instacart sent a letter to Mitek purporting to outline breaches under the Master Services Agreement. Mitek responded on November 11, 2021, refuting ~~Maplebear’s~~Instacart’s claims and offering to engage in further discussions. ~~Maplebear~~Instacart thereafter sent a Notice of Termination of the Master Services Agreement dated November 24, 2021.

The Parties participated in mediation on March 15, 2022. The mediation did not result in the resolution of the case and, following mediation, the Parties stipulated that ~~Maplebear’s~~Instacart’s response to Mitek’s complaint would be due on April 27, 2022. In lieu of filing a response to the complaint, ~~Maplebear~~Instacart elected to file a Motion to Transfer Venue to the County of San Francisco, which ~~Mitek opposed;~~ the ~~hearing for~~Court denied, thereby keeping the ~~Motion to Transfer is presently scheduled for October 28, 2022. The Court has not set any deadlines~~case in the ~~case~~County of San Diego.

On November 28, 2022, Instacart filed a cross-complaint against Mitek alleging: (1) Fraudulent Inducement; (2) Intentional Misrepresentation; (3) False Advertising; (4) Fraudulent Business Practices; (5) Unlawful Business Practices; (6) Unfair Business Practices; (7) Breach of Contract; and (8) Breach of the Implied Covenant of Good Faith and Fair Dealing. On January 27, 2023, Mitek filed a demurrer to the Cross-Complaint (the functional equivalent of a motion to dismiss). The demurrer is pending before the Court.

Both Parties have filed motions to compel further responses to written discovery requests. The motions will be heard on December 1, 2023. On September 29, 2023, the Parties ~~have agreed~~reached an agreement to ~~stay discovery while~~resolve the ~~Motion~~case. The terms of the agreement are to ~~Transfer remains pending.~~be completed on or before November 1, 2023, after which the Parties will dismiss their respective claims.

Biometric Information Privacy Act Claims

On December 16, 2021, the Company was sued in a putative class action in ~~state court in~~the Circuit Court of Cook County, Illinois alleging that the Company had violated the Illinois Biometric Information Privacy Act (“BIPA”) with respect to identity verification services that the Company provided to its customer HyreCar, Inc. (“HyreCar”) for HyreCar’s customers in Illinois (the “BIPA Lawsuit”). Plaintiff claimed that the Company had not obtained the required consent to collect and use Plaintiff’s biometric information, and that Plaintiff and a class of similarly situated individuals therefore are entitled to statutory damages under BIPA.

The Company removed the BIPA Lawsuit to ~~federal court,~~the U.S. District Court for the Northern District of Illinois, and on March 4, 2022 the Company filed ~~(i)~~ a Motion to Compel Arbitration based on HyreCar’s terms and conditions requiring HyreCar customers to arbitrate on an individual (non-class) basis (the “Arbitration Motion”)~~; (ii)~~. On May 4, 2022 the trial court denied the Arbitration Motion. On December 21, 2022, the trial court’s ruling was upheld on appeal, and the case subsequently was remanded back to the trial court.

On March 10, 2023, Plaintiff filed an Amended Complaint adding a second named plaintiff, who is also a HyreCar end-user, but otherwise not materially changing the allegations.On March 27, 2023, the Company filed a Motion to ~~Dismiss; and (iii) a Motion~~Dismiss or, in the Alternative, to Strike Class Allegations.

On ~~March 7, 2022,~~May 11, 2023, and after the ~~Court struck the~~Company’s Motion to Dismiss ~~and Motion~~or, in the Alternative, to Strike Class Allegations had been fully briefed, Plaintiffs filed a Motion for Leave to File a Second Amended Complaint seeking to add two new named plaintiffs, who are end-users of Mitek customers Instacart and Roadie, and to remove one named plaintiff. The Company opposed the Motion for Leave.

On September 13, 2023, Plaintiffs filed a Notice of Voluntary Dismissal. On September 14, 2023, the Court dismissed the lawsuit without prejudice, ~~and set a briefing schedule on~~ending the ~~Arbitration Motion. After the Arbitration Motion was fully briefed, on May 4, 2022 the Court denied the Arbitration Motion.~~

~~On May 10, 2022, the Company initiated an appeal. The appeal is fully briefed and the Court has set oral argument for December 2, 2022. A decision is likely in early 2023.~~litigation.

Other Legal Matters

2924

In addition to the foregoing, the Company is subject to various claims and legal proceedings arising in the ordinary course of its business. The Company accrues for such liabilities when it is both (i) probable that a loss has occurred and (ii) the amount of the loss can be reasonably estimated in accordance with ASC 450, Contingencies. While any legal proceeding has an element of uncertainty, the Company believes that the disposition of ~~any legal proceedings that the Company and management are currently aware of,~~such matters, in the aggregate, will not have a material effect on the Company’s financial condition or results of operations.

11. LEASES

Leases

The Company leases office and research and development facility leases under non-cancelable operating leases for various

terms through 2030. Certain lease agreements include renewal options, rent abatement periods, and rental increases throughout the

term. As of June 30, 2023, the weighted-average remaining lease term for the Company’s operating leases was 4.7 years and the weighted-average discount rate was 3.1%.

As of June 30, 2023, the Company had operating ROU assets of $4.3 million. As of June 30, 2023, total operating lease liabilities of $5.1 million were comprised of current lease liabilities of $2.1 million and non-current lease liabilities of $3.0 million. As of September 30, 2022, the Company had operating ROU assets of $5.2 million. As of September 30, 2022, total operating lease liabilities of $6.2 million were comprised of current lease liabilities of $2.1 million and non-current lease liabilities of $4.1 million.

The Company recognized $0.5 million and $0.6 million of operating lease costs in the three months ended June 30, 2023 and 2022, respectively. The Company recognized $1.5 million and $1.7 million of operating lease costs in the nine months ended June 30, 2023 and 2022, respectively. Operating lease costs are included within cost of revenue, selling and marketing, research and development, and general and administrative expenses, dependent upon the nature and use of the ROU asset, in the Company’s condensed consolidated statement of operations and other comprehensive income (loss).

The Company paid $1.8 million in operating cash flows for operating leases in the nine months ended June 30, 2023.

Maturities of operating lease liabilities as of June 30, 2023 were as follows (amounts in thousands):


	Operating leases
2023 - remaining	$	562
2024	1,845
2025	636
2026	627
2027	632
2028	424
Thereafter	589
Total lease payments	5,315
Less: amount representing interest	(224)
Present value of future lease payments	$	5,091

12. REVENUE CONCENTRATION

For the three months ended June 30, 2023, the Company derived revenue of $7.0 million from one customer, with such customer accounting for 16% of the Company’s total revenue. For the three months ended June 30, 2022, the Company derived revenue of ~~$9.5~~$13.6 million from ~~two~~three customers, with such customers accounting for 14%, 10%, and 10% of the Company’s total revenue, respectively. For the ~~three~~nine months ended June 30, ~~2021,~~2023, the Company derived revenue of ~~$12.9~~$35.2 million from ~~three~~two customers, with such customers accounting for ~~16%, 13%,~~15% and 11% of the Company’s total revenue, respectively. For the nine months ended June 30, 2022, the Company derived revenue of $16.9 million from one customer, with such customer accounting for 16% of the Company’s total revenue. ~~For the nine months ended June 30, 2021, the Company derived revenue of $23.7 million from two customers, with such customers accounting for 17% and 10% of the Company’s total revenue, respectively.~~ The corresponding accounts receivable balances of customers from which revenues were in excess of 10% of total revenue were ~~$4.8~~$7.1 million and ~~$5.9~~$5.3 million at June 30, 2023 and 2022, ~~and 2021,~~ respectively.

The Company’s revenue is derived primarily from sales by the Company to channel partners, including systems integrators and resellers, and end-users of licenses to sell products covered by the Company’s patented technologies. These contractual arrangements do not obligate the Company’s channel partners to order, purchase or distribute any fixed or minimum quantities of the Company’s products. In most cases, the channel partners purchase the license from the Company after they receive an order from an end-user. The channel partners receive orders from various individual end-users; therefore, the sale of a license to a channel partner may represent sales to multiple end-users. End-users can purchase the Company’s products through more than one channel partner.

Revenues can fluctuate based on the timing of license renewals by channel partners. When a channel partner purchases or renews a license, the Company receives a license fee in consideration for the grant of a license to sell the Company’s products and there are no future payment obligations related to such agreement; therefore, the license fee the Company receives with respect to a particular license renewal in one period does not have a correlation with revenue in future periods. During the last several quarters, sales of licenses to one or more channel partners have comprised a significant part of the Company’s revenue. This is attributable to the timing of renewals or purchases of licenses and does not represent a dependence on any single channel partner. The Company believes that it is not dependent upon any single channel partner, even those from which revenues were in excess of 10% of the Company’s total revenue in a specific reporting period, and that the loss or termination of the Company’s relationship with any such channel partner would not have a material adverse effect on the Company’s future operations because either the Company or another channel partner could sell the Company’s products to the end-user that had purchased from the channel partner the Company lost.

International sales accounted for approximately 29% and ~~23%~~28% of the Company’s total revenue in the three months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively. ~~International sales accounted for approximately 29% and 26% of the Company’s total revenue in~~For the nine months ended June 30, 2023 and 2022, international sales accounted for approximately 25% and ~~2021,~~29% of the Company’s total revenue, respectively. From a geographic perspective, approximately ~~68%~~70% and ~~24%~~69% of the Company’s total long-term assets as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively, are associated with the Company’s international subsidiaries. From a geographic perspective, approximately ~~17%~~16% and 6%19% of the Company’s total long-term assets excluding goodwill and other intangible assets as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively, are associated with the Company’s international subsidiaries.

~~12. RELATED PARTY TRANSACTIONS~~13. RESTATEMENT OF PREVIOUSLY REPORTED UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In connection with the ~~third quarter~~preparation of ~~fiscal~~its consolidated financial statements for the twelve months ended September 30, 2022, the Company ~~made loans~~determined that its previously issued unaudited interim consolidated financial statements for the periods ended March 31, 2022 and June 30, 2022 contained errors in the application of GAAP as summarized below.

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 determined that the related impact was material to ~~two non-executive employees totaling $1.0 million. Such loans~~the previously filed consolidated financial statements that contained the error for the quarterly periods ended March 31, 2022 and June 30, 2022 (the “Affected Quarterly Periods”). Therefore, the Company, in consultation with the Audit Committee of the Company’s Board of Directors, concluded that the Affected Quarterly Periods should be restated to present the identified adjustments discussed below. The Company restated the Affected Quarterly Periods in its Annual Report on Form 10-K filed with the SEC on July 31, 2023.

Background of Restatement

In connection with the preparation of the Company’s financial statements for the fiscal year ended September 30, 2022, the Company noted that certain revenue contracts and other items were ~~issued~~improperly accounted for during three and six months ended March 31, 2022 and the three and nine months ended June 30, 2022. Specifically, the Company (a) did not appropriately (i) recognize revenue on its multiyear term licenses; (ii) recognize revenue related to guaranteed minimums and overages for software as a service (“SaaS”) product sales; (iii) cut off revenue related to term license sales; (iv) capitalize certain commissions paid to the HooYu Ltd (“HooYu”) sales team subsequent to the acquisition of HooYu in March 2022; (v) recognize a lease liability and right-of-use asset related to the office lease assumed in the HooYu acquisition; and (vi) recognize certain liabilities upon the acquisition of HooYu that were not valid liabilities; and (b) misclassified certain employee costs related to cloud operations as research and development expense instead of cost of revenue.

The financial statement line items impacted by the respective adjustments are labeled in the tables below based on the ~~same terms~~identifiers from the paragraph above. The condensed consolidated statements of stockholders’ equity have been excluded from the financial statements presented below as ~~those prevailing at the time for comparable loans~~they were only impacted by adjustments to ~~unrelated persons and do not involve more than the normal risk of collectability. The loans made to the non-executive employees~~net income which are ~~due~~presented below in the ~~fourth quarter~~condensed consolidated statements of ~~fiscal 2022~~operations and ~~are included in~~ other ~~current assets in the~~comprehensive income (loss) and condensed consolidated balance sheets.

The impact of the restatement on the Affected Quarterly Period as of and for the three and nine months ended June 30, 2022 is presented in the following tables:

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands except share data)


	As of June 30, 2022
	As Previously Reported		Total Adjustments		As Restated
ASSETS
Current assets:
Cash and cash equivalents	$	21,543	$	—	$	21,543
Short-term investments	49,531		—		49,531
Accounts receivable, net (iii)	29,618		(65)		29,553
Contract assets (i)	5,125		—		5,125
Prepaid expenses	3,078		—		3,078
Other current assets	3,194		—		3,194
Total current assets	112,089		(65)		112,024
Long-term investments	19,534		—		19,534
Property and equipment, net	3,802		—		3,802
Right-of-use assets (v)	5,484		189		5,673
Intangible assets, net	85,743		—		85,743
Goodwill (iv)	127,992		(829)		127,163
Deferred income tax assets (i)	12,993		564		13,557

Other non-current assets (iv), (vi)	6,959		(431)		6,528
Total assets	$	374,596	$	(572)	$	374,024
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,981	$	—	$	3,981
Accrued payroll and related taxes	10,276		—		10,276
Accrued liabilities	4,432		(416)		4,016
Deferred revenue, current portion (ii)	13,220		427		13,647
Lease liabilities, current portion (v)	1,902		191		2,093
Acquisition-related contingent consideration (vi)	4,980		920		5,900
Restructuring accrual	1,807		—		1,807
Income taxes payable	1,332		—		1,332
Other current liabilities (iv), (vi)	1,858		—		1,858
Total current liabilities	43,788		1,122		44,910
Convertible senior notes	126,157		—		126,157

Deferred revenue, non-current portion	1,409		—		1,409
Lease liabilities, non-current portion	4,776		—		4,776
Deferred income tax liabilities, non current portion	19,227		—		19,227
Other non-current liabilities (iv), (vi)	1,923		(90)		1,833
Total liabilities	197,280		1,032		198,312
Commitments and contingencies (Note 10)
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 shares authorized, 44,396,263 and 44,168,745 issued and outstanding, as of June 30, 2022 and September 30, 2021, respectively	44		—		44
Additional paid-in capital	211,212		—		211,212
Accumulated other comprehensive income (loss)	(17,856)		—		(17,856)


Accumulated deficit	(16,084)		(1,604)		(17,688)

Total stockholders’ equity	177,316		(1,604)		175,712
Total liabilities and stockholders’ equity	$	374,596	$	(572)	$	374,024

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE (LOSS)

(amounts in thousands except per share data)


	Three Months Ended June 30, 2022
	As Previously Reported		Total Adjustments		As Restated
Revenue
Software and hardware (i), (ii)	$	19,820	$	(305)	$	19,515
Services and other (i), (ii)	19,513		167		19,680
Total revenue	39,333		(138)		39,195
Operating costs and expenses
Cost of revenue—software and hardware	508		—		508
Cost of revenue—services and other (b)	4,073		1,203		5,276
Selling and marketing	11,216		—		11,216
Research and development (b)	9,614		(1,203)		8,411
General and administrative	6,589		2		6,591
Amortization and acquisition-related costs (iv)	3,283		1,210		4,493
Restructuring costs	1,807		—		1,807
Total operating costs and expenses	37,090		1,212		38,302
Operating income	2,243		(1,350)		893
Interest expense	2,077		—		2,077
Other income, net (v)	89		—		89
Income before income taxes	255		(1,350)		(1,095)
Income tax benefit (i), (ii), (iii)	556		324		880
Net income (loss)	$	811	$	(1,026)	$	(215)
Net income (loss) per share—basic	$	0.02	$	(0.02)	$	(0.00)
Net income (loss) per share—diluted	$	0.02	$	(0.02)	$	(0.00)
Shares used in calculating net income (loss) per share—basic	44,669		—		44,669
Shares used in calculating net income (loss) per share—diluted	45,224		—		45,224

Comprehensive (loss)
Net income (loss)	$	811	$	(1,026)	$	(215)
Foreign currency translation adjustment	(13,595)		—		(13,595)
Unrealized (loss) on investments	909		—		909
Comprehensive (loss)	$	(11,875)	$	(1,026)	$	(12,901)

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE (LOSS)

(amounts in thousands except per share data)


	Nine Months Ended June 30, 2022
	As Previously Reported		Total Adjustments		As Restated
Revenue
Software and hardware (i), (ii)	$	54,545	$	(1,435)	$	53,110
Services and other (i), (ii)	51,975		93		52,068
Total revenue	106,520		(1,342)		105,178
Operating costs and expenses
Cost of revenue—software and hardware	1,196		—		1,196
Cost of revenue—services and other (b)	10,051		3,543		13,594
Selling and marketing	28,859		—		28,859
Research and development (b)	25,457		(3,543)		21,914
General and administrative	18,626		2		18,628
Amortization and acquisition-related costs (iv)	9,947		830		10,777
Restructuring costs	1,807		—		1,807
Total operating costs and expenses	95,943		832		96,775
Operating income	10,577		(2,174)		8,403
Interest expense	6,125		—		6,125
Other income (expense), net (v)	(8)		6		(2)
Income before income taxes	4,444		(2,168)		2,276
Income tax benefit (i), (ii), (iii)	504		564		1,068
Net income	$	4,948	$	(1,604)	$	3,344
Net income per share—basic	$	0.11	$	(0.04)	$	0.07
Net income per share—diluted	$	0.11	$	(0.04)	$	0.07
Shares used in calculating net income per share—basic	44,721		—		44,721
Shares used in calculating net income per share—diluted	45,793		—		45,793

Comprehensive (loss)
Net income	$	4,948	$	(1,604)	$	3,344
Foreign currency translation adjustment	(16,724)		—		(16,724)
Unrealized (loss) on investments	(189)		—		(189)
Comprehensive (loss)	$	(11,965)	$	(1,604)	$	(13,569)

MITEK SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)


	Nine Months Ended June 30, 2022
	As Previously Reported		Total Adjustments		As Restated
Operating activities:
Net income	$	4,948	$	(1,604)	$	3,344
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	10,117		—		10,117
Amortization of intangible assets	9,176		—		9,176
Depreciation and amortization	1,064		—		1,064
Amortization of investment premiums & other	1,348		—		1,348
Accretion and amortization on debt securities	5,239		—		5,239
Net changes in estimated fair value of acquisition-related contingent consideration (vi)	(2,198)		920		(1,278)
Deferred taxes (i), (ii), (iii)	(1,141)		(564)		(1,705)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (iii)	(12,298)		65		(12,233)
Contract assets	(1,737)		—		(1,737)
Other assets (iv), (vi)	(1,090)		242		(848)
Accounts payable	1,147		—		1,147
Accrued payroll and related taxes	(2,643)		—		(2,643)
Deferred revenue (i), (ii), (iii)	1,077		840		1,917
Restructuring accrual	1,900		—		1,900
Other liabilities (iv), (vi)	1,104		101		1,205
Net cash provided by operating activities	16,013		—		16,013
Investing activities:
Purchases of investments	(47,818)		—		(47,818)
Sales and maturities of investments	173,198		—		173,198
Acquisitions, net of cash acquired	(126,607)		—		(126,607)
Purchases of property and equipment	(929)		—		(929)
Net cash used in investing activities	(2,156)		—		(2,156)
Financing activities:




Proceeds from the issuance of equity plan common stock	1,162		—		1,162
Repurchases and retirements of common stock	(14,828)		—		(14,828)
Payment of acquisition-related contingent consideration	(6,770)		—		(6,770)
Loans made to non-executive employees	(1,041)		—		(1,041)

Principal payments on other borrowings	(36)		—		(36)
Net cash provided by (used in) financing activities	(21,513)		—		(21,513)
Foreign currency effect on cash and cash equivalents	(1,113)		—		(1,113)
Net increase (decrease) in cash and cash equivalents	(8,769)		—		(8,769)
Cash and cash equivalents at beginning of period	30,312		—		30,312
Cash and cash equivalents at end of period	$	21,543	$	—	$	21,543
Supplemental disclosures of cash flow information:
Issuance of common stock for acquisition-related contingent consideration	$	2,722	$	—	$	2,722
Cash paid for interest	597		—		597
Cash paid for income taxes	819		—		819
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	(189)		—		(189)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q (this “Form 10-Q”), contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or they prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. The forward-looking statements are contained principally in this Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A—“Risk Factors,” but appear throughout this Form 10-Q. Forward-looking statements may include, but are not limited to, statements relating to our outlook or expectations for earnings, revenues, expenses, asset quality, volatility of our common stock, financial condition or other future financial or business performance, strategies, expectations, or business prospects, the duration and impact of the novel COVID-19 pandemic on our business, our customers, and markets generally, or the impact of legal, regulatory, or supervisory matters on our business, results of operations, or financial condition.

Forward-looking statements can be identified by the use of words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target”, “will,” “would,” “could,” “can,” “may”, or similar expressions. Forward-looking statements reflect our judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part II, Item 1A—“Risk Factors” in this Form 10-Q and in our other filings with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021,~~2022, filed with the ~~U.S. Securities and Exchange Commission~~SEC on July 31, 2023 (“~~SEC”) on December 13, 2021 (“2021~~2022 Annual Report”). Additionally, there may be other factors that could preclude us from realizing the predictions made in the forward-looking statements. We operate in a continually changing business environment and new factors emerge from time to time. We cannot predict such factors or assess the impact, if any, of such factors on our financial position or results of operations. All forward-looking statements included in this Form 10-Q speak only as of the date of this Form 10-Q and you are cautioned not to place undue reliance on any such forward-looking statements. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.

In this Form 10-Q, unless the context indicates otherwise, the terms “Mitek,” “the Company,” “we,” “us,” and “our” refer to Mitek Systems, Inc., a Delaware corporation and its subsidiaries.

Restatement of Previously Issued Consolidated Financial Statements

The Company concluded that the Company’s previously issued financial statements for the interim periods March 31, 2022 and June 30, 2022 should be restated to correct historical errors as more fully described in Note 13. Restatement of Previously Reported Unaudited Interim Consolidated Financial Statements of the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q. The discussion of financial results presented herein is reflective of the restatement adjustments for those interim periods.

Overview

Mitek Systems, Inc. (“Mitek,” the “Company,” “we,” “us,” and “our”) is a leading innovator of mobile image capture and digital identity verification solutions. We are a software development company with expertise in ~~computer vision,~~ artificial intelligence and machine learning. We currently serve more than ~~7,500~~7,900 financial services organizations and leading marketplace and financial technology (“fintech”) brands around the globe. Customers count on Mitek to deliver trusted and convenient online experiences, detect and reduce fraud, and document Know Your Customer (“KYC”) and ~~anti-money laundering~~Anti-Money Laundering (“AML”) regulatory compliance. Our solutions are embedded in native mobile apps and web browsers to facilitate digital consumer experiences. Mitek’s identity verification and authentication technologies and services make it possible for banks, financial services organizations and the world’s leading marketplace and sharing platforms to verify an individual’s identity during digital transactions, allowing them to reduce risk and meet regulatory requirements. Our advanced mobile deposit system enables secure, fast and convenient deposit services. Thousands of organizations use Mitek solutions to optimize the security of mobile check deposits, new account openings and more.

~~To ensure a high level~~In May of ~~security against evolving digital fraud threats, in May~~ 2021, Mitek acquired ID R&D, Inc. (“ID R&D” and such acquisition, the “ID R&D Acquisition”), an award-winning provider of ~~artificial intelligence-based~~AI-based voice and face biometrics and liveness detection. ~~With one of the strongest research and development teams in the industry,~~ ID R&D ~~consistently~~ delivers innovative, ~~best-in-class~~ biometric capabilities that raise the bar on usability and performance. The ID R&D Acquisition helps simplify and secure the entire transaction lifecycle for both businesses and consumers. It provides businesses and financial institutions with access to one authentication solution to deploy throughout the entire transaction cycle, and can provide consumers with a simple, intuitive approach to fighting fraud.

In March of 2022, Mitek acquired HooYu ~~Ltd~~Ltd. (“HooYu”), a leading KYC technology provider in the United Kingdom. ~~The acquisition~~Such technology helps to ensure businesses know the true identity of their customers by linking biometric verification with real-time ~~bureau~~data aggregation across many different sources, including credit bureaus, international sanctions lists, local law-enforcement, and ~~sanction database checks.~~others.

technology providers and identity verification providers. These partners integrate our products into their solutions to meet the needs of their ~~customers.~~

customers, typically provisioning Mitek’s services through their respective platforms.

Third Quarter Fiscal ~~2022~~2023 Highlights

•Revenue for the three months ended June 30, ~~2022~~2023 was ~~$39.3~~$43.1 million, an increase of ~~24%~~10% compared to revenue of ~~$31.8~~$39.2 million in the three months ended June 30, ~~2021.~~2022.

•Net ~~income~~loss was ~~$0.8~~$0.4 million, or ~~$0.02~~$0.01 per diluted share, during the three months ended June 30, ~~2022,~~2023, compared to net ~~income~~loss of ~~$3.0~~$0.2 million, or ~~$0.07~~$0.00 per share, during the three months ended June 30, ~~2021.~~2022.

•Cash provided by operating activities was $28.1 million for the nine months ended June 30, 2023, compared to $16.0 million for the nine months ended June 30, ~~2022, compared to $25.0 million for the nine months ended June 30, 2021.~~2022.

•We added new patents to our portfolio during the third quarter of fiscal ~~2022~~2023 bringing our total number of issued patents to 8296 as of June 30, ~~2022.~~2023. In addition, we have 18 domestic and international patent applications pending as of June 30, ~~2022.~~2023.

~~Acquisition of ID R&D, Inc.~~

On May 28, 2021 (the “Closing Date”), the Company completed the acquisition of ID R&D (the “ID R&D Acquisition”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated May 28, 2021, by and among the Company, ID R&D and Alexey Khitrov. Upon completion of the ID R&D Acquisition, ID R&D became a direct wholly owned subsidiary of the Company. ID R&D is an award-winning provider of artificial intelligence-based voice and face biometrics and liveness detection. Under the terms of the Merger Agreement, the Company agreed to pay an aggregate purchase price of up to $49.0 million. On the Closing Date, the equityholders of ID R&D received from the Company: (i) $13.0 million in cash, subject to adjustments for transaction expenses, escrow amounts, indebtedness and working capital adjustments and (ii) 867,226 shares (or $13.9 million) of its common stock, par value $0.001 per share (“Common Stock”). The terms of the Merger Agreement also provide for additional payments of up to approximately $22.1 million in a combination of cash and Common Stock upon the achievement of certain financial milestones during 2022 and 2023. In May and June of 2022, the Company paid the first of the Earnout Payments of $9.5 million which consisted of $6.8 million paid in cash and $2.7 million in shares of Common Stock to the equityholders of ID R&D.

~~Acquisition of HooYu Ltd~~

On March 23, 2022, the Company completed the acquisition of HooYu Ltd (the “HooYu Acquisition”) pursuant to the Purchase Agreement (the “Purchase Agreement”) dated March 23, 2022, by and among the Company and certain persons identified in the Purchase Agreement (the “Sellers”). Pursuant to the Purchase Agreement, the Company, among other things, acquired 100% of the outstanding share capital of HooYu Ltd, a leading global customer onboarding platform designed to increase the integrity of KYC and maximize the success of customer onboarding. As consideration for the HooYu Acquisition, the Company paid aggregate consideration in the amount of £97.8 million in cash (the “Closing Consideration”), as such amount may be adjusted for transaction expenses and indebtedness. Pursuant to the Purchase Agreement, £0.7 million was withheld as a reduction to the Closing Consideration and is being retained by the Company for the final working capital adjustments and indemnification of certain tax matters under the Purchase Agreement.

Market Opportunities, Challenges & Risks

We believe that financial institutions, fintechs, and other companies see our patented solutions as a way to provide a superior digital customer experience to meet growing consumer ~~demand for~~demands of trust and convenience online and, at the same time, assist them in meeting regulatory requirements. The value of digital transformation to our customers is a possible increase in top line revenue and a reduction in the cost of sales and ~~services.~~service. As the use of new technology increases, so does associated fraud and cyber-attacks. The negative outcomes of fraud and cyber-attacks encompass financial losses, brand damage, and loss of loyal customers. We predict growth in ~~both~~ our deposits business as a result of the increased consumer adoption of digital financial services provided to them by their banks and identity verification products based on current trends in payments, online lending, more stringent regulations, growing usage of sharing apps and online marketplaces, and the ever-increasing demand for digital services.

Factors adversely affecting the pricing of, or demand for, our digital solutions, such as competition from other products or technologies, any decline in the demand for digital transactions, or negative publicity or obsolescence of the software environments in which our products operate, could result in lower revenues or gross margins. Further, because substantially all of our revenues are from a few types of technology, our product concentration may make us especially vulnerable to market demand and competition from other technologies, which could reduce our revenues.

The sales cycle for our software and services can be lengthy and the implementation cycles for our software and services by our channel partners and customers can also be lengthy, often as long as six months and sometimes longer for larger customers. If implementation of our products by our channel partners and customers is delayed or otherwise not completed, our business, financial condition, and results of operations may be adversely affected.

Revenues related to most of our ~~on-premise~~on premise licenses for mobile products are required to be recognized up front upon satisfaction of all applicable revenue recognition criteria. Revenue related to our software as a service (“SaaS”) products is recognized ratably over the life of the contract or as transactions are used depending on the contract criteria. The recognition of future revenues from these licenses is dependent upon a number of factors, including, but not limited to, the term of our license agreements, the timing

of implementation of our products by our channel partners and customers, and the timing of any re-orders of additional licenses and/or license renewals by our channel partners and customers.

During each of the last few years, sales of licenses to one or more channel partners have comprised a significant part of our revenue each year. This is attributable to the timing of renewals or purchases of licenses and does not represent a dependence on any single channel partner. If we were to lose a channel partner relationship, we do not believe such a loss would adversely affect our operations because either we or another channel partner could sell our products to the end-users that had purchased products from the channel partner we lost. However, in that case, we or another channel partner must establish a relationship with the end-users, which could take time to develop, if it develops at all.

We have a growing number of competitors in the mobile image capture and identity verification industry, many of which have greater financial, technical, marketing, and other resources. However, we believe our patented mobile image capture and identity verification technology, our growing portfolio of products and geographic coverage for the financial services industry, and our market expertise gives us a distinct competitive advantage. To remain competitive, we must continue to offer products that are attractive to the consumer as well as being secure, accurate, and convenient. To help us remain competitive, we intend to further strengthen performance of our portfolio of products through research and development as well as partnering with other technology providers.

The COVID-19 pandemic created significant uncertainty in the U.S. and around the globe, resulting in both challenges and opportunities for our business. In response to this situation and in an effort to protect the health and safety of our employees, our workforce transitioned to working remotely and employee travel, including to our international subsidiaries, has been reduced. Because of our IT infrastructure and the nature of our business, our employees have generally been able to work remotely and productively. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local, or foreign authorities, or that we determine are in the best interests of our employees, customers, partners, and stockholders.

The impact of the COVID-19 pandemic accelerated the adoption of digital technologies and created opportunities and uses for our products and we continue to seek new and innovative opportunities to serve our customers’ needs. However, given the continuing uncertainties related to the long-term impacts of the COVID-19 pandemic, we cannot predict how it will continue to affect our operational and financial performance, including our long term revenue growth and profitability, the impact on our customers’ and our sales cycles, our ability to generate new business leads, the impact on our customers’, employee and industry events, and the effects on our vendors. As a result, the extent to which the COVID-19 pandemic will continue to impact our long-term financial condition or results of operations is uncertain.

Results of Operations

Comparison of the Three Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table summarizes certain aspects of our results of operations for the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands, except percentages):
Three Months Ended June 30,
Percentage of Total Revenue Increase (Decrease)
2022 2021 2022 2021 $ %
Revenue
Software and hardware $ 19,820 $ 16,973 50 % 53 % $ 2,847 17 %
Services and other 19,513 14,805 50 % 47 % 4,708 32 %
Total revenue $ 39,333 $ 31,778 100 % 100 % $ 7,555 24 %
Cost of revenue 4,581 3,410 12 % 11 % 1,171 34 %
Selling and marketing 11,216 8,133 29 % 26 % 3,083 38 %
Research and development 9,614 6,946 24 % 22 % 2,668 38 %
General and administrative 6,589 5,633 17 % 18 % 956 17 %
Amortization and acquisition-related costs 3,283 2,224 8 % 7 % 1,059 48 %
Restructuring costs 1,807 — 5 % — % 1,807 100 %
Interest expense 2,077 2,223 5 % 7 % (146) (7) %
Other income, net 89 80 — % — % 9 11 %
Income tax benefit (provision) 556 (304) 1 % (1) % 860 (283) %
Net income $ 811 $ 2,985 2 % 9 % $ (2,174) (73) %


	Three Months Ended June 30,
					Percentage of Total Revenue				Increase (Decrease)
	2023		2022 As Restated		2023		2022 As Restated		$		%
Revenue
Software and hardware	$	21,447	$	19,515	50	%	50	%	$	1,932	10	%
Services and other	21,623		19,680		50	%	50	%	1,943		10	%
Total revenue	$	43,070	$	39,195	100	%	100	%	$	3,875	10	%
Cost of revenue	5,712		5,784		13	%	15	%	(72)		(1)	%
Selling and marketing	10,296		11,216		24	%	29	%	(920)		(8)	%
Research and development	7,461		8,411		17	%	21	%	(950)		(11)	%
General and administrative	11,588		6,591		27	%	17	%	4,997		76	%
Amortization and acquisition-related costs	6,207		4,493		14	%	11	%	1,714		38	%
Restructuring costs	14		1,807		—	%	5	%	(1,793)		(99)	%
Interest expense	2,362		2,077		5	%	5	%	285		14	%
Other income, net	925		89		2	%	—	%	836		939	%
Income tax benefit (provision)	(783)		880		2	%	2	%	(1,663)		(189)	%
Net loss	$	(428)	$	(215)	1	%	1	%	$	(213)	(99)	%

Revenue

Total revenue increased ~~$7.6~~$3.9 million, or ~~24%~~10%, to ~~$39.3~~$43.1 million in the three months ended June 30, ~~2022~~2023 compared to ~~$31.8~~$39.2 million in the three months ended June 30, ~~2021.~~2022. Software and hardware revenue increased ~~$2.8~~$1.9 million, or ~~17%~~10%, to ~~$19.8~~$21.4 million in the three months ended June 30, ~~2022~~2023 compared to ~~$17.0~~$19.5 million in the three months ended June 30, ~~2021.~~2022. This increase is primarily due to an increase in sales of our Mobile Deposit®~~, CheckReader™~~ and IDLive® software products of ~~$2.8~~$2.4 million, partially offset by a decline in revenue from our CheckReader™ and legacy identity verification software and hardware products of $0.5 million. Services and other revenue increased ~~$4.7~~$1.9 million, or ~~32%~~10%, to ~~$19.5~~$21.6 million in the three months ended June 30, ~~2022~~2023 compared to ~~$14.8~~$19.7 million in the three months ended June 30, ~~2021.~~2022. This increase is primarily due to higher ~~Mobile Verify® transactional~~ SaaS revenue of ~~$2.1 million, or 25%, and SaaS revenue of $2.6~~$1.5 million as a result of the HooYu Acquisition and higher hosted mobile deposit transactional revenue of $1.5 million, partially offset by a decrease in transactional SaaS revenue of $1.1 million in the three months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

Cost of Revenue

Cost of revenue includes personnel costs related to billable services and software support, direct costs associated with our hardware products, hosting costs, and the costs of royalties for third party products embedded in our products. Cost of revenue ~~increased $1.2~~decreased $0.1 million, or ~~34%~~1%, to ~~$4.6~~$5.7 million in the three months ended June 30, ~~2022~~2023 compared to ~~$3.4~~$5.8 million in the three months ended June 30, ~~2021.~~2022. As a percentage of revenue, cost of revenue ~~increased~~decreased to ~~12%~~13% in the three months ended June 30, ~~2022~~2023 from ~~11%~~15% in the three months ended June 30, ~~2021.~~2022. The ~~increase~~decrease is primarily due to ~~an increase~~a decrease in ~~variable personnel, hosting and royalty costs as a result of the HooYu Acquisition and increased costs of our identity verification hardware products due to higher hardware revenues~~transactional SaaS revenue during the three months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

Selling and Marketing Expenses

Selling and marketing expenses include payroll, employee benefits, stock-based compensation, and other headcount-related costs associated with sales and marketing personnel. Selling and marketing expenses also include non-billable costs of professional services personnel, advertising expenses, product promotion costs, trade shows, and other brand awareness programs. Selling and marketing expenses ~~increased $3.1~~decreased $0.9 million, or ~~38%~~8%, to $10.3 million in the three months ended June 30, 2023 compared to $11.2 million in the three months ended June 30, ~~2022 compared to $8.1 million in the three months ended June 30, 2021.~~2022. As a percentage of revenue, selling and marketing expenses ~~increased~~decreased to 24% in the three months ended June 30, 2023 from 29% in the three months ended June 30, ~~2022 from 26% in the three months ended June 30, 2021.~~2022. The ~~increase~~decrease in selling and marketing expense is primarily due to ~~higher~~lower personnel-related costs ~~resulting from our increased headcount~~ of ~~$2.0~~$0.6 million ~~higher~~and lower product promotion and other costs ~~of $0.8 million and higher travel and related expenses~~ of $0.3 million in the three months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

Research and Development Expenses

Research and development expenses include payroll, employee benefits, stock-based compensation, third party contractor expenses, and other headcount-related costs associated with software engineering and mobile capture science. Research and development expenses ~~increased $2.7~~decreased $1.0 million, or ~~38%~~11%, to ~~$9.6~~$7.5 million in the three months ended June 30, ~~2022~~2023 compared to ~~$6.9~~$8.4 million in the three months ended June 30, ~~2021.~~2022. As a percentage of revenue, research and development expenses ~~increased~~decreased to ~~24%~~17% in the three months ended June 30, ~~2022~~2023 from ~~22%~~21% in the three months ended June 30, ~~2021.~~2022. The ~~increase~~decrease in research and development expenses is primarily due to ~~higher~~lower personnel-related costs ~~from the ID R&D Acquisition and our increased headcount~~ of ~~$1.9~~$1.5 million, partially offset by higher third-party contractor and other expenses of ~~$0.7 million and higher travel and related expenses of $0.1~~$0.5 million, in the three months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

General and Administrative Expenses

General and administrative expenses include payroll, employee benefits, stock-based compensation, and other headcount-related costs associated with finance, legal, administration, and information technology functions, as well as third party legal, accounting, and other administrative costs. General and administrative expenses increased ~~$1.0~~$5.0 million, or ~~17%~~76%, to $11.6 million in the three months ended June 30, 2023 compared to $6.6 million in the three months ended June 30, ~~2022 compared to $5.6 million in the three months ended June 30, 2021.~~2022. As a percentage of revenue, general and administrative expenses ~~decreased~~increased to 27% in the three months ended June 30, 2023 from 17% in the three months ended June 30, ~~2022 from 18% in the three months ended June 30, 2021.~~2022. The increase in general and administrative expenses is primarily due to higher ~~personnel-related~~audit and accounting fees of $2.2 million, third-party and professional fees of $1.9 million, software, information technology and other costs ~~resulting from our increased headcount~~ of ~~$0.9~~$0.8 million, and ~~higher travel and related expenses~~allowance for uncollectible receivables of ~~$0.1~~$0.4 million, during the three months ended June 30, 2023 compared to the same period in 2022. These increases were partially offset by decreases in personnel-related costs of $0.3 million in three months ended June 30, 2023 compared to the same period in 2022.

Amortization and acquisition-related costs

relative to a decrease in the same period in 2022, during the three months ended June 30, ~~2022~~2023 compared to the same period in ~~2021. These increases were~~2022. This increase was partially offset by a ~~decrease in the fair value of the contingent consideration liability associated with the ID R&D Acquisition of $1.4~~$0.4 million ~~a decrease in acquisition-related expense from the ID R&D Acquisition of $0.3 million and a~~ decrease in amortization expense of ~~intangibles related to~~intangible assets from previous acquisitions that ~~were~~had been fully amortized ~~of $0.3 million during the three months ended June 30, 2022~~as compared to the same period in ~~2021.~~2022.

Restructuring Costs

Over the last three years we have been working towards a multi-horizon strategy that positions us as an identity category leader. We have has invested significantly in building and acquiring innovation, technology, and expertise. At the same time, the COVID-19 pandemic dramatically accelerated digital transformation and the requirements for identity solutions rapidly evolved into a more integrated identity technology stack. The HooYu Acquisition was therefore both timely and necessary but we determined that additional steps needed to be taken to evolve our organization and achieve profitability for our identity business. One of the outcomes of this was an initiative focused on aligning our resources and expense priorities consistent with the investment areas that best enable us to deliver against our identity strategy. Restructuring costs consist of employee severance obligations and other related costs. Restructuring costs were $14,000 in the three months ended June 30, 2023 compared to $1.8 million in the three months ended June 30, ~~2022 and relate to~~2022. As the restructuring plan was initially implemented in June ~~2022. There were no~~2022, restructuring costs decreased in the ~~same period in 2021.~~three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Interest Expense

Interest expense includes the amortization of debt discount and issuance costs and coupon interest accrued on our 0.75% convertible senior notes due 2026 (the “2026 Notes”). Interest expense was $2.4 million for the three months ended June 30, 2023 and consisted of $1.9 million of amortization of debt discount and issuance costs and $0.5 million of interest incurred. Interest expense was $2.1 million for the three months ended June 30, 2022 and consisted of $1.8 million of amortization of debt discount and issuance costs and $0.3 million of coupon interest incurred. Interest expense was $2.2 million for the three months ended June 30, 2021 and consisted of $1.9 million of amortization of debt discount and issuance costs and $0.3 million of coupon interest incurred.

Other Income (Expense), Net

Other income (expense), net includes interest income net of amortization and net realized gains or losses on our marketable securities portfolio, and foreign currency transactional gains or losses. Other income (expense), net increased ~~$9,000,~~$0.8 million, or ~~11%~~939%, to ~~$89,000~~$0.9 million net income in the three months ended June 30, ~~2022~~2023 compared to ~~$80,000~~$0.1 million net income in the three months ended June 30, ~~2021.~~2022. The increase was primarily due to ~~a decrease~~higher interest income net of amortization of $0.7 million and higher foreign currency exchange transactional gains of $0.1 million in ~~realized losses on~~ the ~~sale of securities.~~three months ended June 30, 2023 as compared to the same period in 2022.

Income Tax Benefit (Provision)

For the three months ended June 30, 2023, we recorded an income tax provision of $0.8 million which yielded an effective tax rate of 221%. For the three months ended June 30, 2022, we recorded an income tax benefit of ~~$0.6 million which yielded an effective tax rate of 218%. For the three months ended June 30, 2021, we recorded an income tax provision of $0.3~~$0.9 million, or an effective tax rate of 9%80%. The difference between the U.S. federal statutory tax rate and our effective tax rate for the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 was primarily due to ~~excess tax benefits resulting from the vesting~~a mix of ~~restricted stock and the exercise of stock options as well as~~worldwide income, the impact of ~~foreign and state taxes, and~~non-deductible executive compensation, the impact of state

taxes, and federal and state research and development credits on ~~its~~the tax provision. The three months ended June 30, 2022 was also impacted by excess tax benefits of stock compensation.

Comparison of the Nine Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table summarizes certain aspects of our results of operations for the nine months ended June 30, ~~2022~~2023 and ~~2021~~2022 (amounts in thousands, except percentages):


		Nine Months Ended June 30,													Nine Months Ended June 30,
						Percentage of Total Revenue				Increase (Decrease)									Percentage of Total Revenue				Increase (Decrease)
		2022		2021		2022		2021		$		%			2023		2022 As Restated		2023		2022 As Restated		$		%
Revenue	Revenue													Revenue
Software and hardware	Software and hardware	$	54,545	$	42,288	51	%	49	%	$	12,257	29	%	Software and hardware	$	73,083	$	53,110	54	%	50	%	$	19,973	38	%
Services and other	Services and other	51,975		44,238		49	%	51	%	7,737		17	%	Services and other	61,813		52,068		46	%	50	%	9,745		19	%
Total revenue	Total revenue	$	106,520	$	86,526	100	%	100	%	$	19,994	23	%	Total revenue	$	134,896	$	105,178	100	%	100	%	$	29,718	28	%
Cost of revenue	Cost of revenue	11,247		11,340		11	%	13	%	(93)		(1)	%	Cost of revenue	16,679		14,790		12	%	14	%	1,889		13	%
Selling and marketing	Selling and marketing	28,859		24,048		27	%	28	%	4,811		20	%	Selling and marketing	29,434		28,859		22	%	27	%	575		2	%
Research and development	Research and development	25,457		19,801		24	%	23	%	5,656		29	%	Research and development	22,504		21,914		17	%	21	%	590		3	%
General and administrative	General and administrative	18,626		16,409		17	%	19	%	2,217		14	%	General and administrative	30,126		18,628		22	%	18	%	11,498		62	%
Amortization and acquisition-related costs	Amortization and acquisition-related costs	9,947		5,576		9	%	6	%	4,371		78	%	Amortization and acquisition-related costs	15,302		10,777		11	%	10	%	4,525		42	%
Restructuring costs	Restructuring costs	1,807		—		2	%	—	%	1,807		100	%	Restructuring costs	2,000		1,807		1	%	2	%	193		11	%
Interest expense	Interest expense	6,125		3,543		6	%	4	%	2,582		73	%	Interest expense	6,662		6,125		5	%	6	%	537		9	%
Other income (expense), net	Other income (expense), net	(8)		549		—	%	1	%	(557)		(101)	%	Other income (expense), net	1,719		(2)		1	%	—	%	1,721		86,050	%
Income tax benefit (provision)	Income tax benefit (provision)	504		(187)		—	%	—	%	691		(370)	%	Income tax benefit (provision)	(4,437)		1,068		3	%	1	%	(5,505)		(515)	%
Net income	Net income	$	4,948	$	6,171	5	%	7	%	$	(1,223)	(20)	%	Net income	$	9,471	$	3,344	7	%	3	%	$	6,127	183	%

Revenue

Total revenue increased ~~$20.0~~$29.7 million, or ~~23%~~28%, to ~~$106.5~~$134.9 million in the nine months ended June 30, ~~2022~~2023 compared to ~~$86.5~~$105.2 million in the nine months ended June 30, ~~2021.~~2022. Software and hardware revenue increased ~~$12.3~~$20.0 million, or ~~29%~~38%, to ~~$54.5~~$73.1 million in the nine months ended June 30, ~~2022~~2023 compared to ~~$42.3~~$53.1 million in the nine months ended June 30, ~~2021~~2022 primarily due to an increase in sales of our Mobile Deposit®~~, CheckReader™~~ and IDLive® software products of ~~$12.9~~$20.5 million. The increase in sales of our Mobile Deposit® software product is primarily the result of an existing customer having entered into a significant Mobile Deposit® multiyear contract and the license revenue associated with the full contract term being recognized in the first quarter of fiscal 2023. This increase was partially offset by a decline in revenue from our CheckReader™ and legacy identity verification software and hardware products of ~~$0.7~~$0.5 million. Services and other revenue increased ~~$7.7~~$9.7 million, or ~~17%~~19%, to ~~$52.0~~$61.8 million in the nine months ended June 30, 2023 compared to $52.1 million in the nine months ended June 30, 2022 ~~compared to $44.2 million in the nine months ended June 30, 2021~~ primarily due to strong growth in Mobile Verify® transactional SaaS revenue of $3.8 million in the nine months ended June 30, 2022 compared to the same period in 2021, as well as an increase in maintenance revenue associated with Mobile Deposit® software sales and hosted mobile deposit transactional revenue and identity verification software sales of $1.0 million and an increase in SaaS revenue as a result of the HooYu ~~Acquisition~~acquisition of $7.3 million and higher hosted mobile deposit transactional revenue of $2.9 ~~million.~~million, partially offset by a decrease in transactional SaaS revenue of $0.5 million compared to the same period in 2022.

Cost of Revenue

Cost of revenue includes personnel costs related to billable services and software support, direct costs associated with our hardware products, hosting costs, and the costs of royalties for third party products embedded in our products. Cost of revenue ~~decreased $0.1~~increased $1.9 million, or 1%13%, to ~~$11.2~~$16.7 million in the nine months ended June 30, ~~2022~~2023 compared to ~~$11.3~~$14.8 million in the nine months ended June 30, ~~2021.~~2022. As a percentage of revenue, cost of revenue decreased to ~~11%~~12% in the nine months ended June 30, ~~2022~~2023 from ~~13%~~14% in the nine months ended June 30, ~~2021.~~2022. The ~~decrease~~increase in cost of revenue is primarily due to ~~decreased costs~~an increase of ~~our identity verification hardware products as a result of lower hardware revenues~~ ~~during the nine months ended June 30, 2022 compared to the same period in 2021. The decrease is partially offset by an increase~~$1.9 million in variable personnel, hosting and royalty costs as a result of the HooYu ~~Acquisition and increased costs of our identity verification hardware products due to higher hardware revenues.~~Acquisition.

Selling and Marketing Expenses

Selling and marketing expenses include payroll, employee benefits, stock-based compensation, and other headcount-related costs associated with sales, marketing, and product management personnel. Selling and marketing expenses also include non-billable costs of professional services personnel, advertising expenses, product promotion costs, trade shows, and other brand awareness programs. Selling and marketing expenses increased ~~$4.8~~$0.6 million, or ~~20%~~2%, to $29.4 million in the nine months ended June 30, 2023 compared to $28.9 million in the nine months ended June 30, ~~2022 compared to $24.0 million in the nine months ended June 30, 2021.~~2022. As a percentage of revenue, selling and marketing expenses

decreased to 22% in the nine months ended June 30, 2023 from 27% in the nine months ended June 30, ~~2022 from 28% in the nine months ended June 30, 2021.~~2022. The increase in selling and marketing expense is primarily due to higher ~~personnel-related costs resulting from our increased headcount of $3.2 million,~~

~~higher~~ product promotion and other costs of ~~$1.1~~$0.9 million and ~~higher~~increased travel and related expenses of $0.2 million, partially offset by decreased personnel-related costs of $0.5 million in the nine months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

Research and Development Expenses

Research and development expenses include payroll, employee benefits, stock-based compensation, third party contractor expenses, and other headcount-related costs associated with software engineering and mobile capture science. Research and development expenses increased ~~$5.7~~$0.6 million, or ~~29%~~3%, to ~~$25.5~~$22.5 million in the nine months ended June 30, ~~2022~~2023 compared to ~~$19.8~~$21.9 million in the nine months ended June 30, ~~2021.~~2022. As a percentage of revenue, research and development expenses ~~increased~~decreased to ~~24%~~17% in the nine months ended June 30, ~~2022~~2023 from ~~23%~~21% in the nine months ended June 30, ~~2021.~~2022. The increase in research and development expenses is primarily due to ~~higher personnel-related~~$2.2 million increase in costs ~~resulting from our increased headcount of $3.8~~associated with third-party contractors and $0.1 million ~~higher third-party contractor and other expenses of $1.7 million and higher~~increase in travel and related ~~expenses of $0.2~~costs, partially offset by a $1.7 million decrease in personnel-related costs in the nine months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022.

General and Administrative Expenses

General and administrative expenses include payroll, employee benefits, stock-based compensation, and other headcount-related costs associated with finance, legal, administration, and information technology functions, as well as third party legal, accounting, and other administrative costs. General and administrative expenses increased ~~$2.2~~$11.5 million, or ~~14%~~62%, to $30.1 million in the nine months ended June 30, 2023 compared to $18.6 million in the nine months ended June 30, ~~2022 compared to $16.4 million in the nine months ended June 30, 2021.~~2022. As a percentage of revenue, general and administrative expenses ~~decreased~~increased to ~~17%~~22% in the nine months ended June 30, ~~2022~~2023 from ~~19%~~18% in the nine months ended June 30, ~~2021.~~2022. The increase was primarily due to higher ~~personnel-related costs resulting from our increased headcount~~audit and accounting fees of ~~$1.2~~$4.5 million, ~~higher~~ third-party and professional fees of $4.1 million, software and IT costs of $1.5 million, legal costs of $0.7 million, executive transition costs of $0.7 million and ~~higher travel and related expenses~~allowance for uncollectible receivables of ~~$0.3~~$0.4 million during the nine months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022. The increases were partially offset by decreases in personnel-related costs of $0.4 million in the nine months ended June 30, 2023 compared to the same period in 2022.

Amortization and acquisition-related costs

Amortization and acquisition-related costs include amortization of intangible assets, adjustments recorded due to changes in the fair value of contingent consideration, and other costs associated with acquisitions. Amortization and acquisition-related costs increased ~~$4.4~~$4.5 million, or ~~78%~~42%, to ~~$9.9~~$15.3 million in the nine months ended June 30, ~~2022~~2023 compared to ~~$5.6~~$10.8 million in the nine months ended June 30, ~~2021.~~2022. As a percentage of revenue, amortization and acquisition-related costs increased to 9%11% in the nine months ended June 30, ~~2022~~2023 from 6%10% in the nine months ended June 30, ~~2021.~~2022. The increase in amortization and acquisition-related costs is primarily due to increased amortization ~~of intangibles associated with the HooYu Acquisition and the ID R&D Acquisition of $4.7 million and expenses~~expense associated with the HooYu Acquisition of ~~$2.9~~$5.0 million and an increase in the fair value of acquisition-related contingent consideration associated with the ID R&D Acquisition of $3.5 million relative to a decrease in the same period in 2022, during the nine months ended June 30, ~~2022~~2023 compared to the same period in ~~2021.~~2022. These increases were partially offset by a $3.0 million decrease in acquisition-related costs as certain costs incurred in the ~~fair value of the contingent consideration liability associated with the ID R&D Acquisition of $2.2~~prior year did not recur, and a $1.0 million a decrease in amortization ~~expense~~ of ~~intangibles related to~~intangible assets from previous acquisitions that ~~were~~had been fully amortized ~~of $0.8 million and a decrease in acquisition-related expense from the ID R&D Acquisition of $0.2 million during the nine months ended June 30, 2022~~as compared to the same period in ~~2021.~~2022.

Restructuring Costs

Over the last three years we have been working towards a multi-horizon strategy that positions us as an identity category leader. We have has invested significantly in building and acquiring innovation, technology, and expertise. At the same time, the COVID-19 pandemic dramatically accelerated digital transformation and the requirements for identity solutions rapidly evolved into a more integrated identity technology stack. The HooYu Acquisition was therefore both timely and necessary but we determined that additional steps needed to be taken to evolve our organization and achieve profitability for our identity business. One of the outcomes of this was an initiative focused on aligning our resources and expense priorities consistent with the investment areas that best enable us to deliver against our identity strategy. Restructuring costs consist of employee severance obligations and other related costs. Restructuring costs were ~~$1.8~~$2.0 million in the nine months ended June 30, ~~2022 and relate~~2023 compared to ~~the restructuring plan implemented in June 2022. There were no restructuring costs~~$1.8 million in the same period in ~~2021.~~2022.

Interest Expense

Interest expense includes the amortization of debt discount and issuance costs and coupon interest ~~incurred associated with our~~accrued on the 2026 Notes. Interest expense was $6.7 million for nine months ended June 30, 2023 and consisted of $5.6 million of amortization of debt discount and issuance costs and $1.1 million of interest incurred. Interest expense was $6.1 million for nine months ended June 30, 2022 and consisted of $5.2 million of amortization of debt discount and issuance costs and $0.9 million of coupon interest incurred. Interest expense was $3.5 million for nine months ended June 30, 2021 and consisted of $3.1 million of amortization of debt discount and issuance costs and $0.4 million of coupon interest incurred.

Other Income (Expense), Net

Other income (expense), net includes interest income net of amortization and net realized gains or losses on our marketable securities portfolio and foreign currency transactional gains or losses. Other income (expense), net ~~decreased $0.6~~increased $1.7 million, or ~~negative~~

~~101%~~86,050%, to ~~$8,000 net expense in the nine months ended June 30, 2022 compared to $0.5~~$1.7 million net income in the nine months ended June 30, ~~2021.~~2023 compared to $2,000 net expense in the nine months ended June 30, 2022. The ~~decrease~~increase was primarily due to ~~higher~~$1.6 million increase in interest income net of amortization and $0.3 million increase in realized ~~losses~~gains on investments as compared to the ~~sale of marketable securities, higher~~same period in 2022. These increases were partially offset by $0.2 million increase in foreign currency exchange transactional losses ~~and lower interest income net of amortization.~~as compared to the same period in 2022.

Income Tax Benefit (Provision)

For the nine months ended June 30, 2023, we recorded an income tax provision of $4.4 million, which yielded an effective tax rate of 32%. For the nine months ended June 30, 2022, we recorded an income tax benefit of ~~$0.5 million, which yielded an effective tax rate of 11%. For the nine months ended June 30, 2021, we recorded an income tax provision of $0.2~~$1.1 million, which yielded an effective tax rate of negative 3%47%. The difference between the U.S. federal statutory tax rate and our effective tax rate for the nine months ended June 30, ~~2022~~2023 and ~~2021~~2022 was primarily due to ~~excess tax benefits resulting from the exercise~~a mix of ~~stock options and vesting of restricted stock,~~worldwide income, the impact of ~~foreign and state taxes,~~non-deductible executive compensation, the impact of ~~certain permanent items on its tax provision,~~state taxes, and ~~the impact of~~ federal and state research and development credits on ~~its~~the tax provision.

The nine months ended June 30, 2022 was also impacted by excess tax benefits of stock compensation.

Liquidity and Capital Resources

Cash generated from operations has historically been our primary source of liquidity to fund operations and investments to grow our business. Our additional sources of liquidity include available cash balances and proceeds from the issuance of the 2026 Notes (as defined below). On June 30, ~~2022,~~2023, we had ~~$90.6~~$131.0 million in cash and cash equivalents and investments compared to ~~$227.4~~$101.0 million on September 30, ~~2021, a decrease~~2022, an increase of ~~$136.8~~$30.0 million, or ~~60%~~30%. ~~The decrease~~In summary, our cash flows from continuing operations were as follows (amounts in cash and cash equivalents and investments is primarily due to acquisitions, net of cash acquired of $126.6 million, $6.8 million in payments of acquisition-related contingent consideration, and unfavorable foreign currency losses of $1.1 million.thousands):


	Nine Months Ended June 30,
	2023		2022 As Restated
Cash provided by operating activities	$	28,113	$	16,013
Cash provided (used) by investing activities	25,621		(2,156)
Cash provided (used) by financing activities	1,315		(21,513)

Cash Flows from Operating Activities

Cash flows related to operating activities are dependent on net income, adjustments to net income and changes in working capital. Net cash provided by operating activities during the nine months ended June 30, 2023 was $28.1 million and resulted primarily from net income of $9.5 million and net non-cash charges of $21.6 million, partially offset by unfavorable changes in operating assets and liabilities of $3.0 million. Net cash provided by operating activities during the nine months ended June 30, 2022 was $16.0 million and resulted primarily from net income of ~~$4.9~~$3.3 million and net non-cash charges of ~~$23.6~~$24.0 million, partially offset by unfavorable changes in operating assets and liabilities of ~~$12.5~~$11.3 million. The primary non-cash adjustments to operating activities were stock-based compensation expense, amortization of intangible assets, accretion and amortization on debt securities, amortization of investment premiums & other, and depreciation and amortization totaling $10.1 million, $9.2 million, $5.2 million, $1.3 million, and $1.1 million, respectively, which were partially offset by net changesincrease in ~~the estimated fair value of acquisition-related contingent consideration and a deferred tax benefit of $2.2 million and $1.1 million, respectively.~~

~~Net~~ cash provided by operating activities of $12.1 million during the nine months ended June 30, ~~2021~~2023 compared to nine months ended June 30, 2022 was ~~$25.0~~primarily due to an increase in income taxes payable as we have utilized most of our net operating loss carryforwards of $9.8 million and ~~resulted primarily from net income of $6.2 million, net non-cash charges of $18.5 million, and favorable changes~~an increase in operating assets and liabilities of $0.3 million. The primary non-cash adjustments to operating activities were stock-based compensation expense, amortization of intangible assets, accretion and amortization on debt securities & other, depreciation and amortization, and amortization of investment premiumsaccounts payable and other ~~totaling $8.6 million, $5.2 million, $3.1 million, $1.1 million, and $0.8 million, respectively, which were partially offset by a deferred tax benefit~~assets of ~~$0.3~~$2.3 million.

Cash Flows from Investing Activities

Net cash provided by investing activities was $25.6 million during the nine months ended June 30, 2023, which consisted primarily of net sales and maturities of investments of $26.3 million, partially offset by capital expenditures of $0.7 million. Net cash used in investing activities was $2.2 million during the nine months ended June 30, 2022, which consisted primarily of acquisitions, net of cash acquired of $126.6 million and capital expenditures of $0.9 million, partially offset by net sales and maturities of investments of $125.4 million.

~~Net~~ The increase in cash ~~used in~~provided by investing activities ~~was $147.4~~of $27.8 million during the nine months ended June 30, ~~2021, which consisted~~2023 compared to nine months ended June 30, 2022 was primarily due to a decrease in cash paid for business acquisitions, net of cash acquired of $126.6 million, partially offset by a decrease in net ~~purchases~~sales of investments of ~~$133.9 million, net cash paid in conjunction with the ID R&D Acquisition of $12.5 million, and capital expenditures of $1.0~~$99.1 million.

Cash Flows from Financing Activities

Net cash provided by financing activities was $1.3 million during the nine months ended June 30, 2023, primarily due to $1.4 million of net proceeds from the issuance of equity plan Common Stock. Net cash used in financing activities was $21.5 million during the nine months ended June 30, 2022, primarily due to $14.8 million in repurchases and retirements of our Common ~~Stock,~~Stock. The increase in cash provided by financing activities of $22.8 million during the nine months ended June 30, 2023 compared to nine months ended June 30, 2022 was primarily due to the expiration of the share repurchase program in June 2022 of $14.8 million and the payment of acquisition-related consideration of $6.8 million ~~in payments of acquisition-related contingent consideration,~~ and loans made to non-executive employees of $1.0 million, ~~partially offset by net proceeds from the issuance of equity plan Common Stock of $1.2 million.~~

~~Net cash provided by financing activities was $142.8 million during~~which did not recur in the nine months ended June 30, 2021, which consisted of net proceeds from the issuance of the 2026 Notes of $149.7 million, proceeds from the issuance of equity plan Common Stock of $3.0 million, and proceeds from other borrowings of $0.3 million partially offset by net cash used for the call spreads on the sales and purchases of warrants and convertible senior notes hedge issued in connection with the 2026 Notes of $9.3 million, payment of acquisition-related contingent consideration of $0.8 million, and principal payments on other borrowings of $0.1 million.

2023.

0.75% Convertible Senior Notes due 2026

In February 2021, the Company issued $155.3 million aggregate principal amount of the 2026 ~~Notes.~~Notes (including the Additional Notes, as defined below). The 2026 Notes are senior unsecured obligations of the Company. The 2026 Notes were issued pursuant to an Indenture, dated February 5, 2021 (the “Indenture”), between the Company and UMB Bank, National Association, as trustee. The

Indenture includes customary covenants and sets forth certain events of default after which the 2026 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the 2026 Notes become automatically due and payable. The Company granted the initial purchasers of the 2026 Notes (collectively, the “Initial Purchasers”) a 13-day option to purchase up to an additional $20.25 million aggregate principal amount of the 2026 Notes (the “Additional Notes”), which was exercised in full. The 2026 Notes were purchased in a transaction that was completed on February 5, 2021. As of January 13, 2023 (“Date of Noncompliance”), the Company was not in compliance with certain of the covenants in the Indenture as a result of the Company not timely filing its Form 10-K for the fiscal year ended September 30, 2022 (“Form 10-K”) and the Form 10-Q for the quarter ended December 31, 2022 (“Q1 Form 10-Q”) with the SEC. As a result of not being in compliance, the 2026 Notes began to accrue additional special interest of 0.25% of the outstanding principal of the 2026 Notes for the 90 days after the Date of Noncompliance and 0.50% of the outstanding principal of the 2026 Notes for the 91st through 180th day after the Date of Noncompliance. The Company subsequently did not timely file its Form 10-Q for the quarter ended March 31, 2023 (“Q2 Form 10-Q”) and its Form 10-Q for the quarter ended June 30, 2023 (“Q3 Form 10-Q”). The Company filed its Form 10-K with the SEC on July 31, 2023, its Q1 Form 10-Q with the SEC on September 6, 2023, and its Q2 Form 10-Q with the SEC on September 29, 2023. As of June 30, 2023, the Company was not in compliance with certain covenants in the Indenture as a result of not timely filing its Form 10-K, Q1 Form 10-Q, Q2 Form 10-Q, and Q3 Form 10-Q. As of October 26, 2023, the Company is in compliance with the covenants in the Indenture as all of its required annual and quarterly reports have been filed with the SEC.

The net proceeds from this offering were approximately $149.7 million, after deducting the Initial Purchasers’ discounts and commissions and the Company’s estimated offering expenses related to the offering. The 2026 Notes will mature on February 1, 2026, unless earlier redeemed, repurchased or converted. The 2026 Notes ~~will~~ bear interest from February 5, 2021 at a rate of 0.750% per year payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, 2021. The 2026 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding August 1, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s Common Stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Common Stock on such trading day and the conversion rate on such trading day; and (3) upon the occurrence of certain corporate events or distributions on the Common Stock. On or after August 1, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of the 2026 Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash and, if applicable at the Company’s election, shares of Common Stock, based on the applicable conversion rate(s); provided that the Company will be required to settle conversions solely in cash unless and until the Company (i) receives stockholder approval to increase the number of authorized shares of the Common Stock and (ii) reserves such amount of shares of the Common Stock for future issuance as required pursuant to the indenture that will govern the 2026 Notes. The conversion rate for the 2026 Notes will initially be 47.9731 shares of the Common Stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of approximately $20.85 per share of the Common Stock. The initial conversion price of the 2026 Notes represents a premium of approximately 37.5% to the $15.16 per share last reported sale price of the Common Stock on February 2, 2021. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. The impact of the convertible feature will be dilutive to our earnings per share when our average stock price for the period is greater than the conversion price.

In connection with the issuance of the 2026 Notes, we entered into transactions for convertible notes hedge (the “Notes Hedge”) and warrants (the “Warrant Transactions”). The Notes Hedge was entered into with Bank of America, N.A., Jefferies International Limited and Goldman Sachs & Co. LLC, and provided the Company with the option to acquire, on a net settlement basis, approximately 7.4 million shares of Common Stock at a strike price of $20.85, which is equal to the number of shares of Common Stock that notionally underlie and corresponds to the conversion price of the 2026 Notes. The cost of the Notes Hedge was $33.2 million. The Notes Hedge will expire on February 1, 2026, equal to the maturity date of the 2026 Notes. The Notes Hedge is expected to reduce the potential equity dilution upon conversion of the 2026 Notes if the daily volume-weighted average price per share of our Common Stock exceeds the strike price of the Notes Hedge.

In addition, the Warrant Transactions provided us with the ability to acquire up to 7.4 million shares of our Common Stock. The Warrant Transactions will expire ratably during the 80 trading days commencing on and including May 1, 2026 and may be settled in net shares of Common Stock or net cash at the Company’s election. We received $23.9 million in cash proceeds from the Warrant Transactions. As a result of the Warrant Transactions, the Company is required to recognize incremental dilution of earnings per share to the extent the average share price is over $26.53 for any fiscal quarter.

As of October ~~28, 2022,~~26, 2023, the 2026 Notes were not convertible, therefore, we had not purchased any shares under the Notes Hedge and the Warrant Transactions had not been exercised and remain outstanding. See Note 9. “Convertible Senior Notes,” of the notes to condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for more information relating to the Notes Hedge and Warrant Transactions.

~~Rights Agreement~~

On October 23, 2018, we entered into the Section 382 Rights Agreement (the “Rights Agreement”) and issued a dividend of one preferred share purchase right (a “Right”) for each share of Common Stock payable on November 2, 2018 to the stockholders of record of such shares on that date. Each Right entitles the registered holder, under certain circumstances, to purchase from us one one-thousandth of a share of Series B Junior Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of the Company, at a

~~price of $35.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement.~~

At any time prior to the time any Person becomes an Acquiring Person (as defined in the Rights Agreement), the Board may redeem the Rights in whole, but not in part, at a price of $0.0001 per Right (the “Redemption Price”). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

On February 28, 2019, the Company entered into Amendment No. 1 to the Rights Agreement for the purpose of (i) modifying the definitions of “Beneficial Owner,” “Beneficially Own,” and “Beneficial Ownership” under the Rights Agreement to more closely align such definitions to the actual and constructive ownership rules under Section 382 of the Internal Revenue Code of 1986, as amended or such similar provisions of the Tax Cuts and Jobs Act of 2017 and the rules and regulations promulgated thereunder, and (ii) adding an exemption request process for persons to seek an exemption from becoming an “Acquiring Person” under the Rights Agreement in the event such person wishes to acquire 4.9% or more of the Common Stock then outstanding.

~~The Rights expired on October 22, 2021 and no Rights were redeemed or exchanged.~~

Share Repurchase Program

On June 15, 2021, the Board authorized and approved a share repurchase program for up to $15 million of the currently outstanding shares of our Common Stock. The share repurchase program was completed during the second quarter of fiscal 2022 and as such the Company made no purchases during the three months ended June 30, 2022. The Company made purchases of $14.8 million, or approximately 886,204 shares, during the nine months ended June 30, 2022 at an average price of $16.73 per share and subsequently retired the shares. The share repurchase program expired on June 30, ~~2022.~~2022 and as such no purchases were made after this date. The timing, price and volume of repurchases were based on market conditions, relevant securities laws and other factors. The repurchases were made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions or pursuant to a share repurchase trading plan.

The Company made purchases of $14.8 million, or approximately 886,204 shares, during the nine months ended June 30, 2022 at an average price of 16.73 per share. The share repurchase plan was completed during the second quarter of fiscal 2022 and total purchases made under the share repurchase program were $15.0 million.

On December 13, 2019, the Board authorized and approved a share repurchase program for up to $10 million of the currently outstanding shares of our Common Stock. The share repurchase program expired on December 16, 2020. Total purchases made under the share repurchase program were $1.0 million or approximately 137,000 shares at an average price of $7.33. The purchases under the share repurchase program were made through open market trades.

Other Liquidity Matters

On June 30, ~~2022,~~2023, we had investments of ~~$69.1~~$43.5 million, designated as available-for-sale debt securities, which consisted of commercial paper, corporate issuances, and asset-backed securities, carried at fair value as determined by quoted market prices for identical or similar assets, with unrealized gains and losses, net of tax, and reported as a separate component of stockholders’ equity. All securities ~~whose~~for which maturity or sale is expected within one year are classified as “current” on the condensed consolidated balance sheets. All other securities are classified as “long-term” on the condensed consolidated balance sheets. At June 30, ~~2022,~~2023, we had ~~$49.5~~$40.7 million of our available-for-sale securities classified as current and ~~$19.5~~$2.8 million of our available-for-sale securities classified as long-term. At September 30, ~~2021,~~2022, we had ~~$149.1~~$58.3 million of our available-for-sale securities classified as current and ~~$48.1~~$10.6 million of our available-for-sale securities classified as long-term.

We had working capital of ~~$68.3~~$124.5 million at June 30, ~~2022~~2023 compared to ~~$164.8~~$88.6 million at September 30, ~~2021.~~

2022. We do not have any other material cash requirements other than those related to leases as described in Note 10. “Commitments and ~~Contingencies.”~~Contingencies” of the notes to the condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q. Based on our current operating plan, we believe the current cash and cash equivalents and cash expected to be generated from operations will be adequate to satisfy our working capital needs for at least the next ~~eighteen~~twelve months from the date the financial statements are filed.

Changes in Critical Accounting ~~Policies~~Estimates

Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of the condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. We review our estimates on an on-going basis, including those related to revenue recognition, stock-based compensation, income taxes and the valuation of goodwill, intangibles and other long-lived assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. The critical accounting policies and estimates used in the preparation of our condensed consolidated financial statements are described in Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our ~~2021~~2022 Annual Report.

There have been no material changes to our critical accounting ~~policies and~~ estimates from those disclosed in our ~~2021~~2022 Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For a complete discussion of the Company’s quantitative and qualitative disclosures about market risks, see the section titled Quantitative and Qualitative Disclosures About Market Risks in our ~~2021~~2022 Annual Report. Except as described below, there has been no material change in this information as of June 30, ~~2022~~2023.

Interest Rates

The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our investment portfolio of cash equivalents and marketable securities in a variety of securities, including corporate debt securities, commercial paper, certificates of deposit, and asset-backed securities. We have not used derivative financial instruments in our investment portfolio, and none of our investments are held for trading or speculative purposes. Short-term and long-term debt securities are generally classified as available-for-sale and consequently are recorded on the condensed consolidated balance sheets at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income, net of estimated tax. As of June 30, ~~2022,~~2023, our marketable securities had remaining maturities between approximately one and 2822 months and a fair market value of ~~$69.1~~$43.5 million, representing ~~18%~~10% of our total assets.

The fair value of our cash equivalents and debt securities is subject to change as a result of changes in market interest rates and investment risk related to the issuers’ credit worthiness. We do not utilize financial contracts to manage our investment portfolio’s exposure to changes in market interest rates. A hypothetical 100 basis point increase or decrease in market interest rates would not have a material impact on the fair value of our cash equivalents and debt securities due to the relatively short maturities of these investments. While changes in market interest rates may affect the fair value of our investment portfolio, any gains or losses will not be recognized in our results of operations until the investment is sold or if the reduction in fair value was determined to be an other-than-temporary impairment.

Foreign Currency Risk

As a result of past acquisitions, we have operations in ~~the United Kingdom,~~ France, the Netherlands, ~~Russia,~~ and Spain that are exposed to fluctuations in the

foreign currency exchange rate between the U.S. dollar, the Euro, the Ruble, and the British pound sterling. The functional currency of

our French, Dutch, and Spanish operations is the Euro. Our results of operations and cash flows are subject to fluctuations due to

changes in foreign currency exchange rates, particularly changes in the ~~Euro and British pound.~~Euro. Translation adjustments resulting from translating the

functional currency financial statements into U.S. dollar equivalents are reported separately in the condensed consolidated statements of operations and other comprehensive income (loss).

~~The~~Inflation

We do not believe that inflation had a material effect on our business, financial condition or results of ~~a hypothetical 10% change in foreign exchange rates on monetary assets and liabilities at~~operations during either of the three months ended June 30, ~~2022 would results in a change of approximately $16.9 million~~2023 or 2022. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. ~~To date, foreign currency transaction gains and losses and exchange rate fluctuations have not been material to our financial statements and have not historically.~~

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. ~~Based on this evaluation, our~~Our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as June 30, ~~2022~~2023 due to the material weaknesses discussed below.

Notwithstanding the identified material weaknesses, management believes the condensed consolidated financial statements included in this Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations and cash flows as of and for the periods presented, in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Remediation of Previously Reported Material Weaknesses in Internal Control Over Financial Reporting

~~In connection with the audit of our Company as of and for the year ended September 30, 2021, as~~As previously reported wein our 2022 Annual Report, the Company identified a material ~~weakness in~~weaknesses related to the ~~operating effectiveness of our internal control over financial reporting as a result of certain control deficiencies~~following:

•Management did not design and maintain effective controls related to the precision of ~~our~~the Company’s review over the initial valuation and subsequent remeasurement of the contingent consideration liability recognized as part of the consideration transferred in the ID R&D Acquisition.

In response to this material weakness, we have enhanced the documentation of the control to include evidence of our review of the valuation provided by our third-party specialist. The evidence of our review includes corroborating inputs to the valuation, performing a recalculation of the valuation, and ensuring consistency with accounting principles generally accepted in the U.S. We are required to demonstrate the effectiveness of the new processes for a sufficient period of time; therefore, until the efforts to test the necessary control activities we identified, are fully completed, the material weakness continues to exist at June 30, 2022.

In connection with our interim review as of and for the period ended March 31, 2022, as previously reported, we identified a material weakness related to our controls over the review of US and foreign income tax accounts. We•Management did not have sufficient internal technical resources, ~~nor~~or adequate oversight of ~~our~~the Company’s third-party tax advisor, to appropriately identify, evaluate, and ~~evaluate~~review certain inputs and assumptions that ~~effect~~affect the ~~reported~~US, foreign, and consolidated tax accounts. ~~Our remediation efforts associated with this material weakness which will include increased oversight and review are ongoing and therefore, the material weakness continues to exist at June 30, 2022.~~

In connection with the preparation of our financial statements as of and for the period ended June 30, 2022, management identified the following additional material weaknesses in our internal control over financial reporting:

i.•~~our~~Management did not maintain effective controls related to the financial statement close process to ensure the completeness and accuracy of certain amounts and disclosures, specifically related to balance sheet account reconciliations and ~~our~~the Company’s review and preparation of the consolidation and financial ~~statements, were~~statements.

•Management did not ~~operating effectively to ensure the accuracy and completeness of certain amounts and disclosures;~~

~~ii.our~~design or maintain effective controls ~~related to~~over the review of the accounting for business combinations, including accounting for transaction costs and deferred ~~taxes are not designed effectively.~~taxes. This material weakness resulted in a restatement to the second quarter of fiscal ~~2022;~~2022 as further discussed in Note 15 to the consolidated financial statements as of and for the period ended September 30, 2022.

~~iii.~~•~~our~~Management did not design and maintain effective controls ~~related~~ to ensure proper revenue recognition, specifically ~~over~~related to the accounting review of customer ~~contracts, were~~contracts.

•Management did not ~~designed~~perform sufficient risk assessment procedures in order to design and implement effective controls, including consideration of improper segregation of duties, for substantially all of the Company's financial statement areas.

•Management did not design or ~~operating effectively~~maintain effective information technology general controls over logical access and program change management for certain key information systems used in the financial reporting process.

•Management did not design or maintain controls to ~~ensure~~verify the completeness and accuracy of ~~revenue recorded.~~information used by control owners in the operation of controls across substantially all of the Company’s financial statement areas.

•Management did not maintain sufficient evidence of the operation of certain management review controls and activity level controls across substantially all of the Company's financial statement areas.

•Management did not perform timely and ongoing evaluations to ascertain whether components of internal control are present and functioning.

In ~~response~~order to ~~these~~address and resolve the identified deficiencies that aggregated to material weaknesses, ~~our~~ management with oversight from the ~~oversight~~Company’s Audit Committee is in the process of developing a detailed plan for remediation, which will include:

•Evaluating skill set gaps and hiring additional accounting, financial reporting, and compliance personnel (including internal and external resources), as needed, with relevant public company accounting and financial reporting experience to develop and implement additional policies, procedures, and controls;

•Providing ongoing training for key personnel responsible for internal control over financial reporting;

•Enhancing or designing and implementing a comprehensive and continuous risk assessment process that identifies and assesses risks of material misstatement across the entity and helps ensure that related internal controls are properly designed and in place to respond to those risks in the Company’s financial statements and financial reporting;

•Enhancing or designing and implementing controls over the completeness and accuracy of information used in financial reporting; and

•Enhancing or designing and implementing process-level controls and effective general information technology controls relevant to all of the ~~Audit Committee of our Board of Directors, has identified and begun to implement remediation steps to enhance our overall control environment. Our management~~Company’s financial reporting processes.

The Company is committed to remediating ~~such~~the material weaknesses ~~through continuing training~~ and ~~hiring~~is making progress in that effort. The actions the Company is taking are subject to ongoing senior management review, as well as oversight from the Company’s Audit Committee. When fully implemented and operational, the Company believes the measures described above will remediate the underlying causes of ~~personnel, improving~~ the ~~timeliness of our accounting close process,~~control deficiencies that gave rise to the material weaknesses and ~~continuing to enhance~~strengthen the ~~design of our~~Company’s internal control over financial ~~review controls.~~

~~Although we intend to complete the~~reporting. These remediation efforts are in process as ~~promptly as possible, we cannot at this time estimate how long it~~of the fiscal quarter ended June 30, 2023. The Company will ~~take~~not be able to fully remediate these material ~~weaknesses. In addition, we~~weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. The Company may ~~discover additional material weaknesses that require additional time and resources to remediate and we may decide to take~~also identify additional measures that may be required to ~~address~~remediate the material weaknesses ~~or modify~~in the ~~remediation steps described above. Until these material weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated~~Company’s internal control over financial ~~statements are prepared in accordance with GAAP.~~

reporting, necessitating further action.

Changes in Internal Control over Financial Reporting

~~Other than~~Aside from the ~~new material weaknesses identified and our ongoing remediation efforts described~~matters as set forth above, there has been no change in our internal control over financial reporting during the quarter ended June 30, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Although we intend to complete the remediation process as promptly as possible, we cannot at this time estimate how long it will take to remediate these material weaknesses. In addition, we may discover additional material weaknesses that require additional time and resources to remediate and we may decide to take additional measures to address the material weaknesses or modify the remediation steps described above. Until these material weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with GAAP.

4342

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information in Note 10 of the notes to the condensed consolidated financial statements included inPart I, Item I of this Form 10-Q is incorporated herein by reference.

ITEM 1A. RISK FACTORS

While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. Item 1A—“Risk Factors” in our ~~2021~~2022 Annual Report describes some of the risks and uncertainties associated with our business, which we strongly encourage you to review. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. There have been no material changes in our risk factors from those disclosed in our ~~2021~~2022 Annual ~~Report, except as noted below.~~

We have identified material weaknesses in our internal control over financial reporting, and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In the course of preparing our financial statements for fiscal 2021, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in the operating effectiveness of our internal control over financial reporting as a result of certain control deficiencies related to the precision of our review of the initial valuation and subsequent remeasurement of the contingent consideration liability recognized as part of the consideration transferred in the ID R&D Acquisition. In response to this material weakness, we have enhanced the documentation of the control to include evidence of our review of the valuation provided by our third-party specialist. The evidence of our review includes corroborating inputs to the valuation, performing a recalculation of the valuation, and ensuring consistency with accounting principles generally accepted in the U.S. We are required to demonstrate the effectiveness of the new processes for a sufficient period of time; therefore, until the efforts to test the necessary control activities we identified, are fully completed, the material weakness continues to exist at June 30, 2022.

In connection with our interim review as of and for the period ended March 31, 2022, as previously reported, we identified a material weakness related to our controls over the review of US and foreign income tax accounts. We did not have sufficient internal technical resources, nor oversight of our third-party tax advisor, to appropriately identify and evaluate certain inputs and assumptions that effect the reported consolidated tax accounts. Our remediation efforts associated with this material weakness which will include increased oversight and review are ongoing and therefore, the material weakness continues to exist at June 30, 2022.

In connection with the preparation of our financial statements as of and for the period ended June 30, 2022, we also identified the following additional material weaknesses in our control over financial reporting: (i) our controls related to the financial statement close process, specifically related to balance sheet account reconciliations and our review and preparation of the consolidation and financial statements, were not operating effectively to ensure the accuracy and completeness of certain amounts and disclosures; (ii) our controls related to the review of the accounting for business combinations, including accounting for transaction costs and deferred taxes, are not designed effectively. This material weakness resulted in a restatement to the second quarter of fiscal 2022; and (iii) our controls related to revenue recognition, specifically over the accounting review of customer contracts, were not designed or operating effectively to ensure completeness and accuracy of revenue recorded.

To address our material weakness, our management, with the oversight of the Audit Committee of our Board of Directors, has identified and begun to implement remediation steps to enhance our overall control environment. Our management is committed to remediating such material weaknesses through continuing training and hiring of personnel, improving the timeliness of our accounting close process, and continuing to enhance the design of our financial review controls. See Part I, Item 4 “Controls and Procedures” for additional information about these material weaknesses and our remediation efforts.

If we are unable to further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price. If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources. Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to

remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that are filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ.

~~Russian military action against Ukraine could have a material adverse effect on our operations, results of operations, financial condition, liquidity and business outlook.~~Report.

In February 2022, Russian forces launched significant military actions against Ukraine, and sustained conflict and disruption in the region is likely. We have employees in Russia and our sales in the region are not currently significant. The specific impact on our financial condition, results of operations and cash flows is not determinable as of the date hereof, but enhanced sanctions activity by the U.S. and other countries against officials, individuals, regions and industries in Russia, and subsequent responses from our customers and others may disrupt our relationship with our vendors, disrupt our delivery of services, cause us to shift all or portions of our work occurring in the region to other countries, and may restrict our ability to engage in certain projects in the region. Any such actions could have a material adverse effect on our operations, results of operations, financial condition, liquidity and business outlook.

~~Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.~~

There is an increasing focus from certain investors, employees, regulators and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance (“ESG”) factors. Some investors and investor advocacy groups may use these factors to guide investment strategies and, in some cases, investors may choose not to invest in our company if they believe our policies relating to corporate responsibility are inadequate. Third-party providers of corporate responsibility ratings and reports on companies have increased to meet growing investor demand for measurement of corporate responsibility performance, and a variety of organizations currently measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized. Investors, particularly institutional investors, use these ratings to benchmark companies against their peers and if we are perceived as lagging with respect to ESG initiatives, certain investors may engage with us to improve ESG disclosures or performance and may also make voting decisions, or take other actions, to hold us and our board of directors accountable. In addition, the criteria by which our corporate responsibility practices are assessed may change, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. If we elect not to or are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate.

We may face reputational damage in the event our corporate responsibility initiatives or objectives do not meet the standards set by our investors, stockholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third-party rating services. A low ESG or sustainability rating by a third-party rating service could also result in the exclusion of our common stock from consideration by certain investors who may elect to invest with our competition instead. Ongoing focus on corporate responsibility matters by investors and other parties as described above may impose additional costs or expose us to new risks. Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition, or results of operations, including the sustainability of our business over time.

In addition, the SEC has announced proposed rules that, among other matters, will establish a framework for reporting of climate-related risks. To the extent the proposed rules impose additional reporting obligations, we could face increased costs. Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege our existing climate disclosures are misleading or deficient.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~On April 25, 2022, the Company granted restricted stock units to one new employee for (i) 29,475 shares~~There were no unregistered sales of the Company’s ~~common stock, which shall vest over~~equity securities during the quarter ended June 30, 2023, that were not previously disclosed in a ~~four year period with 25% of the shares subject thereto vesting~~Current Report on each anniversary of the grant date, (ii) 29,475 shares of the Company’s common stock, which shall vest up to 33.33% of the shares subject thereto on each anniversary of the grant date, subject to the achievement of the annual performance criteria which is based on the percentage increase in value of the Company’s common stock as compared to the percentage increase in value of the Russell 2000 Index over the applicable annual performance period, and (iii) 9,824 shares of the Company’s common stock, which shall vest up to 33.33% of the shares subject thereto on each anniversary of the grant date if the annual performance criteria (which is based on the percentage increase in value of the Company’s common stock as compared to the percentage increase in value of the Russell 2000 Index) for the applicable performance period has been exceeded. The restricted stock units were an inducement grant made in accordance with Nasdaq Listing Rule 5635(c)(4) and Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The vesting of each grant is subject to the employee’s continued service with the Company through the applicable vesting date. The inducement grants are subject to the terms and conditions of award agreements covering the grants and the Company’s 2020 Incentive Plan. We intend to file a registration statement on a Form ~~S-8 to register the common stock underlying these restricted stock units prior to the time at which such restricted stock units begin vesting.~~8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

During the preparation of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 we made adjustments to our financial results in the third quarter of fiscal 2022 that consist of a $5.7 million decrease to other current liabilities, a $4.4 million increase to accrued liabilities and a $1.3 million increase to income taxes payable, a $1.3 million decrease to deferred income tax liabilities, and a $1.3 million decrease to other current assets. The adjustments were made to separately state accrued liabilities on the consolidated balance sheets as the amount was greater than 5% of total current liabilities. Additionally, we noted that certain aspects of our acquisition of HooYu Ltd. (the “HooYu Acquisition”) in March 2022 were improperly accounted for in the quarterly report on Form 10-Q for the quarter ended March 31, 2022. Specifically, we did not account for the representations and warranty insurance purchased in connection with the HooYu Acquisition, which should have been accrued for and fully expensed at the date of the HooYu Acquisition. In addition, we did not accrue for a payment of stamp duty tax related to the HooYu Acquisition, which was paid during the third fiscal quarter ended June 30, 2022. Lastly, we did not record deferred tax assets and deferred tax liabilities based on information available at the time of the HooYu Acquisition. We recognized $1.3 million of acquisition-related costs and expenses in the second quarter that had been previously recognized in the third quarter to match the period in which the related acquisition occurred. Additionally, we recognized a deferred tax asset related to the HooYu Acquisition of $1.0 million as part of the opening balance sheet related to the HooYu Acquisition.We have decided to correct these errors during the quarter ended March 31, 2022, concluding that these expenses, accruals and balance sheet reclassifications are material to the unaudited interim consolidated balance sheet and statement of operations and comprehensive income (loss) as of and for the quarter ended March 31, 2022 and on October 28, 2022, filed an amendment to our Form 10-Q for the quarter ended March 31, 2022 to correct such errors.

As a result of the items described above, certain of the GAAP financial results for the three and nine months ended June 30, 2022 furnished in Exhibit 99.1 to the Current Report on Form 8-K filed on July 28, 2022, differ from the financial results disclosed in this Quarterly Report on Form 10-Q. In addition, certain of the reported GAAP financial results for the three and nine months ended June 30, 2022 differ as a result of the items described above as follows (in thousands, except per share data and percentages):None.

Three Months Ended June 30, 2022 Nine Months Ended June 30, 2022
As Furnished As Adjusted As Furnished As Adjusted
Revenue
Software and hardware $ 19,820 $ 19,820 $ 54,545 $ 54,545
Services and other 19,513 19,513 51,975 51,975
Total revenue 39,333 39,333 106,520 106,520
Operating costs and expenses
Cost of revenue—software and hardware 508 508 1,196 1,196
Cost of revenue—services and other 4,059 4,073 10,038 10,051
Selling and marketing 11,174 11,216 28,817 28,859
Research and development 9,411 9,614 25,253 25,457
General and administrative 6,667 6,589 18,704 18,626
Acquisition-related costs and expenses 4,492 3,283 9,827 9,947
Restructuring costs 1,807 1,807 1,807 1,807
Total operating costs and expenses 38,118 37,090 95,642 95,943
Operating income 1,215 2,243 10,878 10,577
Interest expense 2,077 2,077 6,125 6,125
Other income, net 49 89 (48) (8)
Income before income taxes (813) 255 4,705 4,444
Income tax provision (39) 556 (522) 504
Net income $ (852) $ 811 $ 4,183 $ 4,948
Net income per share—basic $ (0.02) $ 0.02 $ 0.09 $ 0.11
Net income per share—diluted $ (0.02) $ 0.02 $ 0.09 $ 0.11
Shares used in calculating net income per share—basic 44,591 44,669 44,721 44,721
Shares used in calculating net income per share—diluted 45,145 45,224 45,793 45,793

June 30, 2022 (Unaudited)
As Furnished As Adjusted
ASSETS
Current assets:
Cash and cash equivalents $ 21,522 $ 21,543
Short-term investments 49,531 49,531
Accounts receivable, net 29,672 29,618
Contract assets 5,125 5,125
Prepaid expenses 3,453 3,078
Other current assets 4,634 3,194
Total current assets 113,937 112,089
Long-term investments 19,534 19,534
Property and equipment, net 3,723 3,802
Right-of-use assets 5,503 5,484
Intangible assets, net 85,743 85,743
Goodwill 129,260 127,992
Deferred income tax assets 11,963 12,993
Convertible senior notes hedge — —
Other non-current assets 5,342 6,959
Total assets $ 375,005 $ 374,596
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 4,200 $ 3,981
Accrued payroll and related taxes 10,173 10,276
Accrued liabilities — 4,432
Deferred revenue, current portion 13,274 13,220
Lease liabilities, current portion 1,908 1,902
Acquisition-related contingent consideration 4,860 4,980
Restructuring accrual 1,807 1,807
Income taxes payable — 1,332
Other current liabilities 7,522 1,858
Total current liabilities 43,744 43,788
Convertible senior notes 126,157 126,157
Deferred revenue, non-current portion 1,409 1,409
Lease liabilities, non-current portion 4,789 4,776
Deferred income tax liabilities 20,493 19,227
Other non-current liabilities 2,011 1,923
Total liabilities 198,603 197,280
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, 44,396,263 and 44,168,745 issued and outstanding, as of June 30, 2022 and September 30, 2021, respectively 44 44
Additional paid-in capital 211,087 211,212
Accumulated other comprehensive loss (17,880) (17,856)
Accumulated deficit (16,849) (16,084)
Treasury stock, at cost, no shares and 7,773 shares as of June 30, 2022 and September 30, 2021, respectively — —
Total stockholders’ equity 176,402 177,316
Total liabilities and stockholders’ equity $ 375,005 $ 374,596

4843

ITEM 6. EXHIBITS

Exhibit No.

Description

Incorporated by

Reference from

Document

Exhibit No.

Description

Incorporated by

Reference from

Document

2.1**

Purchase Agreement, dated March 23, 2022, by and among the persons whose names and addresses are set out in Schedule I and Mitek Systems, Inc.

(1)

2.1**+

Purchase Agreement, dated March 23, 2022, by and among the persons whose names and addresses are set out in Schedule I and Mitek Systems, Inc.

(1)

3.1

Restated Certificate of Incorporation of Mitek Systems, Inc., as amended.

(2)

3.1

Restated Certificate of Incorporation of Mitek Systems, Inc., as amended.

(2)

3.2

Certificate of Amendment of Restated Certificate of Incorporation of Mitek Systems, Inc.

(3)

3.2

Certificate of Amendment of Restated Certificate of Incorporation of Mitek Systems, Inc.

(3)

3.3

Second Amended and Restated Bylaws of Mitek Systems, Inc.

(4)

3.3

Second Amended and Restated Bylaws of Mitek Systems, Inc.

(4)

3.4

Certificate of Designation of Series B Junior Participating Preferred Stock.

(5)

3.4

Certificate of Designation of Series B Junior Participating Preferred Stock.

(5)

10.2*

Restricted Stock Unit Award Agreement, dated as of May 16, 2022, between Christopher Briggs and Mitek Systems, Inc.

10.3*

Performance Restricted Stock Unit Award Agreement, dated as of May 16, 2022, between Christopher Briggs and Mitek Systems, Inc.

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.INS

Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Linkbase Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Linkbase Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


*						Filed herewith.
**						Non-material schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the SEC.
(1)						Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 23, 2022.
(2)						Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014, filed with the SEC on December 7,5, 2014.
(3)						Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2022.
(4)						Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 10, 2014.
~~(4)~~(5)						Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 23, 2018.

4944

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


October ~~28, 2022~~26, 2023	MITEK SYSTEMS, INC.

	By:	/s/ Scipio Maximus Carnecchia
		Scipio Maximus Carnecchia
		Chief Executive Officer (Principal Executive Officer)

	By:	/s/ ~~Frank Teruel~~Fuad Ahmad
		~~Frank Teruel~~Fuad Ahmad
		Interim Chief Financial Officer (Interim Principal Financial and Accounting Officer)

5045


	Nine Months Ended June 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balance, September 30, 2020	41,780	$	42	$	146,518	$	(13,994)	$	(323)	$	132,243
Exercise of stock options	287	—		2,198		—		—		2,198
Settlement of restricted stock units	1,008	1		(1)		—		—		—
Issuance of common stock under employee stock purchase plan	77	—		794		—		—		794
Acquisition-related shares issued	867	1		13,942		—		—		13,943
Stock-based compensation expense	—	—		8,582		—		—		8,582
Sale of convertible senior notes warrants	—	—		23,909		—		—		23,909

Net income	—	—		—		6,171		—		6,171
Components of other comprehensive income:
Currency translation adjustment	—	—		—		—		859		859
Change in unrealized gain (loss) on investments	—	—		—		—		(175)		(175)

Balance, June 30, 2021	44,019	$	44	$	195,942	$	(7,823)	$	361	$	188,524


	ID R&D		HooYu
Accounts receivable	$	173	$	1,234
Property, plant, and equipment	114		243
Other current assets	147		630
Intangible assets	16,930		73,100
Goodwill	27,748		74,312

Current liabilities	(425)		(2,456)
Deferred revenue	—		(2,612)
Deferred income tax liabilities	(2,355)		(16,896)
Net assets acquired	$	42,332	$	127,555


	Three Months Ended June 30, 2022				Nine Months Ended June 30, 2022
	As Furnished		As Adjusted		As Furnished		As Adjusted
Revenue
Software and hardware	$	19,820	$	19,820	$	54,545	$	54,545
Services and other	19,513		19,513		51,975		51,975
Total revenue	39,333		39,333		106,520		106,520
Operating costs and expenses
Cost of revenue—software and hardware	508		508		1,196		1,196
Cost of revenue—services and other	4,059		4,073		10,038		10,051
Selling and marketing	11,174		11,216		28,817		28,859
Research and development	9,411		9,614		25,253		25,457
General and administrative	6,667		6,589		18,704		18,626
Acquisition-related costs and expenses	4,492		3,283		9,827		9,947
Restructuring costs	1,807		1,807		1,807		1,807
Total operating costs and expenses	38,118		37,090		95,642		95,943
Operating income	1,215		2,243		10,878		10,577
Interest expense	2,077		2,077		6,125		6,125
Other income, net	49		89		(48)		(8)
Income before income taxes	(813)		255		4,705		4,444
Income tax provision	(39)		556		(522)		504
Net income	$	(852)	$	811	$	4,183	$	4,948
Net income per share—basic	$	(0.02)	$	0.02	$	0.09	$	0.11
Net income per share—diluted	$	(0.02)	$	0.02	$	0.09	$	0.11
Shares used in calculating net income per share—basic	44,591		44,669		44,721		44,721
Shares used in calculating net income per share—diluted	45,145		45,224		45,793		45,793