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Revenue Recognition
3 Months Ended
Mar. 31, 2013
Revenue Recognition [Abstract]  
REVENUE RECOGNITION

2. REVENUE RECOGNITION

The Company considers revenue to be earned when all of the following criteria are met: persuasive evidence a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectability is reasonably assured. The Company’s agreements with dermatologists regarding the MelaFind ® system combine the elements noted above with a future service obligation. While the Company is required to place the MelaFind® systems with dermatologists for their exclusive use, ownership of the MelaFind ® systems remains with the Company.

The Company generates revenue from the sale of usage based on the number of patient sessions or lesions examined, or a fixed monthly fee. The sale of usage is based upon either the sale of individual patient electronic record cards or a system generated monthly activity report indicating the number of patient sessions or number of lesions examined. Additionally, the Company typically charges an initial installation fee for each MelaFind ® system which covers training, delivery, supplies, maintenance and the right to use MelaFind ®. In accordance with the accounting guidance regarding multiple-element arrangements, the Company allocates total contract consideration to each element based upon the relative standalone selling prices of each element, and recognizes the associated revenue for each element as delivery occurs or over the related service period, generally expected to be two years. Revenues associated with undelivered elements are deferred until delivery occurs or services are rendered.

 

Costs of revenue are associated with: the placement of the MelaFind® system in the doctor’s office, the cost of consumables delivered at installation, the cost of the electronic record cards, technical support costs and depreciation expense of the MelaFind® system placed with the dermatologist which remains the property of the Company. Certain product quality and manufacturing overhead costs associated with supporting the contract manufacturers of MelaFind® are allocated to costs of revenue.