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Mitek Systems, Inc.

Mitek Systems, Inc. is a worldwide provider of intelligent character recognition technology, products and services for the document imaging markets. The company's document imaging software engine and intelligent character recognition products and services are used in mission-critical and high volume data entry, data capture and forms processing applications installed in many of the world's leading financial institutions, manufacturing and service companies, and government organizations.

That's what they say they are. Are they a Rule Maker? Since annual sales were only $9.7 million they would not be classified as a true Rule Maker. But, check out these numbers. They're going nowhere but up.

1. Dominant Brand - It is a standout and the leader in the industry. The CEO estimates they are at least 2 years ahead of any competition. 1 point

2. Repeat Purchases - Sort of. They have licensing agreements that act as repeat purchases every month. 1 point

3. Convenience - Yes. They make it possible for small and medium sized banks to process, in house, their checks. Additional uses for their engines will be upcoming and all will make things easier for the user. 1 point

4. Expanding Possiblities - Definitely. Their engines "read" unstructured forms. There are many, many applications for this type of technology. (Sort of an artificial intelligence.) Palm Pilot type devices for one. There is lots of room to grow well outside the scope of the banking industry. 1 point

5. Familiarity & Interest - Indirectly, we probably all use some sort of character recognition device if you write a check. This technology is the beginning of something big. The CEO has labeled it "breakthrough". 1 point

(The following numbers are based on FY 99 vs FY 98.)

6. Sales Growth - 49.2% 2 points

7. Gross Margins - 78.4% 2 points

8. Net Margins - 20.6% 2 points

9. Cash-to-Debt Ratio - No debt 2 points

10. Foolish Flow Ratio - 3.00 0 points

That's a total of 13 out of 15 possible points. Even though it's a small company (right now) I think it's worth a look. (Receivables did rise 117% compared to revenue growth of 49.2% and I've included an explanation at the end.)

Granted, this was not the most technical analysis of the company and I may not be the best person to present this information. (There are a couple of folks on the Yahoo! message board with a much better understanding of the company.) But, I would be interested to hear comments from other Fools about this company. They have a conference call scheduled for 11:00 am PST on Wednesday and current shareholders are anticipating some very good news about future sales, growth, and/or alliances. From the postings on the Yahoo! board, one of the best with the least amount of crap, anyone that does their homework becomes a shareholder. Thanks for your time.

Fool On!!



An excerpt from Longnproud on the Yahoo! board explaining the rise in receivables:
"It's common it the software industry to give terms when making sales. They increased slightly more than revenues because the revenue mix changed from hardware and software to almost all software. MTIK has never had a problem collecting as most of the customers are very large companies (IBM, SAIC, BankTec, Unysis) that pay up when they're supposed to."
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