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INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2010 or any portion of any unvested options to immediately vest and become exercisable upon a sale of the Company or at such other time as the BOD may elect. Stock -based compensation expense is shown as an individual line on the accompanying consolidated statements of operations. The allocation of stock -based expense between "Cost of revenues" and "Selling, general and administrative expenses" for the Successor Period is as follows (in thousands): Cost of revenues $ 221 Selling, general and administrative expenses 595 Total stock -based compensation expense $ 816 The Company accounts for its equity -based awards using ASC Topic 718. This statement requires entities to measure compensation expense for all equity -based awards granted, modified, or settled using the fair -value measurement method and to recognize the costs in income over the requisite service period, which is generally the vesting period. The Company has elected to recognize these costs on a straight -line basis. The fair value of each stock option award is estimated on the date of grant using BSM option - pricing model. The weighted average grant -date value of each option grant awarded during the Successor Period was as follows: Weighted average grant -date value of options granted $ 118.95 Assumptions: Risk -free rate of return 1.73% Expected life in years 6.50 Expected volatility 47.5% Expected dividend yield $ — The risk free rate of return is determined based on a yield curve of U.S. Treasury rates ranging from 5 to 7 years which is the period commensurate with the expected life of options granted. Expected life in years is calculated using the simplified method, as permitted under ASC Topic 718, given the Company's lack of historical experience with respect to the lives of options granted and post- vesting termination patterns. Since the Company has no historical basis for determining its own volatility, the expected volatility is established based on a peer group comprising companies similar to that of the Company. The expected dividend yield is zero as the Company has not paid any cash dividends and does not anticipate it will do so in the foreseeable future. 31 (Continued)