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Stockholders' Equity | 11 Months Ended
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Sep. 30, 2012
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. 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, 2012, there were warrants to purchase 6,667 shares of the Company’s common stock outstanding with 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 to JHH Co. 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. 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. Of such warrants, warrants to purchase 330,834 shares of the Company’s common stock have been exercised and warrants to purchase 6,667 shares of common stock remain outstanding as of September 30, 2012. These warrants expire in December 2014. The following table summarizes warrant activity in the fiscal year ended September 30, 2012:
|  | Number of warrants |  |  | Weighted-average exercise price |
Oustanding and exercisable at September 30, 2011 |  |  | 132,189 |  |  | $ | 0.91 |
Issued |  |  | — |  |  |  |  |
Exercised |  |  | (125,522 | ) |  | $ | 0.91 |
Expired |  |  | — |  |  |  |  |
Oustanding and exercisable at September 30, 2012 |  |  | 6,667 |  |  | $ | 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 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 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 is amortized using the straight-line method over the vesting period of the option. 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, 2012 of approximately 14.85% for all stock option grants was based on historical forfeiture experience. ASC 718 requires the cash flows from tax benefits resulting from tax deductions in excess of the compensation cost recognized for 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, 2012 and 2011. Prior to the adoption of ASC 718, any tax benefits received by the Company related to stock option exercises would have been reported as operating cash flows. The fair value calculations for stock-based compensation awards to employees for the fiscal years ended September 30, 2012 and 2011 were based on the following assumptions:
|  | 2012 |  | 2011
Risk-free interest rate |  | 0.35% - 1.06% |  | 0.26% - 2.26%
Expected life (years) |  | 5 |  | 5.5
Expected volatility |  | 110% |  | 193%
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, 2012 and 2011, which were allocated as follows:
|  | 2012 |  |  | 2011 |
Sales and marketing |  | $ | 471,716 |  |  | $ | 235,710 |
Research and development |  |  | 592,249 |  |  |  | 290,239 |
General and administrative |  |  | 1,535,893 |  |  |  | 745,289 |
Stock-based compensation expense included in operating expenses |  | $ | 2,599,858 |  |  | $ | 1,271,238 |
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, 2012:
|  | Number of Shares |  |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Life (in Years) |  |  | Aggregate Intrinsic Value |
Vested |  |  | 2,074,410 |  |  | $ | 1.44 |  |  |  | 4.72 |  |  | $ | 4,322,186 |
Unvested |  |  | 1,437,876 |  |  | $ | 6.20 |  |  |  | 8.97 |  |  |  | 440,698 |
Total |  |  | 3,512,286 |  |  | $ | 3.39 |  |  |  | 6.46 |  |  | $ | 4,762,884 |
As of September 30, 2012, the Company had $6,161,479 of unrecognized compensation expense related to outstanding stock options expected to be recognized over a weighted-average period of approximately 3.3 years. The following table summarizes stock option activity under the Company’s stock option plans during the fiscal years ended September 30, 2012 and 2011:
|  | Number of Shares |  |  | Weighted Average Exercise Price Per Share |  |  | Weighted Average Remaining Contractual Term (in Years) |
Outstanding, 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 |  |  |  |  |
Outstanding, September 30, 2011 |  |  | 4,553,904 |  |  | $ | 1.34 |  |  |  | 6.15 |
Granted |  |  | 1,095,750 |  |  | $ | 8.54 |  |  |  |  |
Exercised |  |  | (1,812,215 | ) |  | $ | 0.81 |  |  |  |  |
Cancelled |  |  | (325,153 | ) |  | $ | 6.41 |  |  |  |  |
Outstanding, September 30, 2012 |  |  | 3,512,286 |  |  | $ | 3.39 |  |  |  | 6.46 |
The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2012:
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 |
$0.09 to $0.70 |  |  | 358,840 |  |  |  | 5.27 |  |  |  | $0.33 |  |  |  | 358,840 |  |  |  | $0.33 |  |  |  | — |
$0.79 to $0.82 |  |  | 787,319 |  |  |  | 5.43 |  |  |  | $0.80 |  |  |  | 695,145 |  |  |  | $0.80 |  |  |  | 92,174 |
$1.06 to $2.32 |  |  | 729,302 |  |  |  | 2.56 |  |  |  | $1.21 |  |  |  | 729,302 |  |  |  | $1.21 |  |  |  | — |
$2.60 to $5.90 |  |  | 948,575 |  |  |  | 8.76 |  |  |  | $3.34 |  |  |  | 199,448 |  |  |  | $2.74 |  |  |  | 749,127 |
$6.39 to $11.68 |  |  | 688,250 |  |  |  | 9.22 |  |  |  | $10.30 |  |  |  | 91,675 |  |  |  | $9.54 |  |  |  | 596,575 |
|  |  | 3,512,286 |  |  |  | 6.46 |  |  |  | $3.39 |  |  |  | 2,074,410 |  |  |  | $1.44 |  |  |  | 1,437,876 |
The total intrinsic value of options exercised during the fiscal year ended September 30, 2012 was $14,215,750. The per-share weighted average fair value of options granted during the fiscal year ended September 30, 2012 was $5.97. 2012 Incentive Plan In January 2012, the Company’s board of directors adopted the Mitek Systems, Inc. 2012 Incentive Plan (the “2012 Plan”), upon the recommendation of the compensation committee of the board of directors. The total number of shares of the Company’s common stock reserved for issuance under the 2012 Plan is 2,000,000 shares, plus that number of shares of the Company’s common stock that would otherwise return to the available pool of unissued shares reserved for awards under the Company’s 1999 Stock Option Plan, 2000 Stock Option Plan, 2002 Stock Option Plan, 2006 Stock Option Plan and 2010 Stock Option Plan (collectively, the “Prior Plans”). There were no awards granted under the Prior Plans after the approval of the 2012 Plan by the Company’s stockholders on February 22, 2012. Stock options granted under the Prior Plans that were outstanding at such date remain in effect until such options are exercised or expire. The 2012 Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and cash awards. Stock options granted under the 2012 Plan may be either options intended to constitute incentive stock options or nonqualified stock options, in each case as determined by the compensation committee of the board of directors in accordance with the terms of the 2012 Plan. As of September 30, 2012, stock options to purchase 723,000 shares of the Company’s common stock and 215,834 restricted stock units were outstanding under the 2012 Plan, and 1,245,067 shares of the Company’s common stock were reserved for future grants. The following table summarizes the number of stock options outstanding under the Prior Plans as of September 30, 2012:
2000 Stock Option Plan |  |  | 317,812 |
2002 Stock Option Plan |  |  | 255,663 |
2006 Stock Option Plan |  |  | 405,490 |
2010 Stock Option Plan |  |  | 1,410,321 |
Total stock options outstanding under the Prior Plans |  |  | 2,389,286 |
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 Company filed a registration statement on Form S-8 with the Securities and Exchange Commission registering the shares subject to the grant on December 15, 2011. 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 as the awards are settled in shares of common stock. The Company has awarded restricted stock units to certain of its employees at a weighted-average fair value of $8.44 per share. The restricted stock units vest in equal annual installments over four years. The following table summarizes restricted stock unit activity under the Company’s plans during the fiscal years ended September 30, 2012 and 2011:
|  | Number of Shares |  |  | Weighted Average Fair Market Value Per Share |
Outstanding, September 30, 2010 |  |  | — |  |  |  | — |
Granted |  |  | 300,000 |  |  | $ | 5.12 |
Settled |  |  | — |  |  |  | — |
Cancelled |  |  | — |  |  |  | — |
Outstanding, September 30, 2011 |  |  | 300,000 |  |  | $ | 5.12 |
Granted |  |  | 255,835 |  |  | $ | 8.44 |
Settled |  |  | — |  |  |  | — |
Cancelled |  |  | (40,001 | ) |  | $ | 11.05 |
Outstanding, September 30, 2012 |  |  | 515,834 |  |  | $ | 6.30 |
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. The Company recognized $529,072 and $179,343 in stock-based compensation expense related to outstanding restricted stock units in the fiscal years ended September 30, 2012 and 2011, respectively. As of September 30, 2012, the Company had approximately $2,543,465 of unrecognized compensation expense related to outstanding restricted stock units expected to be recognized over a weighted-average period of approximately 3.5 years.

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- Definition The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187143-122770 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Section B -Paragraph 7, 11A -Chapter 1 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21463-112644 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph d -Article 4 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=6228006&loc=d3e74512-122707 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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