Eye Vision

1. Eye Vision’s arrangement with Holland Hospital is NOT within the scope of ASC 985-605, Software: Revenue Recognition. Deloitte’s Roadmap to Applying ASC 985-605 was used in forming this conclusion.

• The arrangement falls under the category Software and Nonsoftware That Function Together to Deliver a Tangible Product’s Essential Functionality: “Software that is more than incidental to a tangible product is outside the scope of ASC 985-605 if that software functions together with the nonsofware components to deliver that product’s essential functionality.” The embedded software in this arrangement is more than incidental to the tangible product (Clear View Laser) because is always sold with the Lazer and is essential for the Laser to perform the medical procedures. Due to this the arrangement with Holland Hospital is not within the scope of ASC 985-605. The maintenance agreement is also excluded from ASC 985-605’s scope.

2. The deliverables in this arrangements are:

• Nonsoftware Deliverables:

(1) Clear View Laser Product

(2) Maintenance Agreement (including postcontract customer support: Telephone support, repair or replacement of nonconforming parts, software updates, and bug fixes for software)

3. The units of accounting in this arrangement are the Laser equipment and the maintenance agreement. The $1 million received from the Laser equipment sale can be recognized as revenue immediately upon transfer to the customer. The $200,000 received from the maintenance agreement would qualify for separation and be recognized as the service obligations are satisfied, over the 2 year period.

4. The maintenance agreement meets the criteria of ASC 985-605 for separate accounting. The $200,000 revenue would be allocated as the services are performed (if no pattern of performance), than on a straight-line basis over the 2 year period. The $1 million in revenue from the Laser should be recognized upon transfer to the customer at a point in time....