iCAD (ICAD) 8-K Highlights Include 48.5% Revenue Increase

Press Release

iCAD, INC. REPORTS THIRD QUARTER 2006 OPERATING RESULTS

HIGHLIGHTS INCLUDE 48.5% REVENUE INCREASE

OVER THIRD QUARTER OF LAST YEAR

Nashua, NH—October 30, 2006—iCAD, Inc (Nasdaq: ICAD), an industry-leading provider of Computer-Aided Detection (CAD) solutions for the early detection of cancer, today announced financial results for its fiscal 2006 third quarter ended September 30, 2006.

Highlights of the quarter include 48.5% revenue growth, higher gross margins and a reduced loss from operations over the third quarter of 2005. The Company reported revenue of $5.04 million for the third quarter of 2006 as compared to $3.39 million for the same period of 2005. iCAD’s third quarter performance also reflects a 30.2% increase in revenue over the second quarter of 2006. Gross margin for the third quarter increased to 76.3%, from 72.7% in the prior-year third quarter. Net loss for the third quarter of 2006 decreased to ($1,121,397), or ($0.03) per share, compared to net loss of ($2,593,940) or ($0.07) per share in the third quarter of 2005.

Due to the strong third quarter, the Company reported revenue for the nine months ended September 30, 2006 of $13.3 million which is essentially even with $13.6 million for the same nine month period the prior year. Gross margin for the nine months ended September 30, 2006 increased to 77.8% from 76.4% in the prior year nine month period. Net loss for the first nine months of 2006 was ($5,346,793) or ($0.14) per share, as compared to ($3,096,876) or ($0.08), in the prior year nine months.

Sales of iCAD’s digital solutions rose 167.9% over the prior year third quarter from $1,147,372 to $3,073,620. This also represents a 79.3% increase over the second quarter of 2006. This is a significant development when compared to last quarter’s 43.0% year-over-year reported increase in digital sales. iCAD’s analog business experience a 31.2% decline in revenue in the third quarter to $1,260,340, from $1,832,148 in the same quarter of 2005. This was due in part, to the rapid adoption of digital technology combined with previously sub-optimal channel coverage of the film-based market segment. Additionally, during the third quarter, iCAD experienced continued backlog growth from $940,765 in the second quarter to $1,401,445 in the third quarter, an increase of 49.0%.

“The third quarter’s performance reflects the significant progress made in many areas across the Company,” said Ken Ferry, Chief Executive Officer of iCAD, Inc. “We continued to strengthen the leadership team in conjunction with all aspects of our ‘go to market’ strategy. In addition, we have developed stronger strategic relationships with our OEM partners, expanding this portfolio with the signing of the Fuji contract. The increase in our digital revenue is indicative of the progress with OEM partners and strong customer demand for iCAD’s digital product solutions.”

iCAD’s management will host a conference call today at 10:00 a.m. EST to discuss financial results and answer investor questions. Shareholders and other interested parties may participate by dialing +1800 573 4752 (domestic) or +1617 224 4324 (international) and entering passcode 46492920, a few minutes before the start of the conference call. A replay of the conference call will be accessible two hours after its completion through November 6, 2006 by dialing +1888 286 8010 (domestic) or +1617 801 6888 (international) and entering passcode 50290999. The call will also be broadcast live and archived for 90 days on the Internet at www.streetevents.com, www.fulldisclosure.com and www.icadmed.com.

About iCAD, Inc.

iCAD, Inc. (NASDAQ: ICAD) 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 for the high, mid and low volume mammography markets. iCAD is entrusted with the task of early cancer detection by almost one thousand women’s healthcare centers worldwide. For more information, call +1 877 iCADnow or visit www.icadmed.com.

For iCAD, contact Darlene Deptula-Hicks at 603-882-5200 x7944 or via email at ddeptula@icadmed.com

For iCAD Investor Relations, contact Kevin McGrath of Cameron Associates

at 212-245-4577 or via email at kevin@cameronassoc.com

For iCAD Public Relations, contact Wendy Ryan of Schwartz Communications

at 781-684-0770 or via e-mail at icad@schwartz-pr.com

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements contained in this News Release 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.

		Three Months						Nine Months
		September 30,						September 30,
		2006			2005			2006			2005
Sales	$	5,038,336		$	3,393,804		$	13,281,679		$	13,632,515
Cost of sales		1,194,174			926,042			2,950,461			3,214,979
Gross margin		3,844,162			2,467,762			10,331,218			10,417,536
		76.3	%		72.7	%		77.8	%		76.4	%
Operating expenses:
Engineering and product development		1,266,389			1,406,486			3,850,783			3,407,942
General and administrative		1,391,829			1,841,110			5,576,267			4,516,470
Marketing and sales		2,212,666			1,741,036			6,067,395			5,338,476
Total operating expenses		4,870,884			4,988,632			15,494,445			13,262,888
Loss from operations		(1,026,722	)		(2,520,870	)		(5,163,227	)		(2,845,352	)
Interest expense - net		67,760			6,961			95,448			54,212
Net loss before provision for income taxes		(1,094,482	)		(2,527,831	)		(5,258,675	)		(2,899,564	)
Provision for income taxes		-			35,000			-			105,000
Net loss	$	(1,094,482	)	$	(2,562,831	)	$	(5,258,675	)	$	(3,004,564	)
Preferred dividend		26,915			31,109			88,118			92,312
Net loss available to common stockholders	$	(1,121,397	)	$	(2,593,940	)	$	(5,346,793	)	$	(3,096,876	)
Net loss per share
Basic and Diluted	$	(0.03	)	$	(0.07	)	$	(0.14	)	$	(0.08	)
Weighted average number of shares used
in computing loss per share
Basic and Diluted		36,902,885			36,737,096			36,882,050			36,580,641

iCAD, Inc.

Consolidated Balance Sheets

		September 30,			December 31,
		2006			2005
Assets		(unaudited)
Current assets:
Cash and cash equivalents	$	4,971,339		$	4,604,863
Trade accounts receivable, net of allowance for doubtful
accounts of $426,000 in 2006 and $450,000 in 2005		1,815,300			3,958,392
Inventory		3,767,899			2,517,467
Prepaid and other current assets		338,252			176,133
Total current assets		10,892,790			11,256,855
Property and equipment:
Equipment		3,456,902			3,038,344
Leasehold improvements		120,012			120,012
Furniture and fixtures		163,587			149,803
		3,740,501			3,308,159
Less accumulated depreciation and amortization		2,041,132			1,523,724
Net property and equipment		1,699,369			1,784,435
Other assets:
Patents, net of accumulated amortization		165,925			224,519
Technology intangibles, net of accumulated amortization		3,885,946			4,348,008
Tradename, distribution agreements and other,
net of accumulated amortization		229,883			398,733
Goodwill		43,515,285			43,515,285
Total other assets		47,797,039			48,486,545
Total assets	$	60,389,198		$	61,527,835
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,872,913		$	4,250,574
Accrued interest		111,868			48,167
Accrued salaries and other expenses		1,837,077			1,868,736
Deferred revenue		691,206			499,279
Current maturities of note payable		750,000			1,500,000
Total current liabilities		6,263,064			8,166,756
Convertible revolving loans payable to related party		2,258,906			258,906
Convertible loans payable to related parties		2,500,000			-
Convertible loans payable to investors, net of discounts of $58,800		941,176			-
Note payable, less current maturities		-			375,000
Other long term liabilities		219,600			-
Total liabilities		12,182,746			8,800,662
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $ .01 par value: authorized
1,000,000 shares; issued and outstanding
6,295 in 2006 and 6,374 in 2005, with an aggregate liquidation
value of $1,660,000 and $1,739,000 plus 7% annual
dividend, in 2006 and 2005, respectively.		63			64
Common stock, $ .01 par value: authorized
50,000,000 shares; issued 36,970,761 in 2006
and 36,931,261 shares in 2005; outstanding
36,902,885 in 2006 and 36,863,385 shares in 2005		369,707			369,312
Additional paid-in capital		131,518,990			130,781,430
Accumulated deficit		(82,732,044	)		(77,473,369	)
Treasury stock at cost (67,876 common shares)		(950,264	)		(950,264	)
Total stockholders' equity		48,206,452			52,727,173
Total liabilities and stockholders' equity	$	60,389,198		$	61,527,835

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