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Stockholders' Equity
 3 Months Ended
Dec. 31, 2011
Stockholders' Equity [Abstract]  
Stockholders' Equity
4. STOCKHOLDERS' EQUITY

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to stock options and restricted stock unit awards, which was allocated as follows:

 

     Three months ended
December 31,		  
     2011      2010  

Sales and marketing

    $ 69,563       $ 51,640   

Research and development

      107,219         44,275   

General and administrative

      324,915         138,128   
  

 

 

     

 

 

  

Stock-based compensation expense included in operating expenses

    $ 501,697       $ 234,043   
  

 

 

     

 

 

  

The fair value calculations for stock-based compensation awards were based on the following assumptions:

 

    

Three months ended

December 31,

     2011   2010

Risk-free interest rate

    0.35% - 1.06%   0.26% - 1.18%

Expected life (years)

    4.14   5.71

Expected volatility

    90%   194%

Expected dividends

    None   None

The expected life of options granted is derived using assumed exercise rates based on historical exercise patterns and vesting terms and represents the period of time that options granted are expected to be outstanding. Expected stock price volatility is based upon implied volatility and other factors, including historical volatility. After assessing all available information on either historical volatility, implied volatility, or both, the Company concluded that a combination of both historical and implied volatility provides the best estimate of expected volatility.

As of December 31, 2011, approximately $5,385,215 of total unrecognized compensation expense related to stock options and restricted stock unit awards issued to date is expected to be recognized over a weighted-average period of approximately 3.6 years.

The per share weighted-average fair value of options granted during the three months ended December 31, 2011 was $6.33.

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 Form 10-Q.

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.

Stock Options

The following table summarizes stock option activity under the Company's stock option plans for the three months ended December 31, 2011:

 

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

Outstanding, September 30, 2011

      4,553,904      $ 1.34         6.15   

Granted

      215,000      $ 9.87      

Exercised

      (380,088 )    $ 0.55      

Cancelled

      —          —        
  

 

 

       

Outstanding, December 31, 2011

      4,388,816      $ 1.82         6.27   
  

 

 

       

The following table summarizes significant ranges of outstanding and exercisable options as of December 31, 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

      509,820         5.78       $ 0.09         476,771       $ 0.09         33,049   

$0.35 - $  0.70

      689,728         5.25       $ 0.39         680,972       $ 0.39         8,756   

$0.72 - $  0.80

      973,474         6.62       $ 0.79         683,129       $ 0.79         290,345   

$0.82 - $  1.95

      1,071,982         4.22       $ 1.19         893,622       $ 1.15         178,360   

$2.32 - $12.37

      1,143,812         8.74       $ 4.94         233,238       $ 4.14         910,574   
  

 

 

           

 

 

        

 

 

  
     4,388,816         6.27       $ 1.82         2,967,732       $ 0.96         1,421,084   
  

 

 

           

 

 

        

 

 

  

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 or exercisable. The total intrinsic value of options exercised during the three months ended December 31, 2011 was $3,524,675. As of December 31, 2011, there were 2,967,732 options exercisable with a weighted-average remaining contractual term, weighted-average exercise price and aggregate intrinsic value of 5.05 years, $0.96 and $18,713,807, respectively. As of December 31, 2011, there were 4,388,816 options outstanding with a weighted-average remaining contractual term, weighted-average exercise price and aggregate intrinsic value of 6.27 years, $1.82 and $24,536,136, respectively.

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 Company's board of directors. 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 certain of 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 the Company's 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 three months ended December 31, 2011, the Company recognized approximately $77,000 in stock-based compensation expense related to the outstanding restricted stock units. There was no such expense recognized in the three months ended December 31, 2010. As of December 31, 2011, the Company had approximately $1,280,000 of unrecognized compensation expense related to outstanding restricted stock units expected to be recognized over a weighted-average period of approximately 4.2 years. There were 700,000 shares available for grant under the Director Plan as of December 31, 2011.

Warrants

Historically, the Company has granted warrants to purchase its common stock to service providers and investors.

In connection with the issuance of shares of common stock to John H. Harland Company ("JHH Co.") in February and May of 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 of 2012. The warrants were exercised under the cashless exercise method, resulting in the issuance of 288,582 shares of the Company's common stock to the warrant holder and the cancellation of the remaining 32,846 shares in consideration of the issuance.

In connection with the 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, of which warrants to purchase 231,979 shares of the Company's common stock have been exercised and warrants to purchase 105,522 shares of the Company's common stock remain outstanding as of December 31, 2011, subject to adjustment for stock splits, stock dividends and the like. These warrants expire in December 2014 and are discussed in greater detail in Note 3 to the financial statements included in this Form 10-Q.

The following table summarizes warrant activity in the three months ended December 31, 2011:

 

     Number
of warrants		     Weighted-average
exercise price		  

Outstanding and exercisable at September 30, 2011

      132,189      $ 0.91   

Issued

      —       

Exercised

      (26,667 )    $ 0.91   

Expired

      —       
  

 

 

    

Outstanding and exercisable at December 31, 2011

      105,522      $ 0.91