50,000,000 authorized common shares, par value of $0.001, and 5,000,000 preferred shares, par value of $0.001.

At-The-Market Issuance Sales Agreement

On June 18, 2012, we entered into an At-the-Market Issuance Sales Agreement, or Sales Agreement, with MLV & Co. LLC, or MLV, under which we may offer and sell shares of our common stock having aggregate sales proceeds of up to $25 million from time to time through MLV as our sales agent. Sales of our common stock through MLV, if any, will be made by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, including by means of ordinary brokers’ transactions on The NASDAQ Capital Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise agreed upon by us and MLV. MLV will use commercially reasonable efforts to sell our common stock from time to time, based upon instructions from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay MLV a commission of up to 3.0% of the gross sales proceeds of any shares of common stock sold through MLV under the Sales Agreement. We are not obligated to make any sales of common stock under the Sales Agreement. The offering of our shares of common stock pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms. To date, no shares have been sold under the Sales Agreement.

Equity Award Issuances and Settlements

During the six month period ended June 30, 2013, we issued 3,475 and 20,004 common shares to satisfy stock option exercises and restricted stock unit settlements, respectively, compared with the issuance of 33,938 common shares to satisfy stock option exercises during the six month period ended June 30, 2012. There were no restricted stock unit settlements in 2012.

2010 Performance Incentive Plan

As of June 30, 2013 we had reserved, pursuant to various plans, 2,407,507 common shares for issuance upon exercise of stock options and settlement of restricted stock units by employees, directors, officers and consultants of ours, of which 1,000,227 are reserved for options currently outstanding, 384,182 are reserved for restricted stock units currently outstanding and 1,023,098 are available for future equity grants.

Stock Option Summary

Options vest in accordance with terms as determined by our Board of Directors, or the Board, which terms are typically four years for employee grants and one to three years for Board option grants. The expiry date for each option is set by the Board, which is typically seven to ten years. The exercise price of the options is determined by the Board, but generally will be at least equal to the fair value of the share at the grant date.

Stock option transactions and the number of stock options outstanding are summarized below:

The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model based on the weighted-average assumptions noted in the following table:

The expected life was calculated based on the simplified method as permitted by the SEC’s Staff Accounting Bulletin 110, Share-Based Payment. The expected volatility of options granted in 2012 and 2013 was calculated based on the historical volatility of the shares of our common stock. The computation of expected volatility of options granted prior to 2012 was based on the historical volatility of comparable companies from a representative peer group selected based on industry and market capitalization. The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options. In addition to the assumptions above, as required under ASC 718, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

The results for the periods set forth below included share-based compensation expense for stock options and restricted stock units in the following expense categories of the consolidated statements of loss (in thousands):

As of June 30, 2013 and December 31, 2012, the total unrecognized compensation expense related to stock options granted was $3.5 million and $2.7 million respectively, which is expected to be recognized as expense over a period of approximately 2.6 years.

As of June 30, 2013 and December 31, 2012, a total of 3.0 million and 2.6 million, respectively, of options, restricted stock units and warrants have not been included in the calculation of potential common shares in the loss per share computation as their effect on diluted per share amounts would have been anti-dilutive.

We grant restricted stock unit awards that generally vest and are expensed over a four year period. In 2013, we also granted restricted stock unit awards that vest in conjunction with certain performance conditions to certain executive officers, key employees and consultants. At each reporting date, we are required to evaluate whether achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon our assessment of accomplishing each performance provision. For the three and six months ended June 30, 2013, $0.4 million and $0.7 million, respectively, of compensation expense was recognized related to these awards, compared to $0.2 million and $0.2 million for the three and six months ended June 30, 2012, respectively.

The following table summarizes our restricted stock unit award activity during the six months ended June 30, 2013:

As of June 30, 2013, we had approximately $3.0 million in total unrecognized compensation expense related to our restricted stock unit awards that is to be recognized over a weighted-average period of approximately three years.

We recognize non-employee stock-based compensation expense over the period of expected service by the non-employee. As the service is performed, we are required to update our valuation assumptions, re-measure unvested options and restricted stock units and record the stock-based compensation using the valuation as of the vesting date. This differs from the accounting for employee awards where the fair value is determined at the grant date and is not subsequently adjusted. This re-measurement may result in higher or lower stock-based compensation expense in the Consolidated Statements of Loss and Comprehensive Loss. As such, changes in the market price of our stock could materially change the value of an option or restricted stock unit and the resulting stock-based compensation expense.

As of June 30, 2013, there were exercisable warrants outstanding to purchase 1,587,301 shares of common stock at an exercise price of $20 per share, expiring in October 2015. No warrants were exercised during the six month periods ended June 30, 2013 or 2012. The estimated fair value of warrants issued is reassessed at each balance sheet date using the Black-Scholes option pricing model. The following assumptions were used to value the warrants on the following balance sheet dates: