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Stockholders' Equity
 3 Months Ended
Dec. 31, 2012
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,		  
    2012     2011  

Sales and marketing

   $ 76,653     $ 69,563  

Research and development

     123,578       107,219  

General and administrative

     456,303       324,915  
   

 

 

    

 

 

  

Stock-based compensation expense included in operating expenses

   $ 656,534     $ 501,697  
   

 

 

    

 

 

  

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

 

         
   

Three months ended

December 31,
   

2012

  

2011

Risk-free interest rate

   0.18% - 0.71%   0.35% - 1.06%

Expected life (years)

   4.91   4.14

Expected volatility

   165%   90%

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, 2012, the Company had $9,024,393 of unrecognized compensation expense related to outstanding stock options and restricted stock units expected to be recognized over a weighted-average period of approximately 3.1 years.

Stock Options

The following table summarizes stock option activity under the Company’s stock option plans for the three months ended December 31, 2012:

 

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

Outstanding, September 30, 2012

     3,512,286     $ 3.39       6.46  

Granted

     394,563     $ 2.52          

Exercised

     (46,067 )    $ 0.81          

Cancelled

     (80,311 )    $ 7.77          
   

 

 

                  

Outstanding, December 31, 2012

     3,780,471     $ 3.23       6.53  
   

 

 

                  

As of December 31, 2012, the Company had $6,208,656 of unrecognized compensation expense related to outstanding stock options expected to be recognized over a weighted-average period of approximately 2.9 years. The per share weighted-average fair value of options granted during the three months ended December 31, 2012 was $2.48.

The following table summarizes significant ranges of outstanding and exercisable options as of December 31, 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 – $ 0.79

     877,935       5.48     $ 0.60       846,507     $ 0.60       31,428  

$0.80 – $ 1.95

     946,116       2.51     $ 1.12       941,251     $ 1.12       4,865  

$2.34 – $ 2.60

     847,002       8.65     $ 2.50       209,633     $ 2.60       637,369  

$3.33 – $ 9.97

     738,668       9.16     $ 5.96       110,912     $ 8.91       627,756  

$11.05 – $ 11.68

     370,750       9.13     $ 11.08       17,991     $ 11.19       352,759  
   

 

 

                    

 

 

            

 

 

  
      3,780,471       6.53     $ 3.23       2,126,294     $ 1.55       1,654,177  
   

 

 

                    

 

 

            

 

 

  

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, 2012 and 2011was $84,510 and $3,524,675, respectively. As of December 31, 2012, there were 3,780,471 options outstanding with a weighted-average remaining contractual term, weighted-average exercise price and aggregate intrinsic value of 6.53 years, $3.23 and $4,862,479, respectively. As of December 31, 2012, there were 2,126,294 options exercisable with a weighted-average remaining contractual term, weighted-average exercise price and aggregate intrinsic value of 4.57 years, $1.55 and $4,304,201, respectively.

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 December 31, 2012, stock options to purchase 1,080,063 shares of the Company’s common stock and 244,167 restricted stock units were outstanding under the 2012 Plan, and 902,482 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 December 31, 2012:

 

         

2000 Stock Option Plan

     316,392  

2002 Stock Option Plan

     243,163  

2006 Stock Option Plan

     368,000  

2010 Stock Option Plan

     1,372,853  
   

 

 

  

Total stock options outstanding under the Prior Plans

     2,300,408  
   

 

 

  

In May 2003, the President and 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 stockholder 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

The following table summarizes restricted stock unit activity under the Company’s plans during the three months ended December 31, 2012:

                 
    Number of
Shares		     Weighted Average
Fair Market Value
Per Share		  

Outstanding, September 30, 2012

     515,834     $ 6.30  

Granted

     215,000     $ 2.69  

Settled

     —         —    

Cancelled

     (11,667 )    $ 11.05  
   

 

 

          

Outstanding, December 31, 2012

     719,167     $ 5.15  
   

 

 

          

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 $176,158 and $76,861 in stock-based compensation expense related to the outstanding restricted stock units in the three months ended December 31, 2012 and 2011, respectively. As of December 31, 2012, the Company had $2,815,737 of unrecognized compensation expense related to outstanding restricted stock units expected to be recognized over a weighted-average period of approximately 3.4 years.