iCAD Reports Record Second Quarter Financial Results

Record Revenue and Earnings Driven by Strong Growth in Digital Mammography CAD

NASHUA, N.H., July 31 /PRNewswire-FirstCall/ -- iCAD, Inc. (Nasdaq: ICAD),
an industry-leading provider of Computer-Aided Detection (CAD) solutions for
the early identification of cancer, today announced record financial results
for the three and six months ended June 30, 2008. Financial highlights for
the second quarter of 2008 include the following (all comparisons are with the
second quarter of 2007):
-- Record total revenue of $10.5 million, up 73 percent
-- Record digital revenue of $8.0 million, up more than 100 percent
-- International revenue of $693,000, up nearly 300 percent
-- Gross margin of 83.6 percent, up more than 350 basis points
-- Record net income of $2.4 million, or $0.06 per basic share
-- Fourth consecutive quarter with positive cash flow

Other highlights of the quarter include:
-- Receipt of U.S. Food and Drug Administration (FDA) approval for the
Company's SecondLook(R) Digital CAD system for sale with Fujifilm's Computed
Radiography for Mammography (FCRm) systems. SecondLook Digital for FCRm is
the first CAD product approved and available in the U.S. for use with computed
radiography.
-- Announcement of the acquisition of CAD Sciences, a privately held
medical technology company that develops and distributes pharmacokinetic-based
CAD products that aid in the interpretation of contrast enhanced Magnetic
Resonance Imaging (MRI) images of the breast and prostate.
-- Ranked #1 in mammography CAD by MD Buyline's User Satisfaction Report
for the first two quarters of 2008.
-- Established a $5 million line of credit with RBS Citizens Bank to
replace the line of credit with the Company's founder.
-- Appointed Anthony F. Ecock, a Senior Operating Executive with the
private equity firm Welsh, Carson, Anderson & Stowe, and former Vice President
and General Manager of GE Healthcare to the Company's Board of Directors.
"We are especially proud of our financial performance during the second
quarter 2008 as it was a record quarter by all financial measurements. We
achieved records in revenue, gross margin, net income and cash flow, among
other financial metrics relevant for a growing, healthy company," commented
Ken Ferry, iCAD's President and CEO. "In addition to the continued strong
demand for our digital products, the quarter was positively impacted by the
FDA approval of our SecondLook Digital product for use with Fujifilm's
Computed Radiography for Mammography systems. SecondLook Digital for FCRm
represents a considerable market opportunity as it is the first CAD product
approved and available in the U.S. for use with computed radiography, a
successful and growing product category for Fujifilm. The second quarter of
2008 also benefited from the launch of a new version of our comparative
reading solution, TotalLook MammoAdvantage(TM). We expect increasing demand
for this advanced comparative reading solution as the transition from film to
digital mammography continues, and the need to digitize archived film images
grows as well."
"Growth opportunities for the digital CAD market continue to be strong as
there remains considerable room for sustained expansion in the coming years.
According to the FDA website, as of the close of the second quarter of 2008,
38 percent of the installed mammography base in the U.S. had transitioned to
digital, leaving 62 percent of the just over 13,500 systems available for
conversion to digital in the coming years. With CAD selling at a nearly one
to one attachment rate to digital systems placed, we are confident that there
is substantial opportunity for growth over the next two to three years, as
these centers continue to migrate to digital technology."
Commenting on the recently completed acquisition of CAD Sciences, Mr.
Ferry said, "Our acquisition of CAD Sciences broadens our leadership position
beyond mammography CAD and provides a comprehensive portfolio of advanced
image analysis and workflow solutions for the early detection of the most
prevalent cancers. Magnetic Resonance Imaging (MRI) and Computed Tomography
(CT) are demonstrating significant advances in the imaging sector and our
internal development program for colon cancer detection with CT, along with
this acquisition, extends our reach to the imaging modalities of CT and MRI,
in addition to our expertise in film-based, digital radiography and computed
radiography."
"Our integration of this key CAD technology for breast and prostate MRI
should provide significant synergy regarding customer call points for our
sales team, and we expect physician adoption to be accelerated by iCAD's
strong market position in mammography CAD," he added.
2008 Second Quarter Results
Total revenue for the second quarter of 2008 was $10.5 million, a 73
percent increase compared with total revenue of $6.1 million for the second
quarter of 2007. The increase reflects continued strong growth in sales of
the Company's digital products, specifically the Company's SecondLook product.
Second quarter 2008 also benefited from the launch of the Company's new
version of its TotalLook MammoAdvantage product, as customers held off
purchasing decisions in the first quarter of 2008 awaiting this new product.
The modest gains in service and supply revenue are primarily due to new
service contracts for digital products offset by declining new contracts from
film-based product sales, which are maturing. In addition, service and supply
revenue continues to be impacted by reduction in time and material billings
for repair services and related parts sales as the market transitions to
digital systems, which require less service and repair. Over time, the
Company expects to see growth in this segment as digital CAD systems sales
grow and transition from warranty to service contracts.
The gross margin for the second quarter of 2008 increased to 83.6 percent
from 80.0 percent in the prior-year second quarter. For the second quarter of
2008, the Company posted net income, including stock-based compensation
expense of $425,000, of $2.4 million or $0.06 per basic share, compared with a
net loss, including stock-based compensation expense of $216,000, of
($866,000) or ($0.02) per basic share in the second quarter of 2007.
For the second quarter of 2008, sales of iCAD's digital products increased
101 percent to $8.0 million from $4.0 million in the prior-year period. Sales
of film-based products increased 31.7 percent to $1.7 million from $1.3
million, and service and supply revenue increased 3.7 percent to $872,000 from
$841,000, both compared with second quarter 2007 results.

Three months ended June 30,
2008 2007 % Change
Digital revenue $7,961,945 $3,961,880 101.0%
Analog revenue 1,715,180 1,301,852 31.7%
Service & supply revenue 872,364 841,004 3.7%
Total revenue $10,549,489 $6,104,736 72.8%

2008 Six Months Results
For the six months ended June 30, 2008, total revenue increased 38.6
percent to $17.0 million compared with total revenue of $12.3 million for the
six months ended June 30, 2007. The gross margin for the first six months of
2008 increased to 83.1 percent from 80.2 percent in the comparable prior-year
period. Net income for the six months ended June 30, 2008, including stock-
based compensation expense of $817,000, increased to $1.9 million or $0.05 per
basic share, compared with a net loss, including stock-based compensation
expense of $493,000, of ($1.4 million), or ($0.04) per basic share, for the
six months ended June 30, 2007.
For the first six months of 2008, sales of iCAD's digital solutions
increased 65.2 percent over the prior-year period to $12.2 million from $7.4
million. Film-based analog products sales of $3.1 million were essentially
flat compared with $3.1 million of analog product sales recorded during the
first six months of 2007. During the first six months of 2008, service and
supply revenue decreased by 4 percent to $1.6 million from $1.7 million
reported for the first six months of 2007.

Six months ended June 30,
2008 2007 % Change
Digital revenue $12,247,611 $7,415,250 65.2%
Analog revenue 3,084,137 3,119,156 -1.1%
Service & supply revenue 1,649,757 1,717,816 -4.0%
Total revenue $16,981,505 $12,252,222 38.6%

Commenting on the balance sheet, Darlene Deptula-Hicks, Executive Vice
President and Chief Financial Officer, said, "During the second quarter of
2008, we significantly improved our balance sheet and generated over $1.9
million in cash, marking our fourth consecutive quarter of positive cash flow.
Importantly, while we achieved over 72 percent revenue growth during the
quarter, we held operating expenses to a very modest 11 percent increase."
As of June 30, 2008, iCAD had cash and cash equivalents of $7.1 million,
compared with $4.3 million as of December 31, 2007. As of the second quarter
2008, inventories increased modestly to $2.1 million from $1.8 million as of
December 31, 2007, primarily due to preparing for the launch of SecondLook for
Fujifilm's FCRm. Accounts payable were $1.8 million, down slightly from $2.0
million and accounts receivable modestly decreased to $6.2 million, from $6.5
million as of December 31, 2007. Backlog as of June 30, 2008 increased by 70
percent to $2.7 million compared with June 30, 2007.
2008 Financial Guidance
iCAD today introduces financial guidance for the second half of 2008. The
Company expects total revenue for the second half of 2008 to be in the range
of $21 million to $22 million. On a full year basis, total revenue is
projected to be in the range of $38 million to $39 million. The Company also
expects to achieve second half gross margins consistent with or better than Q2
of 2008 of 83.6 percent, and anticipates operating expenses for the second
half to be between $14.5 million and $15.3 million and weighted more heavily
in the fourth quarter. This operating expense guidance includes approximately
$2.0 million in spending for a combination of the integration costs associated
with the acquisition of CAD Sciences, which includes revamping the "go to
market" strategy for the Breast and Prostate MRI CAD products and preparations
for the re-launch of these products in Q4 2008, along with the costs
associated with the clinical trial for the Company's colon CAD product which
is currently underway in partnership with ACR Image Matrix, and expected to
conclude in December 2008. Approximately $1.1 million of these $2.0 million
anticipated expenses should be second half only expenses. We expect net
income to be between $2.7 million and $3.0 million for the second half of
2008.
Conference Call
iCAD management will host an investment community conference call
beginning at 10:00 a.m. ET today to discuss these results and to answer
questions. The conference call, along with a PowerPoint presentation related
to the call, will be broadcast live on the Internet at www.streetevents.com,
www.fulldisclosure.com or www.icadmed.com. Stockholders and other interested
parties may participate in the conference call by dialing +1-866-356-4281
(domestic) or +1-617-597-5395 (international) and entering passcode 59209440.
A replay of the conference call will be accessible two hours after its
completion through August 7, 2008 by dialing +1-888-286-8010 (domestic) or
+1-617-801-6888 (international) and entering passcode 43767917. The call and
PowerPoint presentation will also be archived for 90 days at
www.streetevents.com, www.fulldisclosure.com and www.icadmed.com.
About iCAD, Inc.
iCAD, Inc. is an industry-leading provider of Computer-Aided Detection
(CAD) solutions that enable healthcare professionals to better serve patients
by identifying pathologies and pinpointing cancer earlier. iCAD offers a
comprehensive range of high-performance, upgradeable CAD systems and workflow
solutions for mammography (film-based, digital radiography (DR) and computed
radiography (CR)), Magnetic Resonance Imaging (MRI), and Computed Tomography
(CT). Currently available in more than 2,200 healthcare centers worldwide,
iCAD's solutions aid in the early detection of the most prevalent cancers
including breast, colon, prostate and, in the future, lung cancer. For more
information, call (877) iCADnow or visit www.icadmed.com.For iCAD, contact
Darlene Deptula-Hicks, EVP and CFO at 603-882-5200 x7944 or
via email at ddeptula@icadmed.com
For iCAD Investor Relations, contact Anne Marie Fields of Lippert/Heilshorn &
Associates at 212-838-3777 x6604 or via email at afields@lhai.com
For iCAD Public Relations, contact Sara Morgan of Schwartz Communications at
781-684-0770 or via email at icad@schwartz-pr.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995:
Certain statements contained in this News Release, including but not
limited to, statements about the Company's confidence or strategies or
expectations about revenues, results of operations, timing of regulatory
approval of products or market opportunities, 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 of uncertainty of patent protection, the impact of supply and
manufacturing constraints or difficulties, product 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. Readers are cautioned not to place undue reliance
on those forward-looking statements, which speak only as of the date the
statement was made. The Company is under no obligation to provide any updates
to any information contained in this release.
- Tables to Follow -

iCAD, INC.

Consolidated Statements of Operations
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenue
Products $9,677,125 $5,263,732 $15,331,748 $10,534,406
Service and supplies 872,364 841,004 1,649,757 1,717,816
Total revenue 10,549,489 6,104,736 16,981,505 $12,252,222

Cost of revenue
Products 1,470,227 947,172 2,425,642 1,951,290
Service and supplies 263,614 271,021 446,383 475,531
Total cost of
revenue 1,733,841 1,218,193 2,872,025 2,426,821

Gross margin 8,815,648 4,886,543 14,109,480 9,825,401

Operating expenses:
Engineering and
product development 1,503,595 1,133,424 2,912,804 2,198,299
Marketing and sales 2,809,466 2,793,446 5,192,989 5,302,205
General and
administrative 1,935,891 1,689,951 3,784,237 3,503,306
Total operating
expenses 6,248,952 5,616,821 11,890,030 11,003,810

Income (loss) from
operations 2,566,696 (730,278) 2,219,450 (1,178,409)

Interest expense - net 84,098 109,333 182,705 215,139

Net income (loss)
before provision
for income taxes $2,482,598 $(839,611) $2,036,745 $(1,393,548)

Provision for income
taxes 96,000 - 96,000 -

Net income (loss) 2,386,598 (839,611) 1,940,745 (1,393,548)

Preferred dividend - 26,830 - 55,880

Net Income (loss)
attributable to
common stockholders $2,386,598 $(866,441) $1,940,745 $(1,449,428)

Net income (loss)
per share
Basic $0.06 $(0.02) $0.05 $(0.04)
Diluted $0.05 $(0.02) $0.05 $(0.04)

Weighted average number
of shares used in
computing income
(loss) per share
Basic 39,308,978 38,035,094 39,240,427 37,755,330
Diluted 45,079,257 38,035,094 45,125,187 37,755,330

iCAD, INC. AND SUBSIDIARY

Consolidated Balance Sheets

June 30, December 31,
2008 2007
Assets (unaudited)
Current assets:
Cash and cash equivalents $7,120,057 $4,348,729
Trade accounts receivable, net of
allowance for doubtful accounts of
$50,000 in 2008 and 2007 6,162,126 6,483,618
Inventory, net 2,122,156 1,798,243
Prepaid and other current assets 645,977 320,169
Total current assets 16,050,316 12,950,759

Property and equipment:
Equipment 3,565,479 3,512,557
Leasehold improvements 71,611 71,611
Furniture and fixtures 341,280 330,077
Marketing assets 323,873 323,873
4,302,243 4,238,118
Less accumulated depreciation and
amortization 2,726,453 2,369,590
Net property and equipment 1,575,790 1,868,528

Other assets:
Deposits 63,194 63,194
Patents, net of accumulated amortization 29,207 68,269
Technology intangibles, net of
accumulated amortization 2,807,802 3,115,843
Tradename, net of accumulated
amortization 136,400 148,800
Goodwill 43,515,285 43,515,285
Total other assets 46,551,888 46,911,391

Total assets $64,177,994 $61,730,678

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,784,070 $2,010,717
Accrued salaries and other expenses 2,547,928 3,461,422
Deferred revenue 2,074,885 1,674,005
Convertible loans payable to
related parties 2,297,794 2,793,382
Convertible loans payable to non-
related parties 694,853 684,559
Total current liabilities 9,399,530 10,624,085

Convertible revolving loans payable
to related party - 2,258,906
Total liabilities 9,399,530 12,882,991

Commitments and contingencies

Stockholders' equity:
Common stock, $ .01 par value:
authorized 85,000,000 shares; issued
41,378,854 in 2008 and 39,239,208 in
2007; outstanding 41,310,978 in 2008
and 39,171,332 in 2007 413,788 392,392
Additional paid-in capital 139,024,054 135,055,418
Accumulated deficit (83,709,114) (85,649,859)
Treasury stock at cost (67,876 shares) (950,264) (950,264)
Total Stockholders' equity 54,778,464 48,847,687

Total liabilities and
stockholders' equity $64,177,994 $61,730,678

SOURCE iCAD, Inc.

Media, Darlene Deptula-Hicks, EVP and CFO, for iCAD, +1-603-882-5200 x7944,
ddeptula@icadmed.com; or Investor Relations, Anne Marie Fields of
Lippert/Heilshorn & Associates, +1-212-838-3777 x6604, afields@lhai.com; or
Public Relations, Sara Morgan of Schwartz Communications, +1-781-684-0770,
icad@schwartz-pr.com, for iCAD