Stock-Based Compensation
ASC Topic 718, "Compensation - Stock Compensation," or ASC 718, sets forth the accounting requirements for"stock-based" compensation payments to employees, non-employee directors and consultants and requires all stock based-payments to be recognized as expense in the statement of operations. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award (determined using a Black-Scholes option pricing model), and is recognized as an expense over the requisite service period (generally the vesting period of the equity award). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments, including estimating the market price volatility of our common stock, future employee stock option exercise behavior and requisite service periods. Due to our limited exercise history we applied the simplified method prescribed by SEC Staff Accounting Bulletin 110, Share-Based Payment: Certain Assumptions Used in Valuation Methods - Expected Term, to estimate expected life.

Options or stock awards issued to non-employees who are not directors are recorded at their estimated fair value at the measurement date and are periodically revalued as the options vest and are recognized as expense over the related service period on a graded vesting method. Stock options issued to consultants with performance conditions are measured and recognized when the performance is complete.

ASC Topic 718 requires stock-based compensation expense to be recorded only for those awards expected to vest using an estimated pre-vesting forfeiture rate. As such, ASC Topic 718 requires us to estimate pre-vesting option forfeitures at thetime of grant and reflect the impact of estimated pre-vesting option forfeitures on compensation expense recognized. Estimates ofpre-vesting forfeitures must be periodically revised in subsequent periods if actual forfeitures differ from those estimates. Weconsider several factors in connection with our estimate of pre-vesting forfeitures including types of awards, employee class, andhistorical pre-vesting forfeiture data. The estimation of stock awards that will ultimately vest requires judgment, and to the extentthat actual results differ from our estimates, such amounts will be recorded as cumulative adjustments in the period the estimatesare revised. If actual results differ significantly from these estimates, stock-based compensation expense and our results ofoperations could be materially impacted.