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Stockholders' Equity
 12 Months Ended
Sep. 30, 2011
Stockholders' Equity [Abstract]  
Stockholders' Equity
4.   STOCKHOLDERS' EQUITY

Common Stock

In October 2010, the Company sold 500,000 shares of common stock at $1.50 per share to accredited investors in a private placement, resulting in net proceeds of $750,000.

In December 2010, the Company issued 1,418,573 shares of common stock upon the conversion of outstanding convertible debentures as discussed in greater detail in Note 3 to the financial statements included in this Annual Report on Form 10-K ("Form 10-K").

In May 2011, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which, the Company sold to the investors an aggregate of 2,857,143 shares of the Company's common stock at a purchase price of $5.25 per share for aggregate gross proceeds of $15,000,000. The Company paid cash compensation of approximately $1,050,000 in placement agent fees and reimbursed $25,000 of placement agent out-of-pocket expenses incurred in connection with the financing. In addition, the Company incurred legal fees of approximately $80,000 in connection with the private placement, resulting in net proceeds of approximately $13,845,000.

Warrants

Historically, the Company has granted warrants to purchase its common stock to service providers and investors. As of September 30, 2011, the Company had warrants to purchase 132,189 shares of its common stock outstanding, all of which had an exercise price of $0.91 per share, subject to adjustment for stock splits, stock dividends and the like. These warrants expire in December 2014.

In connection with the issuance of shares of common stock to John H. Harland Company ("JHH Co.") in February and May 2005, the Company issued warrants to purchase 321,428 shares of the Company's common stock at an exercise price of $0.70 per share, subject to adjustment for stock splits, stock dividends and the like. In June 2011, JHH Co. exercised the warrants, which were due to expire between February and May 2012. The warrants were exercised under the cashless exercise method, resulting in the issuance of 288,582 shares of common stock to the warrant holder and the cancellation of the remaining 32,846 shares in consideration of the issuance. See Note 7 to the financial statements included in this Form 10-K.

 

In connection with issuance of convertible debentures in December 2009, the Company issued warrants to purchase an aggregate of 337,501 shares of the Company's common stock with an exercise price of $0.91 per share as discussed in greater detail in Note 3 to the financial statements included in this Form 10-K. Of such warrants, warrants to purchase 205,312 shares of the Company's common stock have been exercised and warrants to purchase 132,189 shares of common stock remain outstanding as of September 30, 2011. These warrants expire in December 2014.

The following table summarizes warrant activity in the fiscal year ended September 30, 2011:

 

     Number
of  warrants		     Weighted-average
exercise price		  
    

Oustanding and exercisable at September 30, 2010

      895,283      $ 0.84   

Issued

      —       

Exercised

      (763,094 )    $ 0.83   

Expired

      —       
  

 

 

    

Oustanding and exercisable at September 30, 2011

      132,189      $ 0.91   
  

 

 

    

Stock-based Compensation

The Company applies the fair value recognition provisions of ASC 718.

The fair value of stock options granted to employees and directors is calculated using the Black-Scholes option pricing model. The Black-Scholes 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 value of stock-based compensation is based on the single option valuation approach under ASC 718. It is assumed no dividends will be declared. The estimated fair value of stock-based compensation awards to employees and directors is amortized using the straight-line method over the vesting period of the options. The estimated expected remaining contractual life of stock option grants at September 30, 2011 was approximately 1.2 years on grants to directors and 6.5 years on grants to employees.

ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The estimated average forfeiture rate for the fiscal year ended September 30, 2011 of approximately 13.33% for all stock option grants was based on historical forfeiture experience.

ASC 718 requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options to be classified as financing cash flows. Due to the Company's valuation allowance from losses in the previous years, there were no such tax benefits during the fiscal years ended September 30, 2011 and 2010, respectively. Prior to the adoption of ASC 718 those benefits would have been reported as operating cash flows had the Company received any tax benefits related to stock option exercises.

 

The fair value calculations for stock-based compensation awards to employees for the fiscal years ended September 30, 2011 and 2010 were based on the following assumptions:

 

     2011    2010

Risk-free interest rate

    0.26% -2.26%    0.32% -2.58%

Expected life (years)

    5.5    5.3

Expected volatility

    193%    213%

Expected dividends

    None    None

The following table summarizes stock-based compensation expense related to stock options and restricted stock unit awards under ASC 718 for the fiscal years ended September 30, 2011 and 2010, which were allocated as follows:

 

     2011      2010  

Sales and marketing

    $ 235,710       $ 68,227   

Research and development

      290,239         99,499   

General and administrative

      745,289         238,543   
  

 

 

     

 

 

  

Stock-based compensation expense related to employee stock options included in operating expenses

    $ 1,271,238       $ 406,269   
  

 

 

     

 

 

  

The following table summarizes vested and unvested options, weighted average exercise price per share, weighted average remaining term and aggregate intrinsic value at September 30, 2011:

 

     Number of Shares      Weighted Average
Exercise Price Per
Share		      Weighted Average
Remaining
Contractual Life
(in Years)		      Aggregate Intrinsic
Value		  

Vested

      3,129,966       $ 0.62         4.96       $ 26,337,736   

Unvested

      1,423,938       $ 2.39         8.77         9,774,962   
  

 

 

           

 

 

  

Total

      4,553,904       $ 1.18         6.15       $ 36,112,698   
  

 

 

           

 

 

  

As of September 30, 2011, the Company had $4,633,295 of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 4 years.

The following table summarizes stock option activity under the Company's stock option plans during the fiscal years ended September 30, 2011 and 2010:

 

     Number of
Shares		     Weighted Average
Exercise Price Per
Share		      Weighted Average
Remaining
Contractual Term
(in Years)		  

Oustanding, September 30, 2009

      3,533,000      $ 0.56         6.10   

Granted

      1,270,500      $ 0.95      

Exercised

      (161,172 )    $ 0.36      

Cancelled

      (108,000 )    $ 1.22      
  

 

 

       

Oustanding, September 30, 2010

      4,534,328      $ 0.66         6.21   

Granted

      976,531      $ 3.70      

Exercised

      (942,639 )    $ 0.53      

Cancelled

      (14,316 )    $ 0.57      
  

 

 

       

Oustanding, September 30, 2011

      4,553,904      $ 1.34         6.15   
  

 

 

       

 

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2011:

 

Range of

Exercise Prices

    Number of
Options
Outstanding		      Weighted
Average
Remaining
Contractual Life
(in Years)		    Weighted
Average
Exercise Price		    Number of
Exercisable
Options		      Weighted
Average
Exercise Price of
Exercisable
Options		    Number of
Unvested
Options		  

$0.07 - $0.09

      545,226       6.12    $0.09      452,697       $0.09      92,529   

$0.35 - $0.70

      964,644       4.84    $0.43      952,972       $0.42      11,672   

$0.72 - $0.80

      1,029,664       6.78    $0.79      677,195       $0.79      352,469   

$0.82 - $1.95

      1,080,564       4.51    $1.19      875,959       $1.14      204,605   

$2.32 - $12.37

      933,806       8.72    $3.79      171,143       $3.69      762,663   
  

 

 

           

 

 

        

 

 

  
     4,553,904       6.15    $1.34      3,129,966       $0.83      1,423,938   
  

 

 

           

 

 

        

 

 

  

The total intrinsic value of options exercised during the year ended September 30, 2011 was $4,731,689. The per-share weighted average fair value of options granted during the year ended September 30, 2011 was $3.54.

Restricted Stock Units

In January 2011, the Company's board of directors adopted, subject to stockholder approval, the Mitek Systems, Inc. Director Restricted Stock Unit Plan, as amended and restated (the "Director Plan"), reserving up to 1,000,000 shares of the Company's common stock for the issuance of restricted stock units to both employee and non-employee members of the board of directors of the Company. On February 23, 2011, the Director Plan was approved by the Company's stockholders at its annual meeting.

On March 15, 2011, the Company awarded an aggregate of 300,000 restricted stock units to its directors at a fair value of $5.12 per share. The restricted stock units vest monthly over five years. To the extent a restricted stock unit becomes vested, and subject to satisfaction of any tax withholding obligations, each vested restricted stock unit will entitle its holder to receive one share of the Company's common stock, which will be settled and deemed issued and outstanding upon the earlier to occur of: (i) a change in control, (ii) a director's separation from service or (iii) the fifth anniversary of the award date. A holder of outstanding restricted stock units has none of the rights and privileges of a stockholder of the Company, including no right to vote or to receive dividends (if any) until such time the awards are settled in shares of common stock.

The cost of the restricted stock units is determined using the fair value of the Company's common stock on the award date, and the compensation expense is recognized ratably over the vesting period. In the fiscal year ended September 30, 2011, the Company recognized approximately $179,000 in stock-based compensation expense related to the outstanding restricted stock units. There was no such expense recognized in the fiscal year ended September 30, 2010. As of September 30, 2011, the Company had approximately $1,357,000 of unrecognized compensation expense related to outstanding restricted stock units expected to be recognized over a weighted average period of approximately 4.5 years. There were 700,000 shares available for grant under the Director Plan as of September 30, 2011.

Stock Option Plans

The Company currently has stock option plans that allow the Company to grant options to purchase common stock to the Company's directors, executive officers and key individuals who make, or are expected to make significant contributions to the Company. The Company granted stock options to purchase 976,531 shares of its common stock during the year ended September 30, 2011, all of which were granted pursuant to the Company's available stock option plans. The Company also currently maintains two stock option plans, the 1999 Stock Option Plan and the 2000 Stock Option Plan that have options outstanding that were previously granted under such plans but under which no further options may be granted.

 

Under the terms of the 2002 Stock Option Plan, the 2006 Stock Option Plan, and the 2010 Stock Option Plan, each of which provides for the grant of incentive and non-qualified options: (i) incentive stock options are granted with an exercise price equal to the fair market value of the Company's common stock at the grant date and for a term of not more than 10 years; (ii) non-qualified stock options may be granted with an exercise price of not less than 85% of fair market value of the Company's common stock at the grant date and for a term of not more than five years; and (iii) the exercise price of options granted to persons owning more than 10% of the total combined voting power of the Company's stock is not to be less than 110% of the fair market value of the Company's common stock as determined on the date of the grant of the options. To date, the Company has elected to grant non-qualified stock options under these plans with a three year term.

The 1999 Plan provides for the purchase of up to 1,000,000 shares of the Company's common stock. The 1999 Plan terminated on June 10, 2009; however options granted under the plan that were outstanding at such date remain in effect until such options are exercised or expire. As of September 30, 2011, options to purchase 490,250 shares of the Company's common stock were outstanding and no options were available for grant under the 1999 Plan.

The 2000 Plan, which terminated on December 13, 2010, provided for the purchase of up to 1,000,000 shares of the Company's common stock. As of September 30, 2011, options to purchase 576,612 shares of the Company's common stock were outstanding and no options were available for grant under the 2000 Plan.

The 2002 Plan provides for the purchase of up to 1,000,000 shares of the Company's common stock. As of September 30, 2011, options to purchase 571,959 shares of the Company's common stock were outstanding and options to purchase up to 765 shares of the Company's common stock were available for grant under the 2002 Plan.

In May 2003, the Chief Executive Officer of the Company was granted an option to purchase up to 400,000 shares of the Company's common stock in connection with his appointment as President and Chief Executive Officer. This grant was made without shareholder approval as an inducement award pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules.

The 2006 Plan provides for the purchase of up to 1,000,000 shares of the Company's common stock. As of September 30, 2011, options to purchase 766,216 shares of the Company's common stock were outstanding and options to purchase up to 100 shares of the Company's common stock were available for grant under the 2006 Plan.

The 2010 Plan provides for the purchase of up to 2,000,000 shares of the Company's common stock. As of September 30, 2011, options to purchase 1,748,867 shares of the Company's common stock were outstanding and options to purchase 231,135 shares of the Company's common stock were available for grant under the 2010 Plan.