ICAD Inc (ICAD) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter iCAD 2005 Earnings Conference Call.

My name is [Anika], and I will be your coordinator for today.

At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of today's conference. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference, Mr. Kevin McGrath of Cameron Associates.

Please proceed, sir.

Thanks and good morning, everyone.

Before I turn the call over to Scott Parr, our President and CEO of iCAD, I need to inform you that certain statements contained in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, but are not limited to, the risks and uncertainties of patent protection; the impact of supply and manufacturing constraints or difficulties; product and market acceptance; possible technological obsolescence; increased competition; customer concentration; and other risks detailed in the Company's filings with the Securities and Exchange Commission.

The words "believe," "demonstrate," "intend," "expect," "estimate," "anticipate," "likely" and similar expressions, identify forward-looking statements.

Listeners are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statements was made.

The Company is under no obligation to provide any updates to any information contained in this conference call.

Now, without further delay, I will turn the call over to Scott Parr, President and CEO of iCAD.

Thank you, Kevin.

And thank you ladies and gentlemen.

Through March of this year, iCAD did very well, demonstrating strong sales, increasing margins, and profitable operations.

We integrated two complementary organizations, and we demonstrated significant benefits from that combination.

Over the last two quarters, we have had a reversal in sales, which reflected a series of diverse, and in some cases, unrelated factors. iCAD was poorly prepared to deal with and to address these factors, and performance suffered as a result.

Some of these factors were temporary.

Others, we believe, we have addressed.

In simple terms, iCAD today, has the right products for today's market and is better prepared and better positioned to market and sell them than at any time in our history.

In particular, at a point in mammography, where clinics of all sizes are considering and contemplating a transition from film-based to digital mammography, iCAD is positioned with products that meet the needs of both film-based and digital workflows and provide a bridge between them.

iCAD reported today on financial results for the third quarter of 2005, in a detailed press release that provides background on factors that influenced third-quarter sales and trends and developments we believe are significant in looking ahead.

I will not repeat the detail of that release in my comments here this morning, but highlight several key points before turning to questions.

We anticipate that as a result of a significantly expanded salesforce and improved sales procedures, of revised and more effective product marketing activities, and as a result of critical new product releases, fourth-quarter 2005 sales should exceed those in either the second or third quarters of 2005.

Our sales objectives for 2006, are in excess of sales levels achieved in 2004.

With a strong balance sheet, approximately $6.5 million in cash at the end of the third quarter, and what we consider an advantageous competitive position in an expanded set of core markets, we look forward to demonstrating the strength of our business model in the fourth quarter of 2005, and beyond.

I would like to note the following recently implemented improvements to iCAD's sales and sales management efforts.

First, our domestic sales force has doubled in size, from 8 sales people at the end of the second quarter to 16 sales people today.

Unit sales of our Second Look® digital products through Hologic, Inc., an important sales channel for us, quadrupled in the third quarter of 2005, compared to the second quarter of 2005.

I believe we've made significant progress through the addition of sales staff and the implementation of supportive marketing programs in assuming greater control over lead generation and sales activities, especially where distributor or reseller contributions have proven less than satisfactory.

This is particularly important to us, because sales to our non-exclusive national distributor of film-based CAD solutions declined significantly, from over $1.8 million in the first quarter of 2005, to less than $700,000 in the recently completed third quarter.

We have of necessity, of taking control of sales processes necessary to reclaim those sales levels.

In a sense, we have taken control of our own success and of our destiny in these areas.

Several months ago, iCAD announced an increased effort to secure selling relationships with national accounts and buying groups, a market segment in which we had done poorly.

This week, we signed a purchasing agreement with Amerinet, one of the nation's largest such buying groups, representing more than 1,900 hospitals and more than 1,400 ambulatory and surgical centers in the United States.

This is the first success in our expanded national accounts program, and we are prepared now, not just to acknowledge the agreement, but to pursue more effectively sales arising from this agreement than we have in past national account relationships.

This month, we implemented a new and advanced iCAD call center program, consolidating inbound sales calls management and outbound direct marketing.

Our new call center is expected to contribute to lead generation and qualification; increased promotion of the our ClickCAD and other fee-per-procedure programs, which have demonstrated disappointing results to-date; and increased direct marketing to targeted and national accounts, including Amerinet, in coordination with agent support of the efforts of our field salesteam.

In marketing, we are emphasizing a new and much more aggressive form of product marketing.

Associated in part with changes in personnel and responsibilities within our sales and marketing group, a principal theme, which you've observed from recent press releases, is our "Gateway to Digital Program," rolled out this month, and precisely defined to addresses the questions, concerns and opportunities confronting some 6,000 smaller film-based mammography practices, approximately two-thirds of the total market.

One of the critical centers of iCAD's business plan is an area within which iCAD has real competitive advantages.

Gateway to Digital provides a series of clinically and economically attractive purchasing alternatives that permit a film-based clinic to make the commitment to iCAD now, while continuing to consider and approach digital workflow options for a later date.

Samples of our new product marketing material will be located at our website, at www.icadmed.com, under "Gateway."

Those materials should be available later this afternoon or tomorrow.

Critical new product releases, which have occurred early in the fourth quarter, also provide an immediate sales opportunity in expanded markets, while enhancing the potential or sale of our existing and previous computer-aided detection solutions.

Key releases include Pure Look, PowerLook, and Total Look, and they have strategic meaning for iCAD.

Over the last quarters, iCAD has largely been defined by the scale of the domestic computer-aided detection market and by increased competition with our principal competitor in this market.

Our new products expand this definition in meaningful ways, and I would like to discuss these in some greater detail.

iCAD's new Pure Look digitizer converts film mammograms into digital form, providing enhanced image capture and ambulating the characteristics that are found in images acquired through digital mammography.

Pure Look offers digitizer characteristics that are superior to those that can be achieved with alternative and competitive technologies, including CCD digitizers, which provide lower quality in acquisition, and laser digitizers that are an older generation of digitizing technology, which carry with them an extraordinary level of cost and problems of maintenance and reliability.

Pure Look digitizers are included in all of iCAD's Second Look products for film-based mammography and in our new Total Look products for review of prior film-based images.

Improvements that we demonstrate in Pure Look are, therefore, reflected in increased image quality and improved performance in our other products.

Our new PowerLook viewer is a software upgrade, available for iCAD's Second Look 200 -- forgive me -- 300 and Second Look 700 systems and used with the radiologist review stations offered with those products.

The radiologist review stations are the monitors that the radiologist uses to view iCAD's breast images and CAD results, and they're typically installed where the radiologist is reading mammographic films.

The benefits offered by our new PowerLook viewer are simple and are dramatic.

PowerLook builds on the quality image acquired through our Pure Look digitizers to provide film-based mammographers with an unprecedented set of high-quality digital viewing features that were previously available only to the people who bought expensive digital mammography systems.

iCAD's PowerLook, located next to the film viewing area, can be used to more thoroughly examine suspicious areas in a breast image that may yield more information through windowing and leveling of regions of the breast image, helping to focus on particular possible problems that may otherwise be concealed in the dense images -- the dense areas of the film or the image.

Some of these benefits, in particular, of permitting closer examination of dark image areas, include those associated with dense breasts and younger patients.

PowerLook is a very attractive and a very easily demonstrated tool.

And it has benefits to the radiologists that we would characterize as having a high wow factor.

It presents very well.

PowerLook enhances our Second Look 300 and Second Look 700 product lines, and we believe it will accelerate sales for these models, as well as contributing incremental revenue and incremental software margins to those sales.

PowerLook is offered at a suggested list price of just under $15,000.

Total Look, the third of our new product releases, is a new product, but it’s built on exactly the same hardware platform as our Second Look 300 CAD solution for film-based mammography, a system, which includes a Pure Look digitizer and integrated computer and associated display and keyboard.

All we do to convert this platform to a substantially new product with a substantially new market opportunity, is to add new proprietary software, which allows radiologists to conveniently review prior film mammograms in digital form, along with the digital mammograms that may be acquired for the same patient.

This product has a suggested list price of just under $50,000.

It’s important to recognize that Total Look is not restricted to CAD users, which means our market for Total Look is larger than our market for digital CAD solutions alone.

Furthermore, unlike our CAD products, which have greater potential in US markets that provide reimbursements for CAD procedures, Total Look is truly global in reach.

Some of the immediate interest in this product has come from international markets.

In simple terms, every mammography clinic that has been made or will make the transition from film to digital workflows, is a prospect for iCAD’s Total Look solution.

With an estimated 16,000 to 20,000 mammography sites worldwide, and digital penetration rates over the next several years, estimated variously at up to 25% of that market, we believe this is significant opportunity for iCAD.

Total Look provides another very strategic benefit to iCAD.

Our cost of goods advantage, related to our history as a designer and manufacturer of film digitizers, has previously been restricted to film-based market segments, and has not previously been a factor in our products for the growing digital mammography market.

With Total Look, we have leveraged our capabilities as an integrated lower-cost manufacturer of digitizers, into what we believe can be a key advantage in the significant, and growing, digital mammography market as well as in film-based market segments.

These are critical and exceptionally well timed products.

They provide bridging solutions between film and digital mammography practices and benefits, at precisely the time such solutions are required.

I look forward to your questions at this time.

[OPERATOR INSTRUCTIONS]

Your first question comes from the line of Joe [Wuti] from Saxony Securities.

Please proceed.

Hi Scott.

Good morning, Joe.

I got a couple of questions, I hope we don’t get cut-off this time considering the position that we control with the Company.

I think they should give us the respect to ask all the questions we need to ask.

I got a -- first, I want to start of with -- about a week or so ago, may be week and half ago, there was a drug that was talked about all the media, Herceptin from Genentech.

Yes.

So, a drug for breast cancer, the highlights of the drug, just to review, were, it showed very good success in treating breast cancer, but the catch was, in early stages of breast cancer.

They also showed success in cutting down relapse by more than 50%.

Is there anything iCAD's doing with this, as far as with the PR department, considering that the catch was early stages and the catch with iCAD is catching breast cancer in early stages?

We haven't done anything in conjunction with the news of that particular drug, Joe.

We have been involved through the current month, which, as October is National Breast Cancer Awareness Month, in a number of regional programs that are meant to highlight for women, both the benefits of early detection and the benefits of computerated detection in achieving an early detection and making available the opportunity for earlier treatment.

Okay.

Did you [expect to see] anything, you know, playing off of this announcement with this drug in the future with the PRs?

I think it's a good suggestion.

I don't have any immediate reaction.

In general, we think that the ability to work with local providers of breast care and impact locally the awareness regarding early detection in CAD, has the greatest potential for us.

National programs can become somewhat diluted with the resources that iCAD is able to devote to them.

Okay.

Second, there was a report that also came out just recently, maybe in the past two weeks, from [Forca].

And after going through the report, I found one pretty big discrepancy, and maybe it's a discrepancy on my behalf, but I believe it's a discrepancy on their behalf.

They have the institutional ownership at 11%.

From what I'm able to gather, we got an institutional ownership over 20%, as of the end of the third quarter.

Is there anything you could comment on that?

Well, I can't comment on an outside report.

Well, comment on what you know to be the institutional ownership then, if we can do that?

My understanding, Joe, is that it is at the 20% level.

Okay.

Yes.

So unless he has information that, you know, that nobody else has, 20% and change is probably more accurate.

Eastman Kodak also reported numbers -- and actually highlighted one of their reasons for their losses, was basically, this particular industry as well.

Do you see that as, more as an industry problem, and Eastman Kodak's problems confirming that it's an industry problem, or do you see that as company -- Eastman Kodak Company related, and as an opportunity for other companies to take advantage of that?

Joe, could I ask you to rephrase the question?

I'm not entirely sure.

There's a couple of question I could answer there and I want to be sure I answer the one that you intend.

Okay.

Eastman Kodak, you're familiar with their recent quarterly announcement, right?

Yes.

Okay.

Obviously, they have indicated that they've had problems within the industrythat iCAD is in as well.

Do you see that as a company problem, specific with Eastman Kodak, or that confirms the fact that there's an industry-wide issue potentially, and would actually, I guess, come to the defense of iCAD, that it's just not iCAD having an issue in this business at the present time, that it's industry-wide?

Well, I think when Kodak defines its industry, it probably defines it significantly more broadly than iCAD.

Of course.

And the principal part of Kodak's industry is the manufacture and sale of x-ray film.

The problems in that market are clearly growing, as a result of a transition on the part of medical practices and radiologists of all kinds, from film-based to digital imaging.

In mammography we see that as well.

And the recent digital mammography study highlighted that there are benefits in making that transition.

I think film producers overall, not just Kodak, but others, are confronting a very real problem as the market for their consumable declines.

Now Kodak also offers a computer-aided detection of breast cancer solution, but it is a miniscule business within their medical imaging and medical product portfolio.

And I don't think that their comments in any of the earnings releases or comments on those, have particularly address that tiny subset of their business.

Okay.

So I think that the trends from film to digital, which we highlight as both having had a near-term detrimental impact and a long-term extreme benefit for iCAD is confirmed by Kodak.

But I'm not sure that anybody had much doubt about the fact that that trend is a real one and underway and occurs in kind of fits and starts.

Okay.

Well, [Fisher] also just brought that up as far as the film to digital.

There's been many articles out there on CAD.

And it seems like you've been more coming up, even since September.

And several of the articles state that basically, the fear of -- or the issues with the business from comparing film to digital, is not really an issue, because most of these clinics can't even afford a digital system anyway.

So their option is film and film alone.

So it's more -- not necessarily a loss of business, but I would say it's more of a postponement of business.

Do you want to comment on that?

I -- Joe, I agree completely.

Okay.

And I think that the--.

I mean, you're not talking about 20% up-charge.

You know, you're talking about a couple 100% up-charge for a clinic to go from film to digital.

Or more.

Or more.

Right.

I think it’s clear that the digital alternatives that are available today are not meaningful options for the large majority of breast practices.

And yet, it’s a concern for them, because at some point they believe, as has happened in many other markets, that the cost associated with one or another digital technology, will come down to the point where they will be able to afford to embrace it.

And you know, I think that's the right vision for them to have.

In a very interesting way that gives iCAD a hook that we are playing very aggressively through the gateway to digital program, that I spoke of earlier and that we provided information about.

There've been a tremendous number of clinics that have been sitting on the fence.

They're paralyzed almost, because they're not sure whether they are going to digital.

They don’t want to make capital investments in analog solutions, including iCAD, and as a result there is a kind of paralysis.

And we've observed this in other markets.

So iCAD has participated in the film to digital transition, in publishing and printing, we participated in it in photography.

And in each of those markets, there appears to be a kind of pause, when people who aren’t sure what they are going to buy, don’t buy anything.

Now the digital mammography study had, I think, the benefit of pulling people off the fence.

People who previously weren’t sure whether they were going to go to digital, are.

They now believe that it's appropriate to go to digital, because of the benefits associated with better examination of young women, better examination of dense breasts, better viewing capabilities.

So they've come off the fence.

And they are going to be digital buyers in the near term.

For the film buyers, where the economics really preclude--I'm sorry, for the smaller scale film clinics, where the economics really preclude the current acquisition of digital technologies, it creates the opportunity for iCAD to say "look, we agree with you that you are going to go digital in the future".

But by acquiring at iCAD's Second Look 300, or Second Look 700, or one of our products under our fee-per-procedure program.

We can give you the immediate benefits associated with the clinical benefits of computerized detection, with the economic benefits of reimbursements.

And we will actually show you how to use the iCAD product as one of the contributing tools when you move to digital and we'll show you how to use the correct reimbursement stream to help afford the acquisition of a digital solution.

And the initial response to that messaging has been good.

It addresses and confronts the indecision that clinics have had, in part about whether to buy CAD with a film basis, whether to buy from iCAD, whether to buy now, by directly offering to them the tools that help conform a current capital investment, a modest one, in a film based Computer Aided Detection System, with a longer-term desire and plan to be digital.

That is a powerful opportunity for us.

[OPERATOR INSTRUCTIONS] Our next question comes from the line of Wayne Lottinville of Show-Me Research.

Please proceed.

Hi Scott, just a couple of questions about your revenues, would you mind breaking out the digital versus film sale percentages?

Sure, bear with me just a second.

Wayne, I'm sorry I'm confronting a whole set of pieces of paper here.

I'm going to ask, Annette, you are monitoring this, could you bring that data in please?

And we will come back to that.

That'll be fine.

I'm sorry, I do have it here for you.

Okay.

We have, of Q3 sales -- especially not that I found the piece.

We have just about $1.1 million represents digital sales.

And during the third quarter, that was just about 33% of our overall revenue mix.

And that is up from 23% in the first quarter, 28% in the second quarter, as a result of the decline in film based products during the third quarter of '05.

Okay.

So the film based would then represent the rest of the percentage or is there some other--?

The other two components would be digitizers, which represented about a $140,000 or 4%, and supplies and service, which was -- it continues to be a nice source of growth force at $440,000 or 13%.

The total for film based products, Wayne, was 1.7 million or just about 50%.

Okay.

And there may be some rounding issues that will account for point one way or the other when you put those together.

And you mentioned that the sales -- I think the sales at logic quadrupled.

Can you give me some numbers on that?

Was that from 1 to 4 or from 10 to 40?

How does that work?

It was from 3 to, I believe, 18 -- 17 or 18, there is one item in our report where we haven't -- we are not sure we correctly attributed it to the correct manufacture.

Okay.

And just one last thing.

The percentage of the quarterly sales to OEMs, do you have an idea of what that is?

It's going to be about that same 33%, because that's really the OEM channel for us.

Okay.

Thanks a lot, Scott.

You're very welcome.

Your next question comes from the line of Andrew [Varghese] of [Miserol].

Please proceed.

Hello Scott.

Hi.

Help me out with the couple of concepts I don't think I understand.

The increased reimbursement is for a digital mammography or for a mammography that is enhanced by CAD systems?

There is an increase in reimbursement when a mammography clinic adds computer-aided detection, because that is a separately reimbursable procedure.

There is a basic reimbursement that is associated with doing, screening or diagnostic mammography, whether it is with a film based system or a digital system.

What the iCAD product offers is the ability to add incrementally to the total reimbursement that is associated with a screening plus CAD procedure.

Could you tell me what that incremental reimbursement is and how that figures into the attractiveness of your pay-per-click marketing?

Sure.

We use as an approximation, about $19, which is the Medicare/Medicaid rate.

Because of the way reimbursements are structured among private insurance payers, that number may be higher or lower.

And I've seen at as high as $35 or $36 per procedure, in some markets, under some reimbursement contracts.

And I've seen it as well, lower.

But we find that that $19 is a pretty good approximation and a pretty good average.

When we compare that to the fee-per-procedure programs we offer.

Today, we really offer two pretty comparable programs.

The first is for a print-only CAD solution.

And we charge $8 per case for that, relative to the $19 per case average.

When a clinic ask for a radiologist viewer in addition to the CAD solution, so that they can seek CAD results on a computer screen next to where they're reading films, we charge an extra dollar a case.

Okay.

And those reimbursements are a part of the 19 total?

The 19 total would be the reimbursement to the clinic.

The clinic would then pay us $8 of that 19.

Okay.

So the 19 is an incremental reimbursement based on CAD.

Exactly right.

Okay.

One more.

Just national purchasing agreements, what is that -- what do you folks have to sacrifice in margin to make something like that work?

I mean these people are obviously buying at a discounted price.

What kind of margin reduction do you guys get from something like that?

It's modest.

In part because it's shared with the reseller where reseller is involved, and in part, because the real objectives of some of these purchasing organizations, certainly include getting a good price, and we work to do that.

But they are also looking for some additional support in training, for some assurances about how we will maintain and support them in the use of our equipment.

I think some very legitimate objectives to be sure that the total package that the manufacturers provides best meets the needs of their members.

So, we don't keep up a tremendous amount of margin in that process.

All right.

Thank you.

I'll join the queue.

Your next question comes from the line of George Whiteside of SWS Financial Services.

Please proceed.

Good morning, Scott.

Good morning, George.

Certainly, an encouraging note is the year-to-year improvement in gross margins and so, we can take some comfort from that.

My question deals with your pre-earnings comments or warnings, and then verified in this release.

And that is the issue of the article in the New England journal having caused customers to defer their sales -- signing a sales agreement.

And has that been independently verified with those customers?

And is there some way to incentivize the sales force to spread the sales throughout the quarter.

I think that the results in the third quarter, again the second quarter before them.

I had it described to me by our national sales manager in a way that was unpleasant, but probably accurate.

And if he said that it's kind of like a plane crash.

It's not one factor, its one factor complicated by a second factor with a third factor and a fourth and a fifth that all, unfortunately, converge at the same time.

And I think that's not an inaccurate representation of our poor results over the last two quarters.

We highlight certain factors that are clearer than others.

And the fact that the digital mammography report was released in the middle of September, and then a series of film based prospects cancelled board meetings or capital acquisition approval meetings, or decision processes, which tend to be clustered at the end of the quarter, because that's their budget cycle as it is ours-- drew us to the conclusion that they were reacting to the DMS, the digital mammography study.

And in fact, tracking those accounts into October, we watched a number of them come back.

Those meetings were held, purchases were approved.

And in direct inquiry, it was very clear there was a desire on the part of a material number of film based buyers, to make sure that they were not making a mistake in investing in a film related solution.

Now there are other factor.

And they are in many cases difficult to quantify.

Some of them are extraneous, others.

There's a not insignificant issue in our Houston and Louisiana markets, over the course of September.

There is a measure of distraction and bio-distress about lots of other factors.

There are also, I think, self inflicted wounds, more perhaps in the second quarter.

But still, we have to ask, why weren't we able to better confront this decline in sales in September of 2005 and to avoid it or manage our way through it?

And I think that those combined, represent the challenge to us, as we seek to assure and then provide assurances, that we're in better control of our destiny, as we go into October and the fourth quarter.

One of the factors, as we look at the numbers, is that we see a decline in sales through our principle national distributor of more than $1 million per quarter, from the first quarter of 2005 to the third quarter.

That's a big difference.

Now they reflect other factors that we see through our overall channels, but that's another of the issues that we've had to confront as we go into the fourth quarter.

We also had some just odd factors.

GE, which is one of our major contributors, had a different quarter end than did iCAD.

So their quarter ended--their third quarter ended some days after iCAD's third quarter.

And that ended up with certain sales that were in their third quarter and then are reflected in our fourth quarter.

But overall, the notion that the cause that was associated with a concern about whether people should move from film to digital now or later, was sufficient and was sufficiently validated, for us to base a very clear marketing program on the premise that a CAD purchased now can contribute to your subsequent digital purchase and digital workflow, and that's the gateway to digital program that you've seen discussed to-date.

Yes.

I suppose that would offer some reassurance to a prospective user of your system, that they could easily migrate to the digital system at some later date if they went with the film based system today.

Exactly.

You commented on the sales and distribution issue.

By taking in-house and having a tracking system, is that your principle way of managing that particular problem?

No, I think that it’s part of it George, but there is more to it than that.

First of all, the bringing in-house a coherent and an effective leads management, sales management, sales tracking system, overdue.

And we see the benefits already, as we are able to provide a better early warning if there are issues.

And more, if we are able to identify the opportunities and pursue them more effectively and more quickly.

But I can't head a distribution system in which we combine a national distributor.

And I am speaking here, of our film based of our analogue side.

We have national distributor.

We have a small group of regional resellers and we have a larger direct salesforce than we've ever had in the past.

Our direct salesforce is designed and instructed to first of all, use and support our resellers.

It is not a channel which we want to compete with.

We want to make them more successful.

And we have got more tools to do that.

But it's also trained, and now increasingly able, to fill in gaps or vacuums where, for a variety of factors, resellers or distributors are not present or effective.

And with the doubling of the salesforce, increased control over what the marketing and sales messages are, and better tracking on an account by account basis, we are much more able to identify opportunities that we didn't see before.

And we're able to pursue them, and do pursue them, directly, where that's the appropriate way to do so.

The priority is always to support and never to ever to compete with the distributor or the reseller, where it is possible to use them effectively.

But as it has become clear that that's not possible in all areas and regions, we've taken control of our destiny in those areas, and I think done so in a very capable manner.

Well it sounds like your in-house system of, sort of, is in tune with the old adage, that unless you're measuring performance, you, frankly, are very likely to have performance problems.

And you now have a system where you can measure that progress.

And I think, hurray that we now have it and shame on us for not having it sooner.

I hear you.

Thank you.

Your next question comes from the line of Scott Warner, an Investor.

Please proceed.

Thanks a lot.

Good morning, Scott.

How are you today?

I'm okay.

Let me ask you first, one little thing and I'll get into the main thing I want to ask.

On the -- on your OEM business say, Hologic, how many units did we price this past quarter -- I know you said, I think, 18 -- versus -- R2 also is with them, correct?

Right.

How many did they have?

Because R2 is a private company, they don't publish, and the information that we have is in some cases second hand or indirect.

In the second quarter and I'm working from memory here, but I believe that Hologic reported that they had sold 33 digital systems with CAD.

I'm looking at Annette, she is shaking her head.

So that's probably okay.

We sold three of them.

All right, jumping ahead, why were they part of it not ours?

Scott, Forgive me.

Let me finish this.

Okay.

That was in the second quarter.

Yes.

In the second quarter they sold some 30 to our 3.

Yes

And the simple answer as to why, is that the R2 product was out first and they had far better relations with the Hologic field salesforce.

In the third quarter where we have represented some 17 or 18, we believe that Hologic sales, probably went up.

I don't know whether Hologic has released yet, so I can't speculate and I don't mean to be providing any insight that we don't have.

But, we believe from that basis, that our share of the Hologic business, if everything else kind of extrapolates, went from insignificant to somewhere between the third and a half.

What determines that the buyer takes?

The buyer then has been massaged by the R2 salesman, to demand the R2 product louder than ours with the Hologic products?

Well, it's typically the Hologic salesperson that would have the first opportunity to choose a product to quote.

And although, the R2 salespeople, and to a lesser extent, the iCAD salespeople are now becoming more involve with the ultimate customer, where permitted.

You could understand that the Hologic salesperson with a very large deal, and Cad is the small part, really doesn't want what's a small part of that deal, to become confusing or disruptive to the larger sale.

So the salesperson makes a large part of that decision.

And we were late to that and have made, I think, significant inroads in building credibility with the Hologic salesforce, which we expect we will continue to do.

All right.

The last question there, before I got on my main one.

Have you visited with the Hologic sales management groups, so to help the sales--our people get more sales, you know, being part of their OEM?

You, yourself, met with them?

Yes.

Okay.

Okay.

In fact, Scott, you were kind enough to send me a note earlier and I appreciated that.

But, getting out into the field is a real important part of what each of us does.

And from my standpoint, one of the real frustrations over the last months, has been that with the arbitration with R2 occupying as much time as it has, the time I would inherently be able to stand in the field, has been more limited than it should be.

But that has been an area where I have been attentive. and in fact, I'm back in the field next Tuesday on just that kind of an account.

Okay, let me get into my second part here.

I’ll skim through how disappointed I am in all of the sales -- that was first going back into the [unintelligible] and how great that was.

And then a bunch of new resellers.

Second then the new sales manager, last February or thereabout.

And now, a larger iCAD direct salesforce supporting, and so on.

Now, I am getting into -- I'm interested in the feedback system that exist in your organization.

Say, six months ago, just arbitrarily, six months ago, versus now, with your current structure, how, for example, when an R2 is in competition for whether it’s a one or two-unit sale or to a HMO, like Kaiser or somebody, what is the reporting system each week, I hope, that comes back to let the management -- the Sales Manager know and also then you know, how we are doing?

And then, my question, and I want to get into this.

What happens after we don’t make the sale and R2 gets it?

What is the follow-up by the sales department as to why we lost the sale?

And then, about you visiting, how often -- how many times in the past six months, have you visited the R2, the place that took R2 and we didn’t make the sale?

John, I am happy to answer those.

I going to have to ask you to do them one at a time.

Okay.

So let's get back to the first one.

Okay.

What is the feedback system now versus six months ago, for getting information up from a sales prospect?

Let me take that--let me take that one.

Okay.

The sales people - and six months ago, there would have been eight of them.

Today, there are 16, work with the National Sales Manager to compile and to update a series of Excel spreadsheets that are based on account-by-account, where that salesperson believes there is a prospect or a working account.

And that is dealt with weekly through personal calls typically, between the National Sales Manager and the VP of Sales and the sales representative, what we would call our Regional Sales Manager at that time.

That was complemented with regular, and by regular, really, quarterly personal meetings of the salesteam, and by approximately quarterly, one-on-one meetings between the Regional Sales Managers and the National Sales Manager and the VP of Sales.

All kind of working with this list on an Excel spreadsheet of what’s going on, what can we expect, what are the issues?

So that the sales management group has a pretty good account-by-account understanding of what are the issues and what are the opportunities?

But it was limited by the fact that we only had eight salespeople in the field.

Today, with 16 salespeople, the process of bringing that over to salesforce.com, which is the [leading] customer relationship system we use, is just now being completed.

And what that provides is the ability, not simply to go over these accounts one-on-one with salespeople, but to be able to generate reports that indicate, by salesperson, for example, which accounts have moved from an initial presentation stage to a quotation stage, or a quotation stage to a decision stage within requisite periods of time.

Flagging the accounts where there are competitive issues where too much time has taken place between stages, or where no action has taken place within a given period of time.

I think that's one of the real powers of a good contact and sales management system.

From the perspective of the sales managers, is that they can really track these things objectively and quantitatively.

Now that complements the one-on-one.

And I give enormous credit to our sales management group, because they are in field most of the time.

So they are actually visiting the sites that have either a high potential or a high risk.

And they are contributing directly to the sales process and the sales achievement in those cases.

That has increased in the fourth quarter.

I hope that answers the question.

[Inaudible] How would you say that, right now, with the 16 personnel we have, assuming they're all effective, how is our coverage on those accounts at risk or ones that are in the process where we know there's a bid out or whatever, how close are we in coverage there, to R2?

Well, of the 16 people who we now have in the field, probably -- we have the original 8 who, of course, are very experienced and very capable.

Of the additional 8, 3 have been with us for more than 90 days and they are beginning to contribute.

And the remainder have been with us from 30 to 90 days, and we expect we'll see some additional contribution in the fourth quarter from those team numbers.

What I meant, how would you say you would compare today, today with the guys, some who have 90 days and some who don't, of our support, going in where there's an account where we're bidding against, basically R2, in a competitive situation, how much presence do we have of our actual iCAD payroll guys in there versus R2?

I'm going to answer that question in two ways.

All right.

First, we believe R2 has significantly more sales people.

And we are, therefore, continuing to add sales people, because that's a good investment for us to make.

Because they have more sales people, it is almost inevitable that there are accounts that they're seeing that we do not see.

If we don't find them, we don't have visibility.

Our resellers don't turn over the leads.

But it would naive for us to assume that we're head-to-head with R2 at every account that R2 is pitching.

Where we are aware of the lead, and therefore, participating in the sales process, I think we are very good.

And in fact, the overall conversion rate, where we are head-to-head, based on data that is undeniably a little bit soft, shows us as turning more than two-thirds of those into iCAD sales, rather than R2 sales.

But I think that the challenge we have, and that we acknowledge in the second quarter, and have made very, very constructive progress in, is more feet on the street, more people, more leads, more touches.

And from my standpoint, it's a balance between overwhelming our ability to train and integrate, and make people productive and getting them on more quickly.

And the view that we take is, we need to move at the fastest pace we can move at, where the people that we put into the street represent iCAD creditably, proudly and responsibly and accurately.

And that's, you know, that's not the ability to put 10 people on per week.

Okay.

And then, in reference to that, before I go the last a little bit, by six months from now, how many personnel will have had 90 days of training on staff? [Unintelligible] going to be 20, 25, or what, 30, or six months from now, do you figure?

Well, six month from now is to ask how many more would hired by, call it the end of the January or February period.

Well, yes, let's say by June then.

Let's give it, say, you hire them by March, so they have 90 days by the end of June.

How many will you have had -- how many guys -- I don't know.

How many guys will be fully trained by the end of the June quarter anyway?

I would say the range would be 20 to 25.

Okay.

That's it.

And the last is when you, as the CEO, you know, just going back, say, six months, over the past six months where we've lost say either to a one or two-unit mammography center or to a Kaiser Permanente, whatever they're called, big sales organization, how many places--how many calls have you made in person, face-to-face, with the guy who is the gatekeeper or whatever he may be called, to find out why we were -- when we were head-to-head, we didn't make the sale, and R2 got it?

How many times have you been out there and made those calls, after we lost the business, to find why?

I typically make those calls before we lose the business, and with the objective of not loosing the business.

All right.

And that is -- that's reasonably common, and more by phone, Scott, than person-to-person, especially over the last two months.

But it is, you know, it's critical to us, not just to know why we win an account, but why we lose the account.

And I think that we have a pretty good view of that and have made real headway in the development of programs and tools, that help us lose fewer/win more.

And I think, you know, a fair question would be, why do we loose accounts to R2?

And with your permission, what I'll do is, I'll try to answer that as best I can.

You get an extra question that I asked for you.

On the digital part of our business, I think the two reasons that we lose accounts to R2, would be the salesperson for the OEM did not pich us.

And that, as you can see, we're beginning to address.

Or, the customer was to satisfied R2 user when they had film based mammography.

And for legitimate reasons in many cases.

Being familiar with R2, with the way that R2 marks it's cases.

It's called the marking Logic.

They would just assume not have to change or relearned a new approach to computer-aided detection.

So if they were good with it when they were film-based users, then they're just happy to have it, thank you very much, when they move to digital.

And that's probably the biggest reason, where an account may be -- an account that goes to R2 rather than iCAD, on the digital side.

On the film-based side, there is some of that same factor.

Somebody is upgrading a existing R2 system, or more commonly, a radiologist has left a practice where R2 was in place and just wants to use the same tool.

I think in what you might call the higher end of the film-based market, higher volume, perhaps less price sensitive, and also the part of the market that's most inclined to move to digital, the R2 brand has historically been better recognized than the iCAD brand.

And that was a kind of confidence or creditability factor for purchases of that kind.

In the market made up by smaller volume, film-based clinics, that's 6,000 potential buyers, two-thirds of the overall market, I think that the competition is not influenced particularly by R2's superb brand marketing in the past.

I think it can be influenced by whether any of the principle decision makers have had experience with R2 in the past.

Or it can be influenced by something as simple as a bad demonstration.

Our systems and the R2 systems, both miss a certain number of cancers when they are run.

We talk about 91% to 93% sensitivity rates, and that means that ordinarily 7% to 9% of certain cancers, or more of others, will be missed.

And if a clinic asks for head-to-head comparison, and they run a limited sample of cases, there is some possibility that the results will be non-typical, that we may just have a disproportionate number of those cancers that are hit by iCAD and R2 hits less than they might over the ordinary.

And that’s an account we walk away with or vice versa.

There are also -- and I guess I would put this into the anecdotal category, accounts that we lose for reasons that are somewhat unexpected and uncontrollable.

And this, I think of in particular, is a large multi unit account in Arizona, which we did not lose to R2, but we lost to Kodak.

Important account of some 10 units, I think, or 12 units.

Shortly after the account was awarded, the Kodak sales rep and the purchasing agent were married.

And we looked at the salesforce and we said, we don't expect you to do that.

So, the balance of reasons are much more understandable and in general, addressable.

Your next question comes from the line of [Jerad] Coleman of JM Cohen & Company.

Please proceed.

My questions have been answered.

Thank you.

Thank you, sir.

Your next question comes from the line of Jeb Terry of Aberdeen.

Please proceed.

Good morning, Scott.

Good morning, Jeb.

Could you add some clarity on the significance or potential of the Amerinet GPO?

Yes.

It's a good question.

The first significance is that we were able to intervene in what had previously been an exclusive buying relationship with our competitor.

So that it reflects the effective execution of a plan that we laid out some months ago, to be able to increase iCAD's participation in the large part of the market that's represented by group buying organizations or purchasing organizations.

So it's significant that Amerinet decided that what we have to offer was sufficiently attractive to want to change the contract they have previously with our competitor and bring iCAD into the mix of options for their member clinics.

Now the greatest significance of this, is absolutely dependent on how we follow up on it.

And I know Mr. Warner mentioned Kaiser, which was an account where we were very pleased that we were designated as a selling CAD supplier, and had disappointing results.

Not insignificant results.

I actually went back and checked and it turns out we've made more than a limited number of sales within the Kaiser group, primarily through GE and with GE, but not as effective, I think, as it could have been.

The challenge for us is now to be able to say, we have the ability to market to the Amerinet population.

And the effectiveness of the product marketing that we do, how we use our call center to be proactive in reaching into those accounts; how we identify the accounts that are in the research or the budgeting stage and drive them into contact with our regional sales managers; what the tools are that we can put into the hands of the Amerinet decision makers, that make it clear here is why you should buy CAD, here is why you should buy iCAD and here is why you should buy it now.

That's the biggest part of the challenge.

And we failed in that before.

Today, I think that is an area where we are immensely better prepared, and where the tools are in place and the sales processes to manage them are in place.

So I'm very optimistic that Amerinet will prove to be a source of meaningful sales for iCAD.

But that part is up to us.

Amerinets's done its parts by saying its okay, we would like to work with you, now we've got to deliver.

Do you have any sense of their 1,900 hospitals and 1,400 surgical centers, how much of those would be, say, high volume versus low volume mammo centers, and how many of them have already converted to digital, or analogue, or is this indicative of their kind of central buying decision processes, making some decision to go digital?

We don't have that information yet.

The Amerinet contract becomes effective on November 1st.

And at that point, the new iCAD call center will be proactive in being able to reach those sites and capture that information, to help us both better understanding opportunity and go capture it.

Okay.

And could address the product development, as we go forward?

Clearly, you've had a lot of products rolled out here recently.

How should we look at that going forward?

Positively, I think.

I'm just thinking about the expenditure level.

It would be record quarter for product if all this -- my numbers are correct.

Well, close to your record.

It is less reflected -- it's not going to be reflected in enormous increases in the cost associated with product development.

In part, because we have used existing hardware platforms and configurations and been able to create new market opportunities for them.

In the case of the Total Look system and because of the work that have been done to be able to create viewer technologies that contribute to PowerLook.

The product development that carries forward, is really meant to continue to distinguish iCAD in two areas -- three areas really.

One, and critically is in superior cancer detection, and superior cancer detection in particular of breast cancer.

That's related to continued algorithm developments.

You should look forward to new algorithm releases in future periods.

That's related to better integration of the CAD detection with other tools that are important to mammographers, tools like the Total Look system.

The priority for us is to use our skills in our technologies, to address the problems and create opportunities with current market targets and customers, through current channels and selling tools, because that, at the end of the day, is the fastest and most profitable way to grow.

We are also continuing the development and the extension of our CAD technology to other fundamental applications, and in particular, colon.

But as we look at the horizon for 2005 fourth quarter and for 2006, the largest part of our growth and the largest evidence in new product development and new product release, or improved product releases, will be in the area of mammography, including the area of CAD for mammography.

Thank you.

You are very welcome.

Your next question comes from a line of Steven [Masseur], Investor.

Please proceed.

Hi Scott.

Good morning, sir.

Would you mind updating us on a couple of areas.

One being the litigation issues and the other the status of your lung and colon efforts, in terms of approvals and so on.

Could you do that for us?

Yes.

With respect to litigation, I'm really going to get back to what our patent counsel has permitted us to say here.

That our patent dispute with R2 technology, proceeded to a hearing before an arbitration panel on October 18th and 19th, 2005.

We anticipate the post-trial briefing is due in early to mid-November, with a decision from the arbitrators due in early December.

iCAD remains confident that it does not infringe any R2 patents and that R2 has infringed one or more of the Company's patents.

And our patent counsel has really asked to restrict our comments to that statement, with respect to the arbitration.

Okay.

Now with respect to products for computed tomography, we had submitted a request for approval for a product that would support the early detection of lung nodules.

We did that in March of this year, using the Premarket Notification or 510(k) Application process.

We did so through Underwriter's Laboratory, which was under a fairly recent program, delegated by the FDA, with the authority to accept and process such applications.

This appear to be a relatively new program, or at least to be one in which Underwriter's Laboratory had not previously confronted software products of the type submitted by iCAD.

And as I think you may recall, we had one subsequent request by Underwriter's Laboratory to resubmit, with information not just about our software, but about the ultimate hardware workstation on which the software would operate, which we did.

Underwriter's Laboratory forwarded our application to the FDA with a recommendation for approval by the FDA.

Subsequent to that, the FDA initiated an additional review.

And whether that's a part of the ordinary process or not is unclear.

But it would seem that the Underwriter's Laboratory delegation carried with it the expectation that the FDA would subsequently review and might further analyze the submission and the conclusions of Underwriters.

And the FDA raised several additional, and I think fair and meaningful questions, that they asked iCAD, to which iCAD respond.

That response was submitted to the FDA last week, actually at the end of the week before.

And we are awaiting any response or any further questions from the FDA, with respect to that submission.

Now, two real results of that.

First of all, it means that our demonstration of our product for early detention of lung nodules, while it will be, and it continues to be present at the RSNA show at the end of November, will probably be demonstrated not as a product which has been approved, but as a product which is considered a work under process.

That doesn’t affect, really, the internal estimates that we had for rollout or for any contribution from the product, but it’s a delay from what we had originally anticipated.

The second consequence is that, better understanding now the sequence and the questions that the FDA is likely to raise, with respect to a software-based product of this kind, we really think it’s realistic to budget more time for the process with our colon - colonic polyps detection product than we originally had.

We had assumptions about how quickly the CT Lung product would be processed, and they proved to be very optimistic.

So, we wanted to reform our assumptions about scheduling with the CT Colon product.

And that has resulted in a deferred planned date for submission, in part, because we understand we need to present more.

So therefore, really, those two areas that are still quite a ways off, in terms of being a revenue generator, if you will?

Absolutely.

And that’s really not a changed point for us.

We have always anticipated that the growth in our business certainly [pre]-2006, and even into 2007, would be through growth in the core breast care market, not necessarily CAD in that market, but related products, including products like Total Look.

And that has been the focus of our development priorities, as well as of our increasing attention to sales channels and sales capacity to those customers.

The other area I'd like you to give me some information on, the Amerinet contract, is certainly an exciting one.

It represents what I call a national account, naturally.

Could you tell me whether the individual locations of some 1,900 hospitals and 1,400 surgical centers, who makes the majority, if not all the decisions, for installation of the system?

Is this the local, management or radiologists, or is it a combination of the local and the headquarters who are purchasing these units?

It will typically be a local decision.

And the Amerinet buying group will attempt to provide a series of advantages choices to the local decision-makers and will also, when requested, help to provide some decision support.

But these are local decisions at those institutions.

And your sales people, are they assigned, do you have like a national account manager, or a manager or technical staff, working with these multiple sales potentials organizations such as Amerinet and Pfizer?

And I'm sure there is a bundle of others.

How do you handle that from a sales point of view?

We do have that as a specialized area.

In the second quarter we retained a very specialized consulting and sales support group, called MSI, which included a group of individuals with significant experience on both sides of the group purchasing and national accounts table, both as buyers and as sellers.

What they've accomplished since that the time is to bring us in front of virtually every key national account, and to get us involved in the process that can lead to contracts.

And I've been very pleased with their ability to get us in front of the right decision-makers to outline and articulate the iCAD story and our benefits.

And I think we're going to see increasing results, in terms of the opportunity to sell to those GPOs, over coming periods.

Our success in selling, as I would reiterate, is a matter of how well we execute.

Well, that's true.

And the preferred pricing is not, my feeling, is the major issue.

When you have the potential of selling multiple units throughout, because when you considered the onesie-twosie sale to one location place, this represents a tremendous amount of potential, obviously, for iCAD.

So, I think you are on the right track, and I hope you have the few more of these GPOs.

So, good luck in the future.

Thank you, sir.

Unfortunately, at this time we just have time for two more participants.

Our next question comes from the line of Dominic [Balzano] of Saxony.

Please proceed.

Scott, this is Joe Rudy, again.

I'm infuriated about that fact that this is now twice in row that I get disconnected off this call.

Concerning the fact with the amount of shares that Dominic and I control in the stock, it's just ridiculous.

First off, I want to go back to follow-up, actually.

Joe, first of all, if I may, I certainly apologize if you feel that that’s been disrespectful.

I think it's extremely disrespectful.

And I have heard other people go on for 20 to 30 minutes, and get nowhere with any question.

And I am asking direct--what I believe to be pretty much a direct question, and not only has the question been answered, but answered and then some, and that penalizes my ability to ask more questions.

Please go ahead.

Okay.

Hologic you said that we receive record sales last quarter from Hologic.

I just want to reiterate, a question that was answered previously.

In your opinion, evidently, that those sales from Hologic, some of them came from sales that ordinarily would have went to R2?

Yes.

Okay.

Second, as far as on the arbitration, I know that you don't want to make any comments on that.

I'm not asking for specific things about the arbitration.

But if we see a mutual or negative result against R2, in your opinion, how much damage does that do to R2 and their business?

Joe, I am going to apologies.

But I am going to follow our attorney's guidance here.

And not expand on the statements that they have made.

Okay.

Lung cancer, in the second quarter you'd said on the call and over the summer, you'd said that the FDA requested that the software was basically a green light, that they wanted to see the hardware platforms validated on a hardware platform.

Now, that was about two and half months ago, three months ago.

It took us two and half months to supply them with that information?

No.

The request for hardware validation came through Underwriters Laboratories.

It was complied with very quickly and resulted in the recommendation of approval that was passed from the Underwriters Laboratory to the FDA, reasonably recently.

And I'm sorry, I'm just not certain of the date of that.

Subsequent to that, a new set of requests for information, have been presented by the FDA directly.

And that's the second set of questions that we responded to last week.

Okay.

Next question.

Insider buying, there were some insiders that purchased some shares, not so long ago, at $3 and change.

I would assume that those insiders and other insiders, and one of them was including yourself, would see the stock price of this levels as a buying opportunity?

Joe, you know the problem with insider buying, and looking at it as you are suggesting.

By the way, I think insider buying, selling, there are few better indicators.

But insiders can't buy if they have material, positive inside information.

And to assume that because insiders are not buying is because they lack confidence or they don’t see the opportunity, may in some cases, be inaccurate.

There has to be some recognition that we operate under different rules and they restrict when we can buy as well when we can sell.

But the blackout period is not every single day of every quarter.

There are periods where there is no blackout period and that insiders are capable of buying.

And considering that there were some insiders, not too long ago, purchase at significantly higher levels, you know, my question to you, and since you are one of them, do you see the fact that that the stock is significantly cheaper in price, as a buying opportunity?

I'm not asking whether or not you're going to--you personally are going to be buying more.

I'm not asking you to comment that you would buy more, but yet we have material information on our desk that restricts us from buying more.

My comment is, you purchased some previously, at higher prices.

Now we're not talking about 10%-15% below that price.

We're significantly below that price.

Do you view that as a buying opportunity?

I'm going to try to walk through the question, and I apologize [inaudible] delicacy.

The first place I'll begin is that I cannot make a recommendation to you as to whether this is buying opportunity for you.

I didn't ask you that.

It would be inappropriate.

The second is to say that our trading policy for iCAD employees, for our directors, our managers, for people including me, have really two components.

The first component I, that in general, from two weeks prior to the end of a quarter, until five days--three days after an earnings release, we are precluded from any transactions at all.

That's a kind of a calendar-bracketed period.

The other part of the policy says that whether or not you're in that window, you can't buy if you have material inside information and you can’t sell if you material inside information.

And it's very difficult sometimes to know what constitutes that, but I am concerned in many cases, about the fact that my focus is on making the good things happen.

And there are too many ways in which those that are not at an announceable level, and I'll say this hypothetically, I think precludes the purchase of shares by key members of the iCAD management team.

So I wouldn't make assumptions that are too narrowly defined by the specific calendar-driven trading window.

And with that as background, I really cannot speak to whether I would consider this an opportunity or not, because I think that would have too much baring on the way others would interpret it for themselves.

Okay.

I asked this question last year, in same quarter, and I got an answer, and then by the end of the year the answer I previously had gotten, was, I guess, the opposite reaction was accomplished.

We're about 6.5 million, you said, currently, with our cash on hand.

Do we foresee the need to raise additional cash?

No.

Okay.

Not even to go forward with colon cancer in the beginning of next year?

We do not foresee a need to go out and raise additional cash.

Okay.

Also just to follow-up, I think it’s something of importance as well.

With institutional ownership, in the beginning of the year, we had just under 5% institutional ownership.

Through the third quarter, we're over 20%.

With that report out from Faulkner, it appears that, you know, if you just read the report, we went from 4 in change to 20 in change back down to 11.

Which, based upon the information that is out there, that is not accurate at all, that we still are at 20 and change.

What is the Company doing, as far as with other institutions, to gain more institutional recognition and to, not present, but to -- for lack of better way -- hold the hand of the institutions that are out there, especially the couple that have sizable positions like we have, you know, to not only to maintain their positions, but to potentially purchase more?

We are as attentive to the questions and requests for attention as we are permitted to be under Regulation FD, with institutions that have a real and legitimate interest and understanding of what the Company is doing, with current holders and with prospective holders.

We are also continuing the process of representing the Company at events, like the -- and it's well timed, the American Electronics Association Financial conference occurs--.

November 6, 7, 8, 9.

7, 8, 9th in San Diego and I'll be presenting on the 8th and on the 9th.

So we continue to believe that we have a powerful story.

And we will proudly represent it in that forum.

And part of the reason, Joe, that we’ve created as much information in the press release that we circulated yesterday, as we did, is that, we need to make sure that we have the core information in general public hands, to be able to use it when we speak to potential institutional buyers or people interested in the Company.

And I also have a 10-Q coming out early enough in November, to use that as a tool to get data that we may want to use to help model or present the Company, into the public in time to be use it at the AEA.

Okay.

As far as on lung cancer, in your press release, you said that you will be showing them at RSNA conference, lung and actually colon as well?

Yes, sir.

Okay.

Is there any internal projections or internal thoughts on when the FDA will potentially be getting back on to you on lung cancer, is it days, weeks, months, years?

Or, can we eliminate some of those?

You know, I recall a conversation, where after we had submitted to [UL[ and gotten some preliminary indications that they were moving it along.

I provided a sense of when that process would be done, and I was simply wrong.

And in this case, given that we're in somewhat new ground, in terms of how the FDA evaluates a 510(k) submission that was originally recommended for approval by UL, it would really be imprudent for me to speculate about what I really just don't know.

Can we eliminate years?

Well, can we eliminate days, and then, narrow it down to weeks and months?

I think that rather than trying to narrow it in any direction;

I'm just going to stay with the previous answer.

Okay.

Colon cancer, will the application be a sole application or will it be partnered up -- will we be partnering up with somebody else?

It will not be a standalone software application in the form that was originally submitted, with respect to lung.

Really, we could have gotten that in this quarter.

And it would have been nice to have hit the number, but it just would have been rejected.

It will be different, because of the approach we're taking, to implementation of a detection system for colonic polyps, then the way in which it was ultimately submitted for lung.

But I prefer not to be more specific about that, for competitive reasons, if for no other reasons.

Okay.

I think that's all the questions I have.

Thanks Scott.

Thanks.

Your next question comes from the line of Scott Warner.

Please proceed.

Just to finish up, on the -- as I understand, I know you went through the R2, and once they have had a film relationship with a mammography center, it's obvious that it's easier for that center and that radiologist to want to continue with them.

Is there any way -- what way can we upset that, including perhaps under-pricing R2, when they go up to the -- when it's going to be a Hologic, or a GE, or whatever product, that they are considering in buying, how do we get to them, so they specify us perhaps, rather than going with the comfortable R2?

Well, I will give you a somewhat glib answer to first, with apologies.

I would rather have it cost more and be better, than to try to address that by offering a lower price.

I don't think that that's the correct way to do it.

Okay.

Just asking, because, I know it's a hard way to get in there, but I'm just concerned that we were losing out some money and that we will lose out and want more as they upgrade.

Scott, the program that we have, one that aims at upgrading the performance of our CAD algorithm.

Yes.

And positively, we've had some very interesting results in studies that have been undertaken over the last several months, that we are now able to use to highlight substantive positive differences between the performance in digital applications of the two systems.

Okay.

And I think the right way to do that is to continue to build and develop, so that the features that confer real benefits on digital mammographers, are those to distinguish iCAD's products, and to couple that with the kind of effective person-to-person contacts with the Hologic, and Siemens, and GE Healthcare salesforces that are part of the package of getting this to the account, so that the account understands this is a better product to buy.

Okay.

That's great if we have a better product.

Great.

I thank you there.

Just last thing is, is there anywhere--I'm not sure if I missed it in the announcement, but where the [Total Look] or PowerLook, that we can, selling these, using these on R2 products?

Is there a compatibility way that this can be done?

They are not Computerated Detection products, Scott.

So, I'd like to rephrase the question.

Okay.

Let's say, for example, that a digital mammographer has decided, for whatever reason, to acquire R2's solution for CAD.

So let's say it's a Hologic buyer.

They have the R2 CAD system for Hologic digital.

Nothing precludes them buying iCAD's Total Look.

Okay.

And if I'm not mistaken, they may already have made such a sale.

Okay.

That's good.

And is PowerLook--would that imply PowerLook or not?

PowerLook only works with iCAD's, Second Look 300 and Second Look 700.

And I'm glad you raised -- that's really, that's a terrific product.

Okay.

Got you.

Scott, I just somebody walked in my door, shaking their heads, yes, we do have one such account.

Yes.

Okay.

Thank you so very much, sir.

Thank you.

This concludes today's question-and-answer segment.

I would like to hand the call over to our presenter for closing remarks.

As a shareholder, and as a member of the Board of Directors of iCAD, I have a different view on how the Company is doing sometimes, and as the President CEO.

And I have to ask, as I'm sure you do, what's the opportunity?

There are a couple of keys to that.

One is, what's the market?

Another is, what's the product or the products?

Another is, what are the programs?

And finally, do we have the right people?

I think the market is a market of great opportunity and there have been impediments to people adopting CAD.

I think those impediments are declining, I think the market opportunity is a very, very positive one.

I'm extremely proud of the products we have.

I think they are the right products at the right time.

I think our programs have been inadequate and are now far better, I would describe them today as adequate or better and they are improving from there.

And I think the people are better.

I think there are areas, in which we as a Company, need assistance, we need to reach out for people who can contribute to the Company's increased success.

We are doing so.

I don't think that's a complete equation fulfilled yet, but overall, market, products, program, people, I believe we have, as a Company, an extraordinary opportunity that we are working at diligently and with increasing success to fulfill.

And I thank you all very much for your attention this morning.

Good day.

Once again ladies and gentlemen, we thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Have a great day.