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Stockholders' Equity
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity [Abstract]  
STOCKHOLDERS' EQUITY
4. STOCKHOLDERS’ EQUITY

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 certain of the Company’s prior equity plans as a result of forfeiture, cancellation or expiration of awards previously granted under such plans.

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. On February 22, 2012, the Company’s stockholders approved the 2012 Plan.

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
June 30,		     Nine Months Ended
June 30,		  
    2012     2011     2012     2011  

Sales and marketing

   $ 214,140     $ 65,324     $ 394,881     $ 168,471  

Research and development

     187,132       76,892       470,958       196,666  

General and administrative

     429,714       219,547       1,118,031       526,210  
   

 

 

    

 

 

    

 

 

    

 

 

  

Stock-based compensation expense included in operating expenses

   $ 830,986     $ 361,763     $ 1,983,870     $ 891,347  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The fair value calculations for stock-based compensation awards to employees for the nine month periods ended June 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)

   4.79   5.51

Expected volatility

   90%   193%

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 June 30, 2012, approximately $9,263,367 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 3.5 years.

The per share weighted-average fair value of options granted during the nine months ended June 30, 2012 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 equity plans for the nine months ended June 30, 2012:

 

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

Outstanding, September 30, 2011

     4,553,904     $ 1.34       6.15  
       

Granted

     913,250     $ 9.40          

Exercised

     (1,734,333 )    $ 0.77          

Cancelled

     (131,956 )    $ 7.67          
   

 

 

                  

Oustanding, June 30, 2012

     3,600,865     $ 3.42       6.68  
   

 

 

                  

 

The following table summarizes significant ranges of outstanding and exercisable options as of June 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		  

 $0.00 to $0.70

     366,162       5.55     $ 0.34       363,238     $ 0.34       2,924  

 $0.79 to $0.82

     851,772       5.84     $ 0.80       663,991     $ 0.80       187,781  

 $1.06 to $2.32

     729,302       2.82     $ 1.21       729,302     $ 1.21       —    

 $2.60 to $5.90

     891,215       8.72     $ 3.07       210,955     $ 2.71       680,260  

$6.39 to $12.37

     762,414       9.49     $ 10.38       68,941     $ 9.54       693,473  
   

 

 

                    

 

 

            

 

 

  
      3,600,865       6.68     $ 3.42       2,036,427     $ 1.36       1,564,438  
   

 

 

                    

 

 

            

 

 

  

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 nine months ended June 30, 2012 was $14,028,720. As of June 30, 2012, there were 3,600,865 options outstanding with a weighted-average remaining contractual term, weighted-average exercise price and aggregate intrinsic value of 6.68 years, $3.42 and $6,732,813, respectively. As of June 30, 2012, there were 2,036,427 options exercisable with a weighted-average remaining contractual term, weighted-average exercise price and aggregate intrinsic value of 4.91 years, $1.36 and $5,560,133, 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.

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 in equal monthly installments 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. There were 700,000 shares available for grant under the Director Plan as of June 30, 2012.

The Company has awarded an aggregate of 180,835 restricted stock units under the 2012 Plan to certain of its employees at a weighted-average fair value of $10.06 per share. The restricted stock units vest in equal annual installments over four years.

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 approximately $168,838 and $383,553 in stock-based compensation expense related to the outstanding restricted stock units in the three and nine months ended June 30, 2012, respectively. In the three and nine months ended June 30, 2011, the Company recognized $76,861 and $102,482 in stock-based compensation expense related to outstanding restricted stock units, respectively. As of June 30, 2012, the Company had approximately $2,608,160 of unrecognized compensation expense related to outstanding restricted stock units expected to be recognized over a weighted-average period of approximately 3.7 years.

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 330,834 shares of the Company’s common stock have been exercised and warrants to purchase 6,667 shares of the Company’s common stock remain outstanding as of June 30, 2012, 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 nine months ended June 30, 2012:

 

                 
    Number
of warrants		     Weighted-average
exercise price		  

Outstanding and exercisable at September 30, 2011

     132,189     $ 0.91  

Issued

     —            

Exercised

     (125,522 )    $ 0.91  

Expired

     —            
   

 

 

          

Outstanding and exercisable at June 30, 2012

     6,667     $ 0.91