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INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2010 Goodwill impairment is determined using a two -step process. The first step of the impairment test is used to identify potential impairment by comparing the fair value of a reporting unit to the book value, including goodwill. If the fair value of a reporting unit exceeds its book value, goodwill of the reporting unit is not considered impaired and the second step of the measurement of goodwill impairment is not required. If the book value of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of the impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit's goodwill with the book value of the goodwill. The reporting unit's implied fair value of goodwill is determined by allocating the fair value to the reporting unit's assets other than goodwill. The excess of any residual fair value after this allocation is used as the implied fair value of the reporting unit goodwill. If the book value of a reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. (i) Impairment of Long -Lived Assets The Company reviews long -lived assets and intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or group of assets to future net cash flows expected to be generated by the asset or group of assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carving amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third -party independent appraisals, as considered appropriate. 6) Deferred Financing Fees The Company capitalizes and amortizes costs incurred to obtain financing over the term of the underlying obligation using the effective interest method. The amortization of debt financing fees is included in "Interest expense" in the accompanying consolidated statements of operations. (k) Other Assets Other assets consists of the long -term portion of lease payments receivable related to a sales type lease arrangement, the long -term portion of other notes receivable, cost -basis investments and deposits. (1) Collections Payable to Clients Collections payable to clients represents amounts collected on behalf of clients, which have not yet been remitted to clients. 11 (Continued)