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INTERMEDIX HOLDINGS INC. AND SUBSIDIARIES 1 Notes to Consolidated Financial Statements December 31, 2010 (M) Revenue Recognition The Company derives revenue from business services fees, subscription fees, hardware sales, and related services. The Company recognizes revenue when there is persuasive evidence of an arrangement, the service or product has been provided to the customer, the collection of the fees is reasonably assured, and the amount of fees is fixed or determinable. Business Services Revenue Business services revenue represents fees earned from the Company's RCM business for account billing, clinical systems and other related services and are typically charged to the customer as a percentage of total collections. Fees under business services arrangements are not fixed or determinable until collections are realized, thus in accordance with Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (ASC 605), revenue is recorded when such collections are made. Subscription and Other Revenue Subscription revenue represents fees earned from the Company's software -as -a- service (SaaS) offerings, whereby customers are granted access to the Company's intemet -based software solutions. Under our SaaS -based solutions, our customers do not have the right to take possession of our software and, in accordance with ASC Topic 985, Software (ASC 985), these arrangements are considered service contracts which are outside the scope of ASC 985. Other revenue is primarily comprised of fees charged for implementation and training services provided in conjunction with the Company's SaaS offerings, as well as support services, hosting services, and hardware sales. Subscription and support services revenues are recognized ratably over the contract terms in accordance with ASC 605. Implementation and training revenues, when sold with SaaS offerings, are accounted for separately when there is objective evidence of the fair value of each deliverable. Implementation and training revenues are recognized ratably over the longer of the contract life or the estimated expected customer life, which is estimated to be five years. Hosting services revenue represents fees charged to manage and host customers' hardware and software solutions at the Company's data centers. Hosting services revenue is recognized ratably over the contract term in accordance with ASC 605. Hardware revenue, which represents the sale of mobile devices that are utilized in conjunction with the Company's SaaS -based solutions, is recognized upon delivery to the customer, when all of the other revenue recognition criteria are met. Support services that are sold together with hardware devices are accounted for separately when there is objective evidence of the fair value of each deliverable, and are recognized ratably over the service term. Amounts that have been invoiced for subscription and other revenue are recorded in accounts receivable and in deferred revenue or revenue, depending on the whether the revenue recognition criteria have been met. 12 (Continued)