10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-9341

iCAD, Inc.

(Exact name of registrant as specified in its charter)

Delaware	02-0377419
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
98 Spit Brook Road, Suite 100, Nashua, NH	03062
(Address of principal executive offices)	(Zip Code)

(603) 882-5200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.    YES  x    NO  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    YES  ¨    NO  x.

As of the close of business on November 6, 2013 there were 10,850,244 shares outstanding of the registrant’s Common Stock, $.01 par value.

iCAD, Inc.

INDEX

		Page
PART I	FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012		3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and September 30, 2012		4
	Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2013 and September 30, 2012		5
	Notes to Condensed Consolidated Financial Statements		6-22
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23-32
Item 3	Quantitative and Qualitative Disclosures about Market Risk		33
Item 4	Controls and Procedures		33
PART II	OTHER INFORMATION
Item 1	Legal Proceedings		34
Item 1A	Risk Factors		34
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6	Exhibits		34
	Signatures		35

2

iCAD, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands except for share data)

	September 30,			December 31,
	2013			2012
Assets
Current assets:
Cash and cash equivalents	$	10,209		$	13,948
Trade accounts receivable, net of allowance for doubtful accounts of $73 in 2013 and $48 in 2012		8,419			4,980
Inventory, net		2,003			2,119
Prepaid expenses and other current assets		658			486
Total current assets		21,289			21,533
Property and equipment, net of accumulated depreciation and amortization of $4,106 in 2013 and $3,627 in 2012		1,825			1,483
Other assets		475			638
Intangible assets, net of accumulated amortization of $12,034 in 2013 and $10,744 in 2012		13,963			15,230
Goodwill		21,109			21,109
Total assets	$	58,661		$	59,993
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,018		$	1,940
Accrued and other expenses		3,515			4,142
Interest payable		569			499
Capital lease - current portion		130			—
Warrant liability		1,054			1,538
Deferred revenue		7,498			6,520
Total current liabilities		14,784			14,639
Deferred revenue, long-term portion		1,633			1,502
Other long-term liabilities		1,313			1,341
Capital lease - long-term portion		279			—
Notes payable		15,299			14,846
Total liabilities		33,308			32,328
Commitments and Contingencies (see Note 6)
Stockholders’ equity:
Preferred stock, $ .01 par value: authorized 1,000,000 shares; none issued.		—			—
Common stock, $ .01 par value: authorized 85,000,000 shares; issued 11,036,075 in 2013 and 10,993,933 in 2012; outstanding 10,850,244 in 2013 and 10,808,102 in 2012		110			110
Additional paid-in capital		166,302			165,416
Accumulated deficit		(139,644	)		(136,446	)
Treasury stock at cost, 185,831 shares in 2013 and 2012		(1,415	)		(1,415	)
Total stockholders’ equity		25,353			27,665
Total liabilities and stockholders’ equity	$	58,661		$	59,993

See accompanying notes to condensed consolidated financial statements.

3

iCAD, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands except for per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenue:
Products	$	4,765		$	5,661		$	14,329		$	13,248
Service and supplies		3,525			2,522			9,603			7,209
Total revenue		8,290			8,183			23,932			20,457
Cost of revenue:
Products		1,383			1,527			4,184			3,603
Service and supplies		747			541			2,251			1,678
Amortization of acquired intangibles		234			233			701			698
Total cost of revenue		2,364			2,301			7,136			5,979
Gross profit		5,926			5,882			16,796			14,478
Operating expenses:
Engineering and product development		2,112			1,971			5,734			6,158
Marketing and sales		2,617			2,842			7,392			7,976
General and administrative		1,551			1,773			4,825			4,971
Total operating expenses		6,280			6,586			17,951			19,105
Loss from operations		(354	)		(704	)		(1,155	)		(4,627	)
Gain from change in fair value of warrant		624			126			484			512
Interest expense		(807	)		(883	)		(2,467	)		(2,549	)
Other income		4			9			16			27
Other expense, net		(179	)		(748	)		(1,967	)		(2,010	)
Loss before income tax expense		(533	)		(1,452	)		(3,122	)		(6,637	)
Income tax expense		(56	)		(13	)		(76	)		(35	)
Net loss and comprehensive loss	$	(589	)	$	(1,465	)	$	(3,198	)	$	(6,672	)
Net loss per share:
Basic and diluted	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)
Weighted average number of shares used in computing loss per share:
Basic and diluted		10,849			10,805			10,835			10,792

See accompanying notes to consolidated financial statements.

4

iCAD, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(unaudited)

	For the nine months ended September 30,
	2013			2012
	(in thousands)
Cash flow from operating activities:
Net loss	$	(3,198	)	$	(6,672	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation		528			701
Amortization		1,291			1,472
Bad debt provision		35			—
Gain from change in fair value of warrant		(484	)		(512	)
Loss on disposal of assets		49			143
Stock-based compensation expense		908			731
Amortization of debt discount and debt costs		588			761
Interest on settlement obligations		214			313
Changes in operating assets and liabilities:
Accounts receivable		(3,474	)		(1,712	)
Inventory		116			178
Prepaid and other current assets		(145	)		215
Accounts payable		78			1,106
Accrued expenses		(799	)		(2,172	)
Deferred revenue		1,110			818
Total adjustments		15			2,042
Net cash used for operating activities		(3,183	)		(4,630	)
Cash flow from investing activities:
Additions to patents, technology and other		(24	)		(3	)
Additions to property and equipment		(510	)		(465	)
Net cash used for investing activities		(534	)		(468	)
Cash flow from financing activities:
Issuance of common stock for cash		3			—
Taxes paid related to restricted stock issuance		(25	)		(13	)
Proceeds from debt financing, net		—			14,325
Net cash (used for) provided by financing activities		(22	)		14,312
Increase (decrease) in cash and equivalents		(3,739	)		9,214
Cash and equivalents, beginning of period		13,948			4,576
Cash and equivalents, end of period	$	10,209		$	13,790
Supplemental disclosure of cash flow information:
Interest paid	$	1,664		$	1,516
Taxes paid	$	117			43
Equipment purchased under capital lease	$	409			—

See accompanying notes to consolidated financial statements.

5

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Note 1 - Basis of Presentation and Significant Accounting Policies

The accompanying condensed consolidated financial statements of iCAD, Inc. and subsidiary (“iCAD” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position at September 30, 2013, the results of operations for the three and nine month period ended September 30, 2013 and 2012, respectively, and cash flows for the three and nine month period ended September 30, 2013 and 2012, respectively. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in the footnotes prepared in accordance with US GAAP has been omitted as permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on February 27, 2013. The results for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2013, or any future period.

Revenue Recognition

The Company recognizes revenue primarily from the sale of products and from the sale of services and supplies. Revenue is recognized when delivery has occurred, persuasive evidence of an arrangement exists, fees are fixed or determinable and collectability of the related receivable is probable. For product revenue, delivery has occurred upon shipment provided title and risk of loss has passed to the customer. Services and supplies revenue are considered to be delivered as the services are performed or over the estimated life of the supply agreement.

The Company recognizes revenue from the sale of its digital, film-based CAD and electronic brachytherapy (“eBx”) products and services in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“Accounting Standards Update “ASU” 2009-13) and ASC Update No. 2009-14, “Certain Arrangements That Contain Software Elements” (Update No. 2009-14). (“ASU 2009-14”). Revenue for the sale of certain CAD products is recognized in accordance with ASC 840 (“Leases”) (“ASC 840”). For multiple element arrangements, revenue is allocated to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). VSOE generally exists only when the deliverable is sold separately and is the price actually charged for that deliverable. The process for determining BESP for deliverables without

6

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

VSOE or TPE considers multiple factors including relative selling prices; competitive prices in the marketplace, and management judgment, however, these may vary depending upon the unique facts and circumstances related to each deliverable.

The Company primarily uses customer purchase orders that are subject to the Company’s terms and conditions or, in the case of an Original Equipment Manufacturer (“OEM”) are governed by distribution agreements. In accordance with our distribution agreements, the OEM does not have a right of return, and title and risk of loss passes to the OEM upon shipment. The Company generally ships Free On Board shipping point and uses shipping documents and third-party proof of delivery to verify delivery and transfer of title. In addition, the Company assesses whether collection is probable by considering a number of factors, including past transaction history with the customer and the creditworthiness of the customer, as obtained from third party credit references.

If the terms of the sale include customer acceptance provisions and compliance with those provisions cannot be demonstrated, all revenue is deferred and not recognized until such acceptance occurs. The Company considers all relevant facts and circumstances in determining when to recognize revenue, including contractual obligations to the customer, the customer’s post-delivery acceptance provisions, if any, and the installation process.

The Company has determined that iCAD’s Digital, MRI and film based sales generally follow the guidance of FASB ASC Topic 605 “Revenue Recognition” (“ASC 605”) as the software has been considered essential to the functionality of the product per the guidance of ASU 2009-14. Typically, the responsibility for the installation process lies with the OEM partner. When iCAD is responsible for product installation, the installation element is considered a separate unit of accounting because the delivered product has stand-alone value to the customer. In these instances, the Company allocates the deliverables based on the framework established within ASU 2009-13. Therefore, the installation and training revenue is recognized as the services are performed according to the VSOE of the element. Revenue from the Digital, MRI and film based equipment when there is installation is recognized based on the relative selling price allocation of the BESP.

Sales of the Company’s eBx product typically include a controller, accessories, and service and source agreements. The Company allocates revenue to the deliverables in the arrangement based on the BESP in accordance with ASU 2009-13. Product revenue is generally recognized when the product has been delivered and service and source revenue is typically recognized over the life of the service and source agreement.

The Company defers revenue from the sale of service contracts related to future periods and recognizes revenue on a straight-line basis in accordance with ASC Topic 605-20, “Services”. The Company provides for estimated warranty costs on original product warranties at the time of sale.

7

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Cost of Revenue

Cost of revenue consists of the costs of products purchased for resale, cost relating to service including costs of service contracts to maintain equipment after the warranty period, product installation, training, customer support, certain warranty repair costs, inbound freight and duty, manufacturing, warehousing, material movement, inspection, scrap, rework, depreciation and in-house product warranty repairs. For the three and nine months ended September 30, 2013, included in cost of revenue is, approximately $119,000 and $389,000, respectively of expense related to the newly enacted Medical Device Excise tax.

Segments

The Company now reports the results of two segments, Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). The Detection segment consists of our advanced image analysis and workflow products, and the Therapy segment consists of our radiation therapy (“Axxent”) products.

Note 2 - Net Loss per Common Share

The Company’s basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period and, if there are dilutive securities, diluted loss per share is computed by including common stock equivalents which includes shares issuable upon the exercise of stock options, net of shares assumed to have been purchased with the proceeds, using the treasury stock method.

A summary of the Company’s calculation of net loss per share is as follows (in thousands except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net loss	$	(589	)	$	(1,465	)	$	(3,198	)	$	(6,672	)
Basic shares used in the calculation of net loss per share		10,849			10,805			10,835			10,792
Effect of dilutive securities:
Stock options		—			—			—			—
Restricted stock		—			—			—			—
Diluted shares used in the calculation of net loss per share		10,849			10,805			10,835			10,792
Net loss per share - basic	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)
Net loss per share - diluted	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)

8

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

The shares of the Company’s common stock, issuable upon the exercise of stock options and warrants and vesting of restricted stock that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive is as follows:

	Period Ended
	September 30,
	2013		2012
Stock Options		1,389,897		1,351,117
Warrants		550,000		550,000
Restricted Stock		216,917		67,741
Stock options, warrants and restricted stock		2,156,814		1,968,858

Note 3 - Long Term Debt

On December 29, 2011, the Company entered into several agreements with entities affiliated with Deerfield Management, a healthcare investment fund (“Deerfield”), pursuant to which Deerfield agreed to provide $15 million in funding to the Company. Pursuant to the terms of a Facility Agreement, dated as of December 29, 2011 (the “Facility Agreement”), on January 6, 2012 (the “Funding Date”), the Company issued to Deerfield promissory notes in the aggregate principal amount of $15 million (the “Note”). Under a Revenue Purchase Agreement, dated as of December 29, 2011 (the “Revenue Purchase Agreement”), the Company agreed to pay Deerfield a portion of the Company’s revenues until the maturity date of the Note, whether or not the Note is outstanding through that date. On the Funding Date, the Company issued to Deerfield (i) six-year warrants to purchase up to 450,000 shares of common stock at an exercise price of $3.50 per share (the “Warrants”) and (ii) a second Warrant (the “B Warrant”) to purchase an additional 100,000 shares of common stock at an exercise price of $3.50 per share, which may become exercisable if certain conditions are met, as described in the Warrants. Collectively, these transactions are referred to as the “Transactions.” On the Funding Date, the Company received net proceeds of $14,325,000 from the Transactions, representing $15,000,000 of gross proceeds, less a $225,000 facility fee and a $450,000 finder’s fee before deducting other expenses of the Transactions.

The Facility Agreement has been accounted for as debt pursuant to ASC 470, Debt (“ASC 470”). The Facility Agreement had an original issue discount of approximately $4.1 million and an additional value allocated to the warrants of approximately $1.0 million. The discount is being accreted to the $15.0 million face value of the Note using the effective interest method with an effective interest rate of 17.35% based on the discount of approximately $5.1 million.

The original issue discount of approximately $4.1 million was assigned to the Revenue Purchase Agreement. Under this agreement, the Company is obligated to pay (1) 4.25% of annual revenues up to $25 million, (2) 2.75% of annual revenues from $25 million to $50 million during 2013 and 2014, and 2.25% of annual revenues in that range during 2015, 2016 and if the Facility Agreement is extended, in 2017, and (3) 1.0% of annual revenues in excess of $50 million. The $4.1 million discount assigned to the Revenue Purchase Agreement was capitalized as debt in accordance with ASC 470-10-25, “Sales of Future

9

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Revenues or Various Other Measures of Income”. The Company has estimated the cash flows associated with the Revenue Purchase Agreement and is amortizing the discount to interest expense over the expected term of the arrangement at an effective amortization rate of approximately 23.6%.

The overall effective interest rate of the financing arrangement, excluding changes in the fair value of the warrants, is currently estimated to be approximately 19%.

The Warrants have been classified as debt in accordance with ASC 480, “Distinguishing Liabilities from Equity”, as the Warrants contain a feature whereby the Company could be required to redeem the Warrants for cash upon the occurrence of a major transaction, as defined in the Warrants. The value of the Warrants was determined using a binomial lattice model. The Warrant is being valued at fair value at each reporting period with changes in fair value recorded in the consolidated statement of operations (see Note 7).

The Company determined that the B Warrant did not have any value as of the Funding Date, as the B Warrant is exercisable upon the Company’s election to extend the Facility Agreement. The Company does not plan to extend the Facility Agreement at this time. If the Company determines it will extend the Facility Agreement, the value of the “B Warrant” will be determined using the binomial lattice model at such time.

The following amounts are included in the consolidated balance sheet as of September 30, 2013 related to the Facility Agreement and Revenue Purchase Agreement:

Principal Amount of Facility Agreement	$	15,000
Unamortized discount		(3,403	)
Carrying amount of Facility Agreement		11,597
Revenue Purchase Agreement		3,702
Notes payable total	$	15,299

10

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

The following amounts comprise interest included in our consolidated statement of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30
	2013		2012
Cash interest expense	$	568	$	564
Non-cash amortization of debt discount		130		180
Amortization of debt costs		46		42
Amortization of settlement obligations		62		97
Interest expense capital lease		1		—
Total interest expense	$	807	$	883

	Nine months ended September 30
	2013		2012
Cash interest expense	$	1,664	$	1,516
Non-cash amortization of debt discount		453		596
Amortization of debt costs		135		124
Amortization of settlement obligations		214		313
Interest expense capital lease		1		—
Total interest expense	$	2,467	$	2,549

Cash interest expense represents the amount of interest expected to be paid in cash under the Facility Agreement and the Revenue Purchase Agreement, which represents the interest of 5.75% on the Facility Agreement and the expected cash payments on the Revenue Purchase Agreement for the period. Non-cash amortization is the amortization of the discount on the Facility Agreement. The amortization of debt costs represents the costs incurred with the financing, which is primarily the facility fee and the finder’s fee which has been capitalized and, is expensed using the effective interest method. The amortization of the settlement obligations represent the interest associated with the settlement agreements for both Carl Zeiss Meditec AG and Hologic, Inc. Interest expense capital lease represents interest related to the capital lease as noted in Note 4.

Note 4 - Lease Commitments

Operating leases

Facilities are leased under operating leases expiring at various dates through September, 2020. Certain of these leases contain renewal options. For the nine month period ended September 30, 2013 and 2012, rent expense under operating leases was $522,000 and $610,000, respectively.

11

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

As of September 30, 2013, future minimum lease payments under non-cancelable operating leases were as follows:

Fiscal Year	Operating Leases
2013	$	131
2014		476
2015		473
2016		490
2017		255
	$	1,825

Capital leases

The Company entered into a capital lease agreement for the purchase of certain equipment in August 2013 for approximately $409,000. Under the guidance of ASC Topic 840, “Leases” the Company determined that the lease was a capital lease as it contained a bargain purchase option wherein the Company has the option to buy the equipment for $1 at the end of the lease term. Accordingly, the equipment has been capitalized and a liability has been recorded. The equipment cost of $409,000 is reflected as property and equipment in the balance sheet and will be depreciated over its useful life.

Future minimum lease payments under this lease are as follows:

Fiscal Year	Capital Leases
2013	$	42
2014		145
2015		145
2016		109
subtotal minimum lease obligation		441
less interest		(32	)
Total, net		409
less current portion		(130	)
long term portion	$	279

12

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Note 5 - Stock-Based Compensation

The Company follows the guidance in ASC Topic 718, “Compensation - Stock Compensation”, (“ASC 718”).

Options granted under the Company’s stock incentive plans were valued utilizing the Black-Scholes model using the following assumptions and had the following fair values:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Average risk-free interest rate	0.64%	0.66%	0.53%	1.06%
Expected dividend yield	None	None	None	None
Expected life	3.5 years	3.5 years	3.5 years	3.5 years
Expected volatility	57.6% to 57.7%	66.5% to 67.1%	57.6% to 68.9%	66.5% to 68.8%
Weighted average exercise price	$6.08	$2.25	$5.25	$2.46
Weighted average fair value	$2.53	$1.07	$2.28	$1.18

As of September 30, 2013 unrecognized compensation cost related to unexercisable options and unvested restricted stock and the weighted average remaining period is as follows:

Remaining expense	$	1,581,046
Weighted average term		1.0 years

The Company’s aggregate intrinsic value for stock options and restricted stock outstanding is as follows:

	Period Ended
	September 30,
Aggregate intrinsic value	2013		2012
Stock options	$	2,194,000	$	8,300
Restricted stock		1,143,000		146,000

Note 6 - Commitments and Contingencies

Foreign Tax Claim

In July 2007, a dissolved former Canadian subsidiary of the Company, CADx Medical Systems Inc. (“CADx Medical”), received a tax re-assessment of approximately $6,800,000 from the Canada Revenue Agency (“CRA”) resulting from CRA’s audit of CADx Medical’s Canadian federal tax return for the year ended December 31, 2002. In February 2010 the CRA reviewed the matter and reduced the tax re-assessment to approximately $703,000, excluding interest and penalties. The Company believes that it is not liable for the re-assessment against CADx Medical and no accrual has been recorded for this matter as of September 30, 2013.

13

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Settlement Obligations

In connection with the acquisition of Xoft, the Company recorded a royalty obligation pursuant to a settlement agreement entered into between Xoft and Hologic in August 2007. Xoft received a nonexclusive, irrevocable, perpetual, worldwide license, including the right to sublicense certain Hologic patents, and a non-compete covenant as well as an agreement not to seek further damages with respect to the alleged patent violations. In return, the Company has a remaining obligation to pay a minimum annual royalty payment to Hologic, of $250,000 payable through 2016. In addition to the minimum annual royalty payments, the litigation settlement agreement with Hologic also provided for payment of royalties based upon a specified percentage of future net sales on any products that practice the licensed rights. The estimated fair value of the patent license and non-compete covenant is $100,000 and is being amortized over the estimated remaining useful life of approximately six years. In addition, a liability has been recorded within accrued expenses and long-term settlement cost for future payment and for future minimum royalty obligations totaling $770,000. The Company recorded interest expense of approximately $33,000 and $94,000 in the three and nine months ended September 30, 2013, and $38,000 and $110,000 in the three and nine months ended September 30, 2012, respectively, related to this obligation.

On December 22, 2011, the Company agreed to a settlement related to the litigation with Carl Zeiss Meditec AG. The Company determined that this settlement should be recorded as a measurement period adjustment and accordingly recorded the present value of the litigation to the opening balance sheet of Xoft. The present value of the liability was estimated at approximately $1.8 million as of December 31, 2011. The Company is obligated to pay $0.5 million in June 2015 and $0.5 million in June 2017, for a total of $1.0 million. As of September 30, 2013, the remaining liability recorded within accrued expenses and long-term settlement cost for future payment and for future minimum royalty obligations is $0.7 million. The Company recorded interest expense of approximately $28,000 and $119,000 in the three and nine months ended September 30, 2013, and $59,000 and $203,000 in the three and nine months ended September 30, 2012, respectively related to this obligation.

Other Commitments

The Company is obligated to pay approximately $1.9 million for firm purchase obligations to suppliers for future product deliverables.

Litigation

On February 18, 2011, in the Orange County Superior Court (Docket No. 30-2011-00451816-CU-PL-CXC), named plaintiffs Jane Doe and John Doe filed a complaint against Xoft, the Company, and Hoag Memorial Hospital Presbyterian asserting causes of action for general negligence, breach of warranty, and strict liability and seeking unlimited damages in excess of $25,000. On March 2, 2011, the Company received a Statement of

14

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Damages - specifying that the damages being sought aggregated an amount of at least approximately $14.5 million. On April 6, 2011, plaintiffs Jane Doe and John Doe amended their complaint alleging only medical malpractice against Hoag Memorial Hospital Presbyterian. On April 8, 2011, another complaint was filed in the Orange County Superior Court (Docket No. 30-2011-00465448-CU-MM-CXC) on behalf of four additional Jane Doe plaintiffs and two John Doe spouses with identical allegations against the same defendants. One John Doe spouse from this group of plaintiffs was later dismissed on August 18, 2011. On April 19, 2011, a sixth Jane Doe plaintiff filed an identical complaint in the Orange County Superior Court (Docket No. 30-2011-00468687-CU-MM-CXC), and on May 4, 2011, a seventh Jane Doe plaintiff and John Doe spouse filed another complaint in the Orange County Superior Court (Docket No. 30-2011-00473120-CU-PO-CXC), again with identical allegations against the same defendants. On July 12, 2011, an eighth Jane Doe plaintiff and John Doe spouse filed a complaint in the Orange County Superior Court (Docket No. 30-2011-00491068-CU-PL-CXC), and on July 14, 2011, a ninth Jane Doe plaintiff and John Doe spouse filed another complaint in the Orange County Superior Court (Docket No. 30-2011-00491497-CU-PL-CXC), each with identical allegations as the previously filed complaints. On August 18, 2011, these two groups of Jane Doe plaintiffs and John Doe spouses amended their complaints to correct certain deficiencies. Additionally on August 18, 2011, a tenth Jane Doe plaintiff and two additional John Doe spouses filed a complaint in the Orange County Superior Court (Docket No. 30-2011-501448-CU-PL-CXC), again with identical allegations against the same defendants. On January 18, 2012, three additional Jane Doe plaintiffs and one additional John Doe spouse filed a complaint in the Orange County Superior Court (Docket No. 30-2012-00538423-CU-PL-CXC) with identical allegations against the same defendants. On April 11, 2012, the above-referenced cases were consolidated for all purposes, excluding trial. On May 2, 2012, plaintiffs filed a master consolidated complaint, with the same case number as the original filed complaint. On August 2, 2012, plaintiffs filed fictitious name amendments adding defendants, Mel Silverstein, M.D., Peter Chen, M.D., Lisa Guerrera, M.D., Ralph Mackintosh, Ph.D., Robert Dillman, M.D., and Jack Cox. On September 14, 2012, an additional Jane Doe plaintiff and John Doe spouse filed a complaint in the Orange County Superior Court (Docket No. 30-2012-00598740-CU-PL-CXC) with identical allegations as plaintiffs above against the same original defendants. On October 17, 2012, plaintiff John Doe No. 11 dismissed his complaint, with prejudice, as to all defendants. On November 26, 2012, plaintiffs filed an additional fictitious name amendment adding defendant, American Ceramic Technology, Inc. On January 15, 2013, plaintiffs filed a dismissal, with prejudice, as to defendant, Mel Silverstein, M.D., only. On May 28, 2013, plaintiffs filed an additional fictitious name amendment adding defendant, American Ceramic Technology. On July 11, 2013, American Ceramic Technology filed a cross-complaint for express and implied indemnity, apportionment, contribution and declaratory relief against all defendants. On October 24, 2013, plaintiff’s filed an amended master consolidated complaint. It is alleged that each Jane Doe plaintiff was a patient who was treated with the Axxent Electronic Brachytherapy System that incorporated the Axxent Flexishield Mini. The Company believes that all of the Jane Doe plaintiffs were part of the group of 29 patients treated using the Axxent Flexishield Mini as part of a clinical trial. The Axxent Flexishield Mini was the subject of

15

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

a voluntary recall. These claims are still in the early stages. Based upon our preliminary analysis, the Company plans to vigorously defend the lawsuits however a loss is reasonably possible. Since the amount of the potential damages in the event of an adverse result is not reasonably estimable, we are unable to estimate a range of loss and no expense has been recorded with respect to the contingent liability associated with this matter.

Note 7 - Fair Value Measurements

The Company follows the provisions of ASC Topic 820, “Fair Value Measurement and Disclosures”, (“ASC 820”). This topic defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities and our notes payable. The carrying amounts of our cash and cash equivalents (which are comprised primarily of deposit and overnight sweep accounts), accounts receivable, accounts payable and certain accrued liabilities approximate fair value due to the short maturity of these instruments. The carrying value of our notes payable approximates fair value.

The Company’s assets that are measured at fair value on a recurring basis relate to the Company’s money market accounts. The Company’s liabilities that are measured at fair value on a recurring basis relate to contingent consideration resulting from the acquisition of Xoft and the Warrants issued in connection with the Deerfield Facility Agreement.

The Company’s money market funds are included in cash and cash equivalents in the accompanying balance sheet, and are considered a Level 1 investment as they are valued at quoted market prices in active markets.

16

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

The following table sets forth Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy.

Fair value measurements using: (000’s) as of December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	12,336	$	—	$	—	$	12,336
Total Assets	$	12,336	$	—	$	—	$	12,336
Liabilities
Contingent Consideration	$	—	$	—	$	—	$	—
Warrant Liability		—		—		1,538		1,538
Total Liabilities	$	—	$	—	$	1,538	$	1,538

Fair value measurements using: (000’s) as of September 30, 2013
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	8,824	$	—	$	—	$	8,824
Total Assets	$	8,824	$	—	$	—	$	8,824
Liabilities
Contingent Consideration	$	—	$	—	$	—	$	—
Warrant Liability		—		—		1,054		1,054
Total Liabilities	$	—	$	—	$	1,054	$	1,054

The fair value of contingent consideration is a Level 3 liability and was determined to be $0 at December 31, 2012 and September 30, 2013, as the Company does not expect to meet the revenue thresholds for the Xoft transaction.

As discussed in Note 3, the Company issued 450,000 warrants which were immediately exercisable and therefore were valued as of the Funding Date. The warrant liability for the warrants associated with the debt was valued using the binomial lattice-based valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions in valuing the warrant liability were as follows as of December 31, 2012 and September 30, 2013.

17

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

	September 30, 2013			December 31, 2012
Warrants
Exercise price	$	3.50		$	3.50
Volatility		31.4	%		82.4	%
Equivalent term (years)		4.27			5.00
Risk-free interest rate		1.2	%		0.8	%

The volatility was determined based on the definition in the Warrants, and the risk-free interest rate was determined using the six year LIBOR rate as of the measurement date.

In addition the other significant assumptions include the probability of voluntary exercise versus a major transaction (as defined in the Warrants); and assuming a major transaction, the probability of cashless major exercise; and assuming a cashless major exercise, the annual probabilities for a major transaction. The Company has estimated a low probability of these items as of September 30, 2013.

The following sets forth a reconciliation of the changes in the fair value of warrants payable during the period:

Nine months ended September 30, 2013
Balance as of December 31, 2012	$	1,538
Fair value adjustment		(484	)
Balance as of September 30, 2013	$	1,054

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets, including our goodwill, are measured at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be impaired. We did not consider any assets to be impaired during the three months ended September 30, 2013.

Note 8 - Income Taxes

At September 30, 2013, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740, “Income Taxes”. The Company does not expect that the unrecognized tax benefits will materially increase within the next twelve months. The Company did not recognize any interest or penalties related to uncertain tax positions at September 30, 2013. The Company files United States federal income tax returns and income tax returns in various states and local jurisdictions. The Company’s three preceding tax years remain subject to examination by federal and state taxing authorities. In addition, because the Company has net operating loss carry-forwards, the Internal Revenue Service and state jurisdictions are permitted to audit earlier years and propose adjustments up to the amount of net operating loss generated in those years. The Company is not under examination by any other federal or state jurisdiction for any tax years.

18

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Note 9 - Goodwill

In accordance with FASB ASC Topic 350-20, “Intangibles - Goodwill and Other”, (“ASC 350-20”), the Company tests goodwill for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of the Company is less than the carrying value of the Company.

The Company’s goodwill arose in connection with its acquisitions in June 2002, December 2003 and December 2010.

The Company assesses the potential impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors management considers important, which could trigger an impairment of such asset, include the following:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner or use of the assets or the strategy for our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• a sustained decline in our market capitalization below net book value.

During the second quarter of 2013, the Company determined that it operated in two segments and, accordingly, determined that there are two reporting units. The Company is in the process of allocating the goodwill by reporting unit and will complete the analysis in conjunction with the annual impairment assessment. We do not expect the allocation of goodwill by reporting unit to have a material impact on the financial statements. In addition, the Company concluded there were no triggering events as of September 30, 2013.

The carrying amount of goodwill (in thousands) for the quarter ended September 30, 2013 was approximately $21,109.

Note 10 - Segment Reporting

In accordance with FASB Topic ASC 280, “Segments”, operating segments, are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

19

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

The Company now reports the results of two segments, Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). The Detection segment consists of our advanced image analysis and workflow products, and the Therapy segment consists of our radiation therapy (“Axxent”) products. The primary factors used by our CODM to allocate resources are based on revenues, operating income, and earnings before interest, taxes, depreciation, amortization, and other specific and non-recurring items (“Adjusted EBITDA”) of each segment. Included in segment operating income are stock compensation, amortization of technology and depreciation expense.

We do not track our assets by operating segment and our CODM does not use asset information by segment to allocate resources or make operating decisions.

20

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

Segment revenues, segment operating income, segment adjusted EBITDA and a reconciliation of segment operating income to loss before income tax is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Segment revenues:
Detection	$	4,310		$	3,780		$	12,755		$	12,552
Therapy		3,980			4,403			11,177			7,905
Total Revenue	$	8,290		$	8,183		$	23,932		$	20,457
Segment operating income (loss):
Detection	$	1,485		$	611		$	4,111		$	2,804
Therapy		(288	)		458			(441	)		(2,460	)
Segment operating income (loss)	$	1,197		$	1,069		$	3,670		$	344
General and administrative expenses	$	(1,551	)	$	(1,773	)	$	(4,825	)	$	(4,971	)
Interest expense		(807	)		(883	)		(2,467	)		(2,549	)
Gain on fair value of warrant		624			126			484			512
Other income		4			9			16			27
Loss before income tax	$	(533	)	$	(1,452	)	$	(3,122	)	$	(6,637	)
Segment adjusted EBITDA:
Detection segment operating income	$	1,485		$	611		$	4,111		$	2,804
Stock compensation		98			84			292			245
Depreciation		45			34			131			107
Amortization		129			130			388			390
Detection adjusted EBITDA	$	1,757		$	859		$	4,923		$	3,546
Therapy segment operating income (loss)	$	(288	)	$	458		$	(441	)	$	(2,460	)
Stock compensation		34			24			101			71
Depreciation		95			166			321			473
Amortization		234			233			702			698
Therapy adjusted EBITDA	$	75		$	881		$	683		$	(1,218	)

Note 11 - Recent Accounting Pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires the

21

iCAD, INC. AND SUBSIDIARY.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2013

netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs are required to be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Company’s consolidated financial statements

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Certain information included in this Item 2 and elsewhere in this Form 10-Q that are not historical facts contain forward looking statements that involve a number of known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to, uncertainty of future sales and expense levels, protection of patents and other proprietary rights, the impact of supply and manufacturing constraints or difficulties, regulatory changes and requirements applicable to our products, product market acceptance, possible technological obsolescence of products, increased competition, integration of the acquired businesses, the impact of litigation and/or government regulation, changes in Medicare reimbursement policies, competitive factors, the effects of a decline in the economy in markets served by the Company and other risks detailed in the Company’s other filings with the Securities and Exchange Commission. The words “believe”, “plan”, “intend”, “expect”, “estimate”, “anticipate”, “likely”, “seek”, “should”, “would”, “could” 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.

Results of Operations

Overview

iCAD is an industry-leading provider of advanced image analysis, workflow solutions and radiation therapy solutions for the early identification and treatment of cancer. The Company now reports in two segments - Detection and Therapy.

The Company has grown primarily through acquisitions including CADx, Qualia Computing, CAD Sciences and Xoft to become a broad player in the oncology market.

In the Detection segment, its industry-leading solutions include advanced image analysis and workflow solutions that enable healthcare professionals to better serve patients by identifying pathologies and pinpointing the most prevalent cancers earlier, a comprehensive range of high-performance, upgradeable Computer-Aided Detection (CAD) systems and workflow solutions for mammography, Magnetic Resonance Imaging (MRI) and Computed Tomography CT.

The Company intends to continue the extension of its superior image analysis and clinical decision support solutions for mammography, MRI and CT imaging. iCAD believes that advances in digital imaging techniques should bolster its efforts to develop additional commercially viable CAD/advanced image analysis and workflow products.

In the Therapy segment the Company offers an isotope-free cancer treatment platform technology. The Xoft Electronic Brachytherapy System (“Xoft eBx”) can be used for the treatment of early-stage breast cancer, endometrial cancer, cervical cancer and skin cancer. We believe the Xoft eBx

23

system platform indications represent strategic opportunities in the United States and International markets to offer differentiated treatment alternatives. In addition, the Xoft eBx system generates additional recurring revenue for the sale of consumables and related accessories which will continue to drive growth in this segment.

The Company’s headquarters are located in Nashua, New Hampshire, with manufacturing and contract manufacturing facilities in New Hampshire and Massachusetts and an operations, research, development, manufacturing and warehousing facility in San Jose, California.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition, results of operations, and cash flows are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to accounts receivable allowance, inventory valuation and obsolescence, intangible assets, income taxes, warranty obligations, contingencies and litigation. Additionally, the Company uses assumptions and estimates in calculations to determine stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a comprehensive list of the Company’s critical accounting policies, reference should be made to the Annual Report on Form 10-K for the year ended December 31, 2012 filed on February 27, 2013.

24

Three months ended September 30, 2013 compared to the three months ended September 30, 2012

Revenue:

	Three months ended September 30,
	2013		2012		Change			% Change
Detection revenue
Product revenue	$	2,246	$	2,023	$	223			11.0	%
Service revenue		2,064		1,757		307			17.5	%
Subtotal		4,310		3,780		530			14.0	%
Therapy revenue
Product revenue		2,519		3,638		(1,119	)		(30.8	)%
Service revenue		1,461		765		696			91.0	%
Subtotal		3,980		4,403		(423	)		(9.6	)%
Total revenue	$	8,290	$	8,183	$	107			1.3	%

Three months ended September 30, 2013:

Total revenue for the three month period ended September 30, 2013 was $8.3 million compared with revenue of $8.2 million for the three month period ended September 30, 2012, an increase of approximately $107,000, or 1.3%. The increase in revenue was due to a $423,000 decrease in revenue from Therapy products offset by an increase in Detection revenues of approximately $530,000.

Detection product revenue increased by approximately $0.2 million from $2.0 million to $2.2 million or 11% in the three months ended September 30 2013 as compared to September 30, 2012. The increase is due primarily to an increase in our Digital, CAD revenue of approximately $0.5 million and a decrease in film based revenues of $0.3 million. The increase in Digital CAD revenue is due primarily to an increase in direct customer sales. Film based revenues continue to decrease as a result of the transition to digital technologies.

Detection service revenue increased approximately $0.3 million from $1.8 million in the three months ended September 30, 2012 to $2.1 million in the three months ended September 30, 2013. The increase in service revenue reflects the sale of service contracts as the result of our initiatives to sell into our installed base of customers as well as additional billable MRI engineering revenue.

Therapy product revenue decreased by $1.1 million from $3.6 million in the three months ended September 30, 2012 to $2.5 million in the three months ended September 30, 2013. Product sales for our Axxent eBx systems decreased due primarily to a decrease in system sales of approximately $0.8 million and a decrease in sales of accessories of $0.3 million. Revenue from the sale of our Axxent eBx systems can vary due to an increase or decrease in the number of units sold which can cause a significant fluctuation in revenue in the period. However, we continue to see interest in the Xoft solution for both its use in the treatment of non-melanoma skin cancers as well as the intra-operative radiation therapy (“IORT”) market. Revenue growth for electronic brachytherapy products is also enhanced by sales of our balloon and surface applicators, which we believe is based on market adoption of the systems resulting in increased procedure volumes.

25

Therapy service and supply revenue increased approximately $0.7 million from $0.8 million in the three months ended September 30, 2012 to $1.5 million for the three months ended September 30, 2013. The increase in Therapy service and supply revenue is due primarily to increases in service revenue due to the growing installed base and source agreement revenues which is driven by increased procedure volumes. We expect service and supply revenue for our electronic brachytherapy products to increase as patient treatment volume and our installed base of electronic brachytherapy products increases.

Gross Profit:

	Three months ended Sept 30,
	2013			2012			Change			% Change
Products	$	1,383		$	1,527		$	(144	)		(9.4	)%
Service & supply		747			541			206			38.1	%
Amortization of acquired technology		234			233			1			0.4	%
Total cost of revenue	$	2,364		$	2,301		$	63			2.7	%
Gross profit	$	5,926		$	5,882		$	44			0.7	%
profit %		71.5	%		71.9	%

Gross profit for the three month period ended September 30, 2013 was $5.9 million, or 71.5% of revenue as compared to $5.9 million or 71.9% of revenue in the three month period ended September 30, 2012. Gross profit percent changes primarily due to changes in the mix of business, consulting costs related to non-recurring engineering revenue, and additional manufacturing investments. Gross profit percent is also impacted by amortization of acquired technology, and the impact of the medical device excise tax implemented as of January 1, 2013 which represented an additional $119,000 of expense as compared to the quarter ended September 30, 2012.

Operating Expenses:

	Three months ended Sept 30,
	2013		2012		Change			Changer %
Operating expenses:
Engineering and product development	$	2,112	$	1,971	$	141			7.2	%
Marketing and sales		2,617		2,842		(225	)		(7.9	)%
General and administrative		1,551		1,773		(222	)		(12.5	)%
Total operating expenses	$	6,280	$	6,586	$	(306	)		(4.6	)%

Engineering and Product Development. Engineering and product development costs for the three month period ended September 30, 2013 increased by $0.1 million or 7.2%, from $2.0 million in 2012 to $2.1 million in 2013. The increase in engineering and product development costs was primarily due to an increase in expenses related to an IORT clinical trial, consulting and subcontracting costs.

26

Marketing and Sales. Marketing and sales expenses decreased by $0.2 million or 7.9%, from $2.8 million in the three month period ended September 30, 2012 to $2.6 million in the three month period ended September 30, 2013. The decrease in marketing and sales expenses primarily resulted from reductions in salary and related expenses as compared to the three months ended September 30, 2012.

General and Administrative. General and administrative expenses decreased by $0.2 million or 12.5%, from $1.8 million in the three month period ended September 30, 2012 to $1.6 million in the three month period ended September 30, 2013. Decreases in amortization expense, consulting and legal, were offset by increases in stock compensation costs, bonus expense and travel costs.

Other Income and Expense:

	Three months ended September 30,
	2013			2012			Change			Change %
Gain from change in fair value of warrants	$	624		$	126			498			395.2	%
Interest expense		(807	)		(883	)		76			(8.6	)%
Other income		4			9			(5	)		(55.6	)%
	$	(179	)	$	(748	)	$	569			(76.1	)%
Tax expense		(56	)		(13	)		(43	)		330.8	%

Gain from change in fair value of warrants. The $624,000 and $126,000 gain from the change in fair value of the warrants for the periods ended September 30, 2013 and 2012, respectively, resulted from a decrease in the fair value of the warrants under the binomial lattice based valuation methodology, due primarily to a decrease in the Company’s stock price, and volatility which are the key assumptions in determining the value of the warrants. We expect the value of the warrants to continue to fluctuate as changes in the Company stock price and volatility, which is driven by changes in our stock price, can have a significant impact on the value of the Warrants.

Interest expense. Interest expense of $807,000 decreased by $76,000 or 8.6% for the three month period ended September 30, 2013 as compared to interest expense of $883,000 in the three month period ended September 30, 2012. Interest expense is due primarily to interest expense related to the credit facility entered into with certain entities affiliated with Deerfield Management. Interest related to the Hologic and Zeiss settlement obligations was $61,000 in the three months ended September 30, 2013 as compared to $97,000 in the same period in 2012.

Interest income. Interest income of $4,000 and $9,000 for the quarters ended September 30, 2013, and 2012, respectively reflects income earned from our money market accounts.

Tax expense. Tax expense of $56,000 and $13,000 for the quarters ended September 30, 2013, and 2012, respectively is due primarily to state non-income and franchise based taxes.

27

Nine months ended September 30, 2013 compared to the nine months ended September 30, 2012

Revenue:

	Nine months ended September 30,
	2013		2012		Change			% Change
Detection revenue
Product revenue	$	6,566	$	7,327	$	(761	)		(10.4	)%
Service revenue		6,189		5,225		964			18.4	%
Subtotal		12,755		12,552		203			1.6	%
Therapy revenue
Product revenue		7,763		5,921		1,842			31.1	%
Service revenue		3,414		1,984		1,430			72.1	%
Subtotal		11,177		7,905		3,272			41.4	%
Total revenue	$	23,932	$	20,457	$	3,475			17.0	%

Nine months ended September 30, 2013:

Total revenue for the nine month period ended September 30, 2013 was $23.9 million compared with revenue of $20.5 million for the nine month period ended September 30, 2012, an increase of approximately $3.5 million, or 17.0%. The increase in revenue was primarily due to an increase in Therapy revenue of $3.3 million and an increase in Detection revenue of $0.2 million.

Detection product revenue decreased by approximately $0.7 million from $7.3 million to $6.6 million or 10.4% in the nine months ended September 30 2013 as compared to the nine months ended September 30, 2012. The decrease is due primarily to a decrease in film based revenues of $0.8 million as a result of the slowing of the transition from analog to digital technology.

Detection service revenue increased approximately $1.0 million from $5.2 million in the nine months ended September 30, 2012 to $6.2 million in the nine months ended September 30, 2013. The increase in service revenue reflects the sale of service contracts as the result of our initiatives to sell into our installed base of customers as well as additional billable MRI engineering revenue.

Therapy product revenue increased $1.9 million or 31.1% from $5.9 million in the nine months ended September 30, 2012 to $7.8 million in the nine months ended September 30, 2013. The increase in product revenue is due to sales of our Axxent Electronic Brachytherapy System and accessories which has continued to increase both for its use in in the treatment of non-melanoma skin cancers as well as the IORT market. Revenue from the sale of our Axxent eBx systems can vary due to an increase or decrease in the number of units sold which can cause a significant fluctuation in revenue in the period. Revenue growth for electronic brachytherapy products was also enhanced by continued sales increases for balloon and surface applicators, which we believe is based on market adoption of the systems resulting in increased procedure volumes.

Therapy service and supply revenue increased approximately $1.4 million from $2.0 million in the nine months ended September 30, 2012 to $3.4 million for the nine months ended September 30, 2013. The increase in service and supply revenue is due primarily to increases in service and source agreements related to sales of the electronic brachytherapy system which is driven by

28

increased procedure volumes. We expect service and supply revenue for our electronic brachytherapy products to increase as our installed base of electronic brachytherapy products increases.

Gross Profit:

	Nine months ended Sept 30,
	2013			2012			Change		% Change
Products	$	4,184		$	3,603		$	581		16.1	%
Service & supply		2,251			1,678			573		34.1	%
Amortization of acquired technology		701			698			3		0.4	%
Total cost of revenue	$	7,136		$	5,979		$	1,157		19.4	%
Gross profit	$	16,796		$	14,478		$	2,318		16.0	%
profit %		70.2	%		70.8	%

Gross profit for the nine month period ended September 30, 2013 was $16.8 million, or 70.2% of revenue as compared to $14.5 million or 70.8% of revenue in the nine month period ended September 30, 2012. Gross profit percent decreased slightly due to the impact of the medical device excise tax implemented as of January 1, 2013 which represented an additional $389,000 of expense as compared to the quarter ended September 30, 2012. This decrease was offset by an increase in gross profit percent due to the impact of higher revenue which absorbed the fixed manufacturing expenses and the amortization of acquired technology.

Operating Expenses:

	Nine months ended Sept 30,
	2013		2012		Change			Change %
Operating expenses:
Engineering and product development	$	5,734	$	6,158	$	(424	)		(6.9	)%
Marketing and sales		7,392		7,976		(584	)		(7.3	)%
General and administrative		4,825		4,971		(146	)		(2.9	)%
Total operating expenses	$	17,951	$	19,105	$	(1,154	)		(6.0	)%

Engineering and Product Development. Engineering and product development costs for the nine month period ended September 30, 2013 decreased by $0.4 million or 6.9%, from $6.2 million for the nine month period ended September 30, 2012 to $5.7 million for the same period in 2013. The decrease in engineering and product development costs was primarily due to a decrease in consulting, subcontracting, licensing and personnel costs of approximately $560,000 offset by an increase in clinical research expenses.

Marketing and Sales. Marketing and sales expenses decreased by $0.6 million or 7.3%, from $8.0 million in the nine month period ended September 30, 2012 to $7.4 million in nine month period ended September 30, 2013. The decrease in marketing and sales expenses primarily resulted from reductions in salary and salary related expenses during the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012.

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General and Administrative. General and administrative expenses decreased by $146,000 or 2.9%, from $5.0 million in the nine month period ended September 30, 2012 to $4.8 million in the nine month period ended September 30, 2013. The decrease in general and administrative expense for the period ended September 30, 2013 is primarily due to a decrease in amortization and legal expense offset by an increase in personnel costs, stock compensation and bad debt expense as compared to the nine months ended September 30, 2012.

Other Income and Expense:

	Nine months ended September 30,
	2013			2012			Change			Change %
Gain from change in fair value of warrants	$	484		$	512			(28	)		(5.5	)%
Interest expense		(2,467	)		(2,549	)		82			(3.2	)%
Other income		16			27			(11	)		(40.7	)%
	$	(1,967	)	$	(2,010	)	$	43			(2.1	)%
Tax expense		(76	)		(35	)		(41	)		117.1	%

Gain from change in fair value of warrants. The $484,000 and $512,000 gain from the change in fair value of the warrants for the period ended September 30, 2013 and 2012, respectively, resulted from a changes in the fair value of the warrants under the binomial lattice based valuation methodology, due primarily to changes in volatility, the expected life of the warrant and the stock price of the Company at the valuation date, which are key drivers in determining the value of the warrants. We expect the value of the warrants to continue to fluctuate as changes in volatility which is driven by changes in our stock price, and changes in the Company stock price can have a significant impact on the value of the warrants.

Interest Expense. Interest expense is approximately $2.5 million for each of the nine month periods ended September 30, 2013 and 2012. Interest expense is due primarily to interest expense of approximately $2.3 million related to the credit facility entered into with certain entities affiliated with Deerfield Management. Interest related to the Hologic and Zeiss settlement obligations was $214,000 in the nine months ended September 30, 2013 as compared to $313,000 in the same period in 2012.

Interest Income. Interest income of $16,000 and $27,000 for the nine months ended September 30, 2013, and 2012, respectively reflects income earned from our money market accounts.

Tax expense. Tax expense of $76,000 and $35,000 for the nine months ended September 30, 2013, and 2012, respectively is due primarily to state non-income and franchise based taxes.

Liquidity and Capital Resources

We believe that our current liquidity and capital resources are sufficient to sustain operations through at least the next twelve months, primarily due to cash on hand and projected cash generation from operations. Our ability to generate cash that is adequate to meet our future capital requirements will depend primarily on operating cash flow. If sales or cash collections are reduced

30

from current expectations, or if expenses and cash requirements are increased, we may require additional financing, although there are no guarantees that we will be able to obtain the financing if necessary, on acceptable terms or at all.

As of September 30, 2013, the Company had cash and cash equivalents of $10.2 million, current assets of $21.3 million, current liabilities of $14.8 million and working capital of $6.5 million. The ratio of current assets to current liabilities was 1.44:1.

Pursuant to the agreements with Deerfield Management, a healthcare investment fund (“Deerfield”) in December 2011, the Company is obligated under the terms these agreements, to repay an aggregate principal amount of $15 million. In addition, we agreed to pay Deerfield a portion of our revenues until the maturity date of the note payable, whether or not the note is outstanding through that date. We also issued warrants at an exercise price of $3.50 per share and a second B warrant (to purchase an additional 100,000 shares of common stock at an exercise price of $3.50 per share, which may become exercisable if certain conditions are met. As a result, we are obligated to pay interest at 5.75% on the outstanding balance of the note which is approximately $216,000 per quarter until the fourth quarter of 2014. In 2015, interest is approximately $162,000 per quarter and in 2016, interest is approximately $108,000 per quarter, with the final payment of $7.5 million on the note payable due in January 2017 (unless we elect to extend). We are also required to pay a minimum commitment of $125,000 per quarter based on our revenue; however this minimum is met at approximately $2.9 million of revenue per quarter. We expect to exceed the minimum revenue thresholds on a quarterly basis as we did in the quarter ended September 30, 2013.

Net cash used for operating activities for the nine month period ended September 30, 2013 was $3.2 million, compared to net cash used for operating activities of $4.6 million for the nine month period ended September 30, 2012. The cash used for operating activities for the nine months ended September 30, 2013 resulted primarily from uses of cash due to an increase in accounts receivable of $3.5 million, a $0.7 million decrease in accounts payable and accrued expenses, offset by sources of cash due to an increase of $1.1 million in deferred revenue. We expect that cash used or provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, specifically the timing of when we recognize revenue, our accounts receivable collections and the timing of other payments.

The net cash used for investing activities for the nine month period ended September 30, 2013 was $534,000 as compared to $468,000 for the nine month period ended September 30, 2012. Cash used for investing activities consisted primarily of additions to property and equipment.

Net cash used for financing activities for the nine month period ended September 30, 2013 was $22,000 as compared to net cash provided by financing activities for the nine month period ended September 30, 2012 of $14.3 million, which consisted of cash received in connection with the credit facility entered into with Deerfield in December 2011, described in Note 3 of the accompanying Condensed Consolidated Financial Statements.

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Contractual Obligations

The following table summarizes, for the periods presented, our future estimated cash payments under existing contractual obligations (in thousands).

Contractual Obligations	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		5+ years
Operating Lease Obligations	$	1,825	$	491	$	954	$	380	$	—
Capital Lease Obligations		409	$	133		276		—
Settlement Obligations		2,475		275		800		1,050		350
Notes Payable		19,122		1,363		9,794		7,965		—
Other Commitments		1,869		1,869		—		—		—
Total Contractual Obligations	$	25,700	$	4,131	$	11,824	$	9,395	$	350

Settlement obligations represent the minimum payments attributable to the obligations related primarily to Zeiss and Hologic.

Other commitments represent firm purchase obligations to suppliers for future product deliverables.

In addition to the contractual obligations related to the interest payments from the note payable, the Company is obligated under the revenue agreement discussed in Note 3 of the accompanying financial statements, to pay Deerfield 4.25% of revenues up to $25 million, either 2.75% (for 2013 and 2014) or 2.25% (for 2015, 2016 and if applicable 2017) of annual revenues from $25 million to $50 million and 1.0% of annual revenues in excess of $50 million. Included in the above amounts are the minimum annual payments under the revenue agreement of $125,000 per quarter payable in arrears. The Company has included only the minimum annual payments in Notes Payable.

Recent Accounting Pronouncements

See Note 11 to the Condensed Consolidated Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We believe we are not subject to material foreign currency exchange rate fluctuations, as substantially all of our sales and expenses are denominated in the U.S. dollar. We do not hold derivative securities and have not entered into contracts embedded with derivative instruments, such as foreign currency and interest rate swaps, options, forwards, futures, collars or warrants, either to hedge existing risks or for speculative purposes.

Item 4. Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, as of September 30, 2013, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”) were effective at the reasonable level of assurance.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We conduct periodic evaluations to enhance, where necessary our procedures and controls.

Our principal executive officer and principal financial officer conducted an evaluation of our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to determine whether any changes in internal control over financial reporting occurred during the quarter ended September 30, 2013, that have materially affected or which are reasonably likely to materially affect internal control over financial reporting. Based on that evaluation, there has been no such change during such period.

33

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to the detailed discussion regarding litigation set forth in Note 6 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

The Company is involved in various legal matters that are in the process of litigation or settled in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, we believe that the ultimate resolution of all such matters and claims will not have a material adverse effect on our financial condition. However, such matters could have a material adverse effect on our operating results and cash flows for a particular period.

Item 1A. Risk Factors

Our risk factors are described in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2012 as filed with the SEC on February 27, 2013. There have been no material changes in the risks affecting iCAD since the filing of our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities in the quarter ended September 30, 2013.

Item 6. Exhibits

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012, (iii) Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2013 and 2012, and (iv) Notes to Consolidated Financial Statements.

34

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		iCAD, Inc.
		(Registrant)
Date:	November 13, 2013	By:	/s/ Kenneth M. Ferry
		Kenneth M. Ferry
		President, Chief Executive Officer, Director
Date:	November 13, 2013	By:	/s/ Kevin C. Burns
		Kevin C. Burns
		Executive Vice President of Finance and Chief Financial Officer, Treasurer

35

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Kenneth M. Ferry, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 of iCAD, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 13, 2013
		/s/ Kenneth M. Ferry
		Kenneth M. Ferry
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Kevin C. Burns, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013 of iCAD, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 13, 2013
		/s/ Kevin C. Burns
		Kevin Burns
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of iCAD, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2013 (the “Report”), I, Kenneth M. Ferry, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ Kenneth M. Ferry
		Kenneth M. Ferry
		Chief Executive Officer
Date:	November 13, 2013

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of iCAD, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2013 (the “Report”), I, Kevin C. Burns, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ Kevin C. Burns
		Kevin C. Burns
		Chief Financial Officer
Date:	November 13, 2013

XML

Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Changes And Error Corrections [Abstract]

Revenue Recognition

Revenue Recognition

The Company recognizes revenue primarily from the sale of products and from the sale of services and supplies. Revenue is recognized when delivery has occurred, persuasive evidence of an arrangement exists, fees are fixed or determinable and collectability of the related receivable is probable. For product revenue, delivery has occurred upon shipment provided title and risk of loss has passed to the customer. Services and supplies revenue are considered to be delivered as the services are performed or over the estimated life of the supply agreement.

The Company recognizes revenue from the sale of its digital, film-based CAD and electronic brachytherapy (“eBx”) products and services in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“Accounting Standards Update “ASU” 2009-13) and ASC Update No. 2009-14, “Certain Arrangements That Contain Software Elements” (Update No. 2009-14) (“ASU 2009-14”). Revenue for the sale of certain CAD products is recognized in accordance with ASC 840 (“Leases”) (“ASC 840”). For multiple element arrangements, revenue is allocated to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). VSOE generally exists only when the deliverable is sold separately and is the price actually charged for that deliverable. The process for determining BESP for deliverables without VSOE or TPE considers multiple factors including relative selling prices; competitive prices in the marketplace, and management judgment, however, these may vary depending upon the unique facts and circumstances related to each deliverable.

The Company primarily uses customer purchase orders that are subject to the Company’s terms and conditions or, in the case of an Original Equipment Manufacturer (“OEM”) are governed by distribution agreements. In accordance with our distribution agreements, the OEM does not have a right of return, and title and risk of loss passes to the OEM upon shipment. The Company generally ships Free On Board shipping point and uses shipping documents and third-party proof of delivery to verify delivery and transfer of title. In addition, the Company assesses whether collection is probable by considering a number of factors, including past transaction history with the customer and the creditworthiness of the customer, as obtained from third party credit references.

If the terms of the sale include customer acceptance provisions and compliance with those provisions cannot be demonstrated, all revenue is deferred and not recognized until such acceptance occurs. The Company considers all relevant facts and circumstances in determining when to recognize revenue, including contractual obligations to the customer, the customer’s post-delivery acceptance provisions, if any, and the installation process.

The Company has determined that iCAD’s Digital, MRI and film based sales generally follow the guidance of FASB ASC Topic 605 “Revenue Recognition” (“ASC 605”) as the software has been considered essential to the functionality of the product per the guidance of ASU 2009-14. Typically, the responsibility for the installation process lies with the OEM partner. When iCAD is responsible for product installation, the installation element is considered a separate unit of accounting because the delivered product has stand-alone value to the customer. In these instances, the Company allocates the deliverables based on the framework established within ASU 2009-13. Therefore, the installation and training revenue is recognized as the services are performed according to the VSOE of the element. Revenue from the Digital, MRI and film based equipment when there is installation is recognized based on the relative selling price allocation of the BESP.

Sales of the Company’s eBx product typically include a controller, accessories, and service and source agreements. The Company allocates revenue to the deliverables in the arrangement based on the BESP in accordance with ASU 2009-13. Product revenue is generally recognized when the product has been delivered and service and source revenue is typically recognized over the life of the service and source agreement.

The Company defers revenue from the sale of service contracts related to future periods and recognizes revenue on a straight-line basis in accordance with ASC Topic 605-20, “Services”. The Company provides for estimated warranty costs on original product warranties at the time of sale.

Cost of Revenue

Cost of Revenue

Cost of revenue consists of the costs of products purchased for resale, cost relating to service including costs of service contracts to maintain equipment after the warranty period, product installation, training, customer support, certain warranty repair costs, inbound freight and duty, manufacturing, warehousing, material movement, inspection, scrap, rework, depreciation and in-house product warranty repairs. For the three and nine months ended September 30, 2013, included in cost of revenue is, approximately $119,000 and $389,000, respectively of expense related to the newly enacted Medical Device Excise tax.

Debt

The Facility Agreement has been accounted for as debt pursuant to ASC 470, Debt (“ASC 470”). The Facility Agreement had an original issue discount of approximately $4.1 million and an additional value allocated to the warrants of approximately $1.0 million. The discount is being accreted to the $15.0 million face value of the Note using the effective interest method with an effective interest rate of 17.35% based on the discount of approximately $5.1 million.

Sales of Future Revenues or Various Other Measures of Income

The original issue discount of approximately $4.1 million was assigned to the Revenue Purchase Agreement. Under this agreement, the Company is obligated to pay (1) 4.25% of annual revenues up to $25 million, (2) 2.75% of annual revenues from $25 million to $50 million during 2013 and 2014, and 2.25% of annual revenues in that range during 2015, 2016 and if the Facility Agreement is extended, in 2017, and (3) 1.0% of annual revenues in excess of $50 million. The $4.1 million discount assigned to the Revenue Purchase Agreement was capitalized as debt in accordance with ASC 470-10-25, “Sales of Future Revenues or Various Other Measures of Income”. The Company has estimated the cash flows associated with the Revenue Purchase Agreement and is amortizing the discount to interest expense over the expected term of the arrangement at an effective amortization rate of approximately 23.6%.

Distinguishing Liabilities from Equity

The Warrants have been classified as debt in accordance with ASC 480, “Distinguishing Liabilities from Equity”, as the Warrants contain a feature whereby the Company could be required to redeem the Warrants for cash upon the occurrence of a major transaction, as defined in the Warrants. The value of the Warrants was determined using a binomial lattice model. The Warrant is being valued at fair value at each reporting period with changes in fair value recorded in the consolidated statement of operations (see Note 7).

Compensation - Stock Compensation

The Company follows the guidance in ASC Topic 718, “Compensation - Stock Compensation”, (“ASC 718”).

Fair Value Measurement and Disclosures

The Company follows the provisions of ASC Topic 820, “Fair Value Measurement and Disclosures”, (“ASC 820”). This topic defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value.

Income Taxes

At September 30, 2013, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740, “Income Taxes”. The Company does not expect that the unrecognized tax benefits will materially increase within the next twelve months. The Company did not recognize any interest or penalties related to uncertain tax positions at September 30, 2013. The Company files United States federal income tax returns and income tax returns in various states and local jurisdictions. The Company’s three preceding tax years remain subject to examination by federal and state taxing authorities. In addition, because the Company has net operating loss carry-forwards, the Internal Revenue Service and state jurisdictions are permitted to audit earlier years and propose adjustments up to the amount of net operating loss generated in those years. The Company is not under examination by any other federal or state jurisdiction for any tax years.

Intangibles - Goodwill and Other

In accordance with FASB ASC Topic 350-20, “Intangibles - Goodwill and Other”, (“ASC 350-20”), the Company tests goodwill for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of the Company is less than the carrying value of the Company.

Segments

In accordance with FASB Topic ASC 280, “Segments”, operating segments, are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs are required to be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Company’s consolidated financial statements.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue:
Products	$ 4,765	$ 5,661	$ 14,329	$ 13,248
Service and supplies	3,525	2,522	9,603	7,209
Total revenue	8,290	8,183	23,932	20,457
Cost of revenue:
Products	1,383	1,527	4,184	3,603
Service and supplies	747	541	2,251	1,678
Amortization of acquired intangibles	234	233	701	698
Total cost of revenue	2,364	2,301	7,136	5,979
Gross profit	5,926	5,882	16,796	14,478
Operating expenses:
Engineering and product development	2,112	1,971	5,734	6,158
Marketing and sales	2,617	2,842	7,392	7,976
General and administrative	1,551	1,773	4,825	4,971
Total operating expenses	6,280	6,586	17,951	19,105
Loss from operations	(354)	(704)	(1,155)	(4,627)
Gain from change in fair value of warrant	624	126	484	512
Interest expense	(807)	(883)	(2,467)	(2,549)
Other income	4	9	16	27
Other expense, net	(179)	(748)	(1,967)	(2,010)
Loss before income tax expense	(533)	(1,452)	(3,122)	(6,637)
Income tax expense	(56)	(13)	(76)	(35)
Net loss and comprehensive loss	$ (589)	$ (1,465)	$ (3,198)	$ (6,672)
Net loss per share:
Basic and diluted	$ (0.05)	$ (0.14)	$ (0.30)	$ (0.62)
Weighted average number of shares used in computing loss per share:
Basic and diluted	10,849	10,805	10,835	10,792

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 5 - Stock-Based Compensation

The Company follows the guidance in ASC Topic 718, “Compensation - Stock Compensation”, (“ASC 718”).

Options granted under the Company’s stock incentive plans were valued utilizing the Black-Scholes model using the following assumptions and had the following fair values:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Average risk-free interest rate	0.64%	0.66%	0.53%	1.06%
Expected dividend yield	None	None	None	None
Expected life	3.5 years	3.5 years	3.5 years	3.5 years
Expected volatility	57.6% to 57.7%	66.5% to 67.1%	57.6% to 68.9%	66.5% to 68.8%
Weighted average exercise price	$6.08	$2.25	$5.25	$2.46
Weighted average fair value	$2.53	$1.07	$2.28	$1.18

As of September 30, 2013 unrecognized compensation cost related to unexercisable options and unvested restricted stock and the weighted average remaining period is as follows:

Remaining expense	$	1,581,046
Weighted average term		1.0 years

The Company’s aggregate intrinsic value for stock options and restricted stock outstanding is as follows:

	Period Ended
	September 30,
Aggregate intrinsic value	2013		2012
Stock options	$	2,194,000	$	8,300
Restricted stock		1,143,000		146,000

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Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Basis Of Presentation And Significant Accounting Policies [Abstract]
Cost of revenue related to Medical Device Excise tax	$ 119,000	$ 389,000

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Net Loss per Common Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Calculation of Net Loss Per Share

A summary of the Company’s calculation of net loss per share is as follows (in thousands except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net loss	$	(589	)	$	(1,465	)	$	(3,198	)	$	(6,672	)
Basic shares used in the calculation of net loss per share		10,849			10,805			10,835			10,792
Effect of dilutive securities:
Stock options		—			—			—			—
Restricted stock		—			—			—			—
Diluted shares used in the calculation of net loss per share		10,849			10,805			10,835			10,792
Net loss per share - basic	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)
Net loss per share - diluted	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)

Exercise of Stock Options and Warrants and Vesting of Restricted

The shares of the Company’s common stock, issuable upon the exercise of stock options and warrants and vesting of restricted stock that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive is as follows:

	Period Ended
	September 30,
	2013		2012
Stock Options		1,389,897		1,351,117
Warrants		550,000		550,000
Restricted Stock		216,917		67,741
Stock options, warrants and restricted stock		2,156,814		1,968,858

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Fair Value Measurements - Additional Information (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013	Sep. 30, 2013 Level 3 [Member]	Dec. 31, 2012 Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value of contingent consideration			$ 0	$ 0
Warrant or right exercisable	450,000	450,000
Period of LIBOR rate		6 years
Asset impairment charges	$ 0

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Long Term Debt (Additional Information) (Detail) (USD $)	9 Months Ended		1 Months Ended			9 Months Ended					9 Months Ended
	Sep. 30, 2013	Jan. 06, 2012	Dec. 31, 2011 Warrant [Member]	Sep. 30, 2013 Warrant [Member]	Dec. 29, 2011 Warrant [Member]	Sep. 30, 2013 2012 [Member]	Sep. 30, 2013 2013 [Member]	Sep. 30, 2013 2014 [Member]	Sep. 30, 2013 2017 [Member]	Dec. 29, 2011 Warrant B [Member]	Sep. 30, 2013 Facility Agreement [Member]	Dec. 29, 2011 Facility Agreement [Member]	Sep. 30, 2013 Revenue Purchase Agreement [Member]	Jan. 06, 2012 Promissory Notes [Member]	Sep. 30, 2013 Promissory Notes [Member] Facility Agreement [Member]
Financing Arrangements [Line Items]
Amount provided in funding to company												$ 15,000,000
Promissory notes issued in aggregate principal amount											11,597,000		3,702,000	15,000,000
Term period of warrants			6 years
Number of common stock shares issued				100,000	450,000
Exercise price of warrants	3.50				3.50					3.50
Net proceeds received from transactions		14,325,000
Gross proceeds		15,000,000
Facility fee		225,000
Finder fee		450,000
Original issue of discount											3,403,000		4,100,000		4,100,000
Additional value allocated to warrants											1,000,000
Original issue discount being accreted											15,000,000
Effective amortization rate of financing arrangements is currently estimated to be approximately	19.00%												23.60%		17.35%
Amount of discount											$ 5,100,000
Percentage of revenue under condition one due in year one two and three						4.25%
Percentage of revenue under condition two due in year one, two and three							2.75%
Percentage of revenue under condition two due in year four, five and six								2.25%
Percentage of revenue under condition three due in year four, five and six									1.00%
Revenue payment due to extended maturity period	2017
Amount of revenue under condition one	25 and Less
Amount of revenue under condition two	25 to 50
Amount of revenue under condition three	50 and Above
Interest on facility agreement											5.75%

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Net Loss per Common Share - Exercise of Stock Options and Warrants and Vesting of Restricted (Detail)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options, warrants and restricted stock	2,156,814	1,968,858
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options, warrants and restricted stock	1,389,897	1,351,117
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options, warrants and restricted stock	550,000	550,000
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options, warrants and restricted stock	216,917	67,741

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Stock-Based Compensation - Unrecognized Compensation Cost Related to Unexercisable Options and Unvested Restricted Stock and the Weighted Average Remaining Period (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013
Employee Service Share Based Compensation Nonvested Awards Total Compensation Cost Not Yet Recognized [Abstract]
Remaining expense	$ 1,581,046
Weighted average term	1 year

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Fair Value Measurements - Reconciliation of the Changes in the Fair Value of Warrants (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Fair Value Of Warrant Liability Additional Textual [Abstract]
Balance as of December 31, 2012			$ 1,538
Fair value adjustment	(624)	(126)	(484)	(512)
Balance as of September 30, 2013	$ 1,054		$ 1,054

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Lease Commitments - Future Minimum Lease Payments Under Non-cancelable Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013
Leases [Abstract]
2013	$ 131
2014	476
2015	473
2016	490
2017	255
Total	$ 1,825

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Segment Information - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2013 Segment
Segment Reporting [Abstract]
Number of reporting segments	2

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Net Loss per Common Share - Calculation of Net Loss per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net loss	$ (589)	$ (1,465)	$ (3,198)	$ (6,672)
Basic shares used in the calculation of net loss per share	10,849	10,805	10,835	10,792
Effect of dilutive securities:
Diluted shares used in the calculation of net loss per share	10,849	10,805	10,835	10,792
Net loss per share - basic	$ (0.05)	$ (0.14)	$ (0.30)	$ (0.62)
Net loss per share - diluted	$ (0.05)	$ (0.14)	$ (0.30)	$ (0.62)
Stock Options [Member]
Effect of dilutive securities:
Incremental common shares attributable to share-based payment arrangements
Restricted Stock [Member]
Effect of dilutive securities:
Incremental common shares attributable to share-based payment arrangements

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Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Note 1 - Basis of Presentation and Significant Accounting Policies

The accompanying condensed consolidated financial statements of iCAD, Inc. and subsidiary (“iCAD” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position at September 30, 2013, the results of operations for the three and nine month period ended September 30, 2013 and 2012, respectively, and cash flows for the three and nine month period ended September 30, 2013 and 2012, respectively. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in the footnotes prepared in accordance with US GAAP has been omitted as permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on February 27, 2013. The results for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2013, or any future period.

Revenue Recognition

The Company recognizes revenue primarily from the sale of products and from the sale of services and supplies. Revenue is recognized when delivery has occurred, persuasive evidence of an arrangement exists, fees are fixed or determinable and collectability of the related receivable is probable. For product revenue, delivery has occurred upon shipment provided title and risk of loss has passed to the customer. Services and supplies revenue are considered to be delivered as the services are performed or over the estimated life of the supply agreement.

The Company recognizes revenue from the sale of its digital, film-based CAD and electronic brachytherapy (“eBx”) products and services in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Update No. 2009-13, “Multiple-Deliverable Revenue Arrangements” (“Accounting Standards Update “ASU” 2009-13) and ASC Update No. 2009-14, “Certain Arrangements That Contain Software Elements” (Update No. 2009-14). (“ASU 2009-14”). Revenue for the sale of certain CAD products is recognized in accordance with ASC 840 (“Leases”) (“ASC 840”). For multiple element arrangements, revenue is allocated to all deliverables based on their relative selling prices. In such circumstances, a hierarchy is used to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”), and (iii) best estimate of the selling price (“BESP”). VSOE generally exists only when the deliverable is sold separately and is the price actually charged for that deliverable. The process for determining BESP for deliverables without VSOE or TPE considers multiple factors including relative selling prices; competitive prices in the marketplace, and management judgment, however, these may vary depending upon the unique facts and circumstances related to each deliverable.

The Company primarily uses customer purchase orders that are subject to the Company’s terms and conditions or, in the case of an Original Equipment Manufacturer (“OEM”) are governed by distribution agreements. In accordance with our distribution agreements, the OEM does not have a right of return, and title and risk of loss passes to the OEM upon shipment. The Company generally ships Free On Board shipping point and uses shipping documents and third-party proof of delivery to verify delivery and transfer of title. In addition, the Company assesses whether collection is probable by considering a number of factors, including past transaction history with the customer and the creditworthiness of the customer, as obtained from third party credit references.

If the terms of the sale include customer acceptance provisions and compliance with those provisions cannot be demonstrated, all revenue is deferred and not recognized until such acceptance occurs. The Company considers all relevant facts and circumstances in determining when to recognize revenue, including contractual obligations to the customer, the customer’s post-delivery acceptance provisions, if any, and the installation process.

The Company has determined that iCAD’s Digital, MRI and film based sales generally follow the guidance of FASB ASC Topic 605 “Revenue Recognition” (“ASC 605”) as the software has been considered essential to the functionality of the product per the guidance of ASU 2009-14. Typically, the responsibility for the installation process lies with the OEM partner. When iCAD is responsible for product installation, the installation element is considered a separate unit of accounting because the delivered product has stand-alone value to the customer. In these instances, the Company allocates the deliverables based on the framework established within ASU 2009-13. Therefore, the installation and training revenue is recognized as the services are performed according to the VSOE of the element. Revenue from the Digital, MRI and film based equipment when there is installation is recognized based on the relative selling price allocation of the BESP.

Sales of the Company’s eBx product typically include a controller, accessories, and service and source agreements. The Company allocates revenue to the deliverables in the arrangement based on the BESP in accordance with ASU 2009-13. Product revenue is generally recognized when the product has been delivered and service and source revenue is typically recognized over the life of the service and source agreement.

The Company defers revenue from the sale of service contracts related to future periods and recognizes revenue on a straight-line basis in accordance with ASC Topic 605-20, “Services”. The Company provides for estimated warranty costs on original product warranties at the time of sale.

Cost of Revenue

Cost of revenue consists of the costs of products purchased for resale, cost relating to service including costs of service contracts to maintain equipment after the warranty period, product installation, training, customer support, certain warranty repair costs, inbound freight and duty, manufacturing, warehousing, material movement, inspection, scrap, rework, depreciation and in-house product warranty repairs. For the three and nine months ended September 30, 2013, included in cost of revenue is, approximately $119,000 and $389,000, respectively of expense related to the newly enacted Medical Device Excise tax.

Segments

The Company now reports the results of two segments, Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). The Detection segment consists of our advanced image analysis and workflow products, and the Therapy segment consists of our radiation therapy (“Axxent”) products.

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Long Term Debt

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Long Term Debt

Note 3 - Long Term Debt

On December 29, 2011, the Company entered into several agreements with entities affiliated with Deerfield Management, a healthcare investment fund (“Deerfield”), pursuant to which Deerfield agreed to provide $15 million in funding to the Company. Pursuant to the terms of a Facility Agreement, dated as of December 29, 2011 (the “Facility Agreement”), on January 6, 2012 (the “Funding Date”), the Company issued to Deerfield promissory notes in the aggregate principal amount of $15 million (the “Note”). Under a Revenue Purchase Agreement, dated as of December 29, 2011 (the “Revenue Purchase Agreement”), the Company agreed to pay Deerfield a portion of the Company’s revenues until the maturity date of the Note, whether or not the Note is outstanding through that date. On the Funding Date, the Company issued to Deerfield (i) six-year warrants to purchase up to 450,000 shares of common stock at an exercise price of $3.50 per share (the “Warrants”) and (ii) a second Warrant (the “B Warrant”) to purchase an additional 100,000 shares of common stock at an exercise price of $3.50 per share, which may become exercisable if certain conditions are met, as described in the Warrants. Collectively, these transactions are referred to as the “Transactions.” On the Funding Date, the Company received net proceeds of $14,325,000 from the Transactions, representing $15,000,000 of gross proceeds, less a $225,000 facility fee and a $450,000 finder’s fee before deducting other expenses of the Transactions.

The Facility Agreement has been accounted for as debt pursuant to ASC 470, Debt (“ASC 470”). The Facility Agreement had an original issue discount of approximately $4.1 million and an additional value allocated to the warrants of approximately $1.0 million. The discount is being accreted to the $15.0 million face value of the Note using the effective interest method with an effective interest rate of 17.35% based on the discount of approximately $5.1 million.

The original issue discount of approximately $4.1 million was assigned to the Revenue Purchase Agreement. Under this agreement, the Company is obligated to pay (1) 4.25% of annual revenues up to $25 million, (2) 2.75% of annual revenues from $25 million to $50 million during 2013 and 2014, and 2.25% of annual revenues in that range during 2015, 2016 and if the Facility Agreement is extended, in 2017, and (3) 1.0% of annual revenues in excess of $50 million. The $4.1 million discount assigned to the Revenue Purchase Agreement was capitalized as debt in accordance with ASC 470-10-25, “Sales of Future Revenues or Various Other Measures of Income”. The Company has estimated the cash flows associated with the Revenue Purchase Agreement and is amortizing the discount to interest expense over the expected term of the arrangement at an effective amortization rate of approximately 23.6%.

The overall effective interest rate of the financing arrangement, excluding changes in the fair value of the warrants, is currently estimated to be approximately 19%.

The Warrants have been classified as debt in accordance with ASC 480, “Distinguishing Liabilities from Equity”, as the Warrants contain a feature whereby the Company could be required to redeem the Warrants for cash upon the occurrence of a major transaction, as defined in the Warrants. The value of the Warrants was determined using a binomial lattice model. The Warrant is being valued at fair value at each reporting period with changes in fair value recorded in the consolidated statement of operations (see Note 7).

The Company determined that the B Warrant did not have any value as of the Funding Date, as the B Warrant is exercisable upon the Company’s election to extend the Facility Agreement. The Company does not plan to extend the Facility Agreement at this time. If the Company determines it will extend the Facility Agreement, the value of the “B Warrant” will be determined using the binomial lattice model at such time.

The following amounts are included in the consolidated balance sheet as of September 30, 2013 related to the Facility Agreement and Revenue Purchase Agreement:

Principal Amount of Facility Agreement	$	15,000
Unamortized discount		(3,403	)
Carrying amount of Facility Agreement		11,597
Revenue Purchase Agreement		3,702
Notes payable total	$	15,299

The following amounts comprise interest included in our consolidated statement of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30
	2013		2012
Cash interest expense	$	568	$	564
Non-cash amortization of debt discount		130		180
Amortization of debt costs		46		42
Amortization of settlement obligations		62		97
Interest expense capital lease		1		—
Total interest expense	$	807	$	883

	Nine months ended September 30
	2013		2012
Cash interest expense	$	1,664	$	1,516
Non-cash amortization of debt discount		453		596
Amortization of debt costs		135		124
Amortization of settlement obligations		214		313
Interest expense capital lease		1		—
Total interest expense	$	2,467	$	2,549

Cash interest expense represents the amount of interest expected to be paid in cash under the Facility Agreement and the Revenue Purchase Agreement, which represents the interest of 5.75% on the Facility Agreement and the expected cash payments on the Revenue Purchase Agreement for the period. Non-cash amortization is the amortization of the discount on the Facility Agreement. The amortization of debt costs represents the costs incurred with the financing, which is primarily the facility fee and the finder’s fee which has been capitalized and, is expensed using the effective interest method. The amortization of the settlement obligations represent the interest associated with the settlement agreements for both Carl Zeiss Meditec AG and Hologic, Inc. Interest expense capital lease represents interest related to the capital lease as noted in Note 4.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6 - Commitments and Contingencies

Foreign Tax Claim

In July 2007, a dissolved former Canadian subsidiary of the Company, CADx Medical Systems Inc. (“CADx Medical”), received a tax re-assessment of approximately $6,800,000 from the Canada Revenue Agency (“CRA”) resulting from CRA’s audit of CADx Medical’s Canadian federal tax return for the year ended December 31, 2002. In February 2010 the CRA reviewed the matter and reduced the tax re-assessment to approximately $703,000, excluding interest and penalties. The Company believes that it is not liable for the re-assessment against CADx Medical and no accrual has been recorded for this matter as of September 30, 2013.

Settlement Obligations

In connection with the acquisition of Xoft, the Company recorded a royalty obligation pursuant to a settlement agreement entered into between Xoft and Hologic in August 2007. Xoft received a nonexclusive, irrevocable, perpetual, worldwide license, including the right to sublicense certain Hologic patents, and a non-compete covenant as well as an agreement not to seek further damages with respect to the alleged patent violations. In return, the Company has a remaining obligation to pay a minimum annual royalty payment to Hologic, of $250,000 payable through 2016. In addition to the minimum annual royalty payments, the litigation settlement agreement with Hologic also provided for payment of royalties based upon a specified percentage of future net sales on any products that practice the licensed rights. The estimated fair value of the patent license and non-compete covenant is $100,000 and is being amortized over the estimated remaining useful life of approximately six years. In addition, a liability has been recorded within accrued expenses and long-term settlement cost for future payment and for future minimum royalty obligations totaling $770,000. The Company recorded interest expense of approximately $33,000 and $94,000 in the three and nine months ended September 30, 2013, and $38,000 and $110,000 in the three and nine months ended September 30, 2012, respectively, related to this obligation.

On December 22, 2011, the Company agreed to a settlement related to the litigation with Carl Zeiss Meditec AG. The Company determined that this settlement should be recorded as a measurement period adjustment and accordingly recorded the present value of the litigation to the opening balance sheet of Xoft. The present value of the liability was estimated at approximately $1.8 million as of December 31, 2011. The Company is obligated to pay $0.5 million in June 2015 and $0.5 million in June 2017, for a total of $1.0 million. As of September 30, 2013, the remaining liability recorded within accrued expenses and long-term settlement cost for future payment and for future minimum royalty obligations is $0.7 million. The Company recorded interest expense of approximately $28,000 and $119,000 in the three and nine months ended September 30, 2013, and $59,000 and $203,000 in the three and nine months ended September 30, 2012, respectively related to this obligation.

Other Commitments

The Company is obligated to pay approximately $1.9 million for firm purchase obligations to suppliers for future product deliverables.

Litigation

On February 18, 2011, in the Orange County Superior Court (Docket No. 30-2011-00451816-CU-PL-CXC), named plaintiffs Jane Doe and John Doe filed a complaint against Xoft, the Company, and Hoag Memorial Hospital Presbyterian asserting causes of action for general negligence, breach of warranty, and strict liability and seeking unlimited damages in excess of $25,000. On March 2, 2011, the Company received a Statement of Damages - specifying that the damages being sought aggregated an amount of at least approximately $14.5 million. On April 6, 2011, plaintiffs Jane Doe and John Doe amended their complaint alleging only medical malpractice against Hoag Memorial Hospital Presbyterian. On April 8, 2011, another complaint was filed in the Orange County Superior Court (Docket No. 30-2011-00465448-CU-MM-CXC) on behalf of four additional Jane Doe plaintiffs and two John Doe spouses with identical allegations against the same defendants. One John Doe spouse from this group of plaintiffs was later dismissed on August 18, 2011. On April 19, 2011, a sixth Jane Doe plaintiff filed an identical complaint in the Orange County Superior Court (Docket No. 30-2011-00468687-CU-MM-CXC), and on May 4, 2011, a seventh Jane Doe plaintiff and John Doe spouse filed another complaint in the Orange County Superior Court (Docket No. 30-2011-00473120-CU-PO-CXC), again with identical allegations against the same defendants. On July 12, 2011, an eighth Jane Doe plaintiff and John Doe spouse filed a complaint in the Orange County Superior Court (Docket No. 30-2011-00491068-CU-PL-CXC), and on July 14, 2011, a ninth Jane Doe plaintiff and John Doe spouse filed another complaint in the Orange County Superior Court (Docket No. 30-2011-00491497-CU-PL-CXC), each with identical allegations as the previously filed complaints. On August 18, 2011, these two groups of Jane Doe plaintiffs and John Doe spouses amended their complaints to correct certain deficiencies. Additionally on August 18, 2011, a tenth Jane Doe plaintiff and two additional John Doe spouses filed a complaint in the Orange County Superior Court (Docket No. 30-2011-501448-CU-PL-CXC), again with identical allegations against the same defendants. On January 18, 2012, three additional Jane Doe plaintiffs and one additional John Doe spouse filed a complaint in the Orange County Superior Court (Docket No. 30-2012-00538423-CU-PL-CXC) with identical allegations against the same defendants. On April 11, 2012, the above-referenced cases were consolidated for all purposes, excluding trial. On May 2, 2012, plaintiffs filed a master consolidated complaint, with the same case number as the original filed complaint. On August 2, 2012, plaintiffs filed fictitious name amendments adding defendants, Mel Silverstein, M.D., Peter Chen, M.D., Lisa Guerrera, M.D., Ralph Mackintosh, Ph.D., Robert Dillman, M.D., and Jack Cox. On September 14, 2012, an additional Jane Doe plaintiff and John Doe spouse filed a complaint in the Orange County Superior Court (Docket No. 30-2012-00598740-CU-PL-CXC) with identical allegations as plaintiffs above against the same original defendants. On October 17, 2012, plaintiff John Doe No. 11 dismissed his complaint, with prejudice, as to all defendants. On November 26, 2012, plaintiffs filed an additional fictitious name amendment adding defendant, American Ceramic Technology, Inc. On January 15, 2013, plaintiffs filed a dismissal, with prejudice, as to defendant, Mel Silverstein, M.D., only. On May 28, 2013, plaintiffs filed an additional fictitious name amendment adding defendant, American Ceramic Technology. On July 11, 2013, American Ceramic Technology filed a cross-complaint for express and implied indemnity, apportionment, contribution and declaratory relief against all defendants. On October 24, 2013, plaintiff’s filed an amended master consolidated complaint. It is alleged that each Jane Doe plaintiff was a patient who was treated with the Axxent Electronic Brachytherapy System that incorporated the Axxent Flexishield Mini. The Company believes that all of the Jane Doe plaintiffs were part of the group of 29 patients treated using the Axxent Flexishield Mini as part of a clinical trial. The Axxent Flexishield Mini was the subject of a voluntary recall. These claims are still in the early stages. Based upon our preliminary analysis, the Company plans to vigorously defend the lawsuits however a loss is reasonably possible. Since the amount of the potential damages in the event of an adverse result is not reasonably estimable, we are unable to estimate a range of loss and no expense has been recorded with respect to the contingent liability associated with this matter.

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Lease Commitments

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Lease Commitments

Note 4 - Lease Commitments

Operating leases

Facilities are leased under operating leases expiring at various dates through September, 2020. Certain of these leases contain renewal options. For the nine month period ended September 30, 2013 and 2012, rent expense under operating leases was $522,000 and $610,000, respectively.

As of September 30, 2013, future minimum lease payments under non-cancelable operating leases were as follows:

Fiscal Year	Operating Leases
2013	$	131
2014		476
2015		473
2016		490
2017		255
	$	1,825

Capital leases

The Company entered into a capital lease agreement for the purchase of certain equipment in August 2013 for approximately $409,000. Under the guidance of ASC Topic 840, “Leases” the Company determined that the lease was a capital lease as it contained a bargain purchase option wherein the Company has the option to buy the equipment for $1 at the end of the lease term. Accordingly, the equipment has been capitalized and a liability has been recorded. The equipment cost of $409,000 is reflected as property and equipment in the balance sheet and will be depreciated over its useful life.

Future minimum lease payments under this lease are as follows:

Fiscal Year	Capital Leases
2013	$	42
2014		145
2015		145
2016		109
subtotal minimum lease obligation		441
less interest		(32	)
Total, net		409
less current portion		(130	)
long term portion	$	279

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Income Taxes - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013
Income Tax Disclosure [Abstract]
Material unrecognized tax benefits	$ 0
Adjustment to liabilities or operations	0
Interest or penalties related to uncertain tax positions	$ 0
Company preceding tax years	3 years

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Long Term Debt - Amount Related to Facility and Revenue Purchase Agreements (Detail) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Credit Facilities [Line Items]
Notes payable total	$ 15,299,000	$ 14,846,000
Facility Agreement [Member]
Credit Facilities [Line Items]
Principal Amount of Facility Agreement	15,000,000
Unamortized discount	(3,403,000)
Carrying amount of Facility Agreement	11,597,000
Revenue Purchase Agreement [Member]
Credit Facilities [Line Items]
Unamortized discount	(4,100,000)
Carrying amount of Facility Agreement	$ 3,702,000

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Lease Commitments - Future Minimum Lease Payments Under Non-cancelable Capital Leases (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Leases [Abstract]
2013	$ 42
2014	145
2015	145
2016	109
subtotal minimum lease obligation	441
less interest	(32)
Total, net	409
less current portion	(130)
long term portion	$ 279

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Fair Value Measurements - Assets and Liabilities which are Measured at Fair Value on a Recurring Basis (Detail) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Assets
Total Assets	$ 8,824	$ 12,336
Liabilities
Total Liabilities	1,054	1,538
Money Market Accounts [Member]
Assets
Total Assets	8,824	12,336
Contingent Consideration [Member]
Liabilities
Total Liabilities
Warrant [Member]
Liabilities
Total Liabilities	1,054	1,538
Level 1 [Member]
Assets
Total Assets	8,824	12,336
Liabilities
Total Liabilities
Level 1 [Member] | Money Market Accounts [Member]
Assets
Total Assets	8,824	12,336
Level 1 [Member] | Contingent Consideration [Member]
Liabilities
Total Liabilities
Level 1 [Member] | Warrant [Member]
Liabilities
Total Liabilities
Level 2 [Member]
Assets
Total Assets
Liabilities
Total Liabilities
Level 2 [Member] | Money Market Accounts [Member]
Assets
Total Assets
Level 2 [Member] | Contingent Consideration [Member]
Liabilities
Total Liabilities
Level 2 [Member] | Warrant [Member]
Liabilities
Total Liabilities
Level 3 [Member]
Assets
Total Assets
Liabilities
Total Liabilities	1,054	1,538
Level 3 [Member] | Money Market Accounts [Member]
Assets
Total Assets
Level 3 [Member] | Contingent Consideration [Member]
Liabilities
Total Liabilities
Level 3 [Member] | Warrant [Member]
Liabilities
Total Liabilities	$ 1,054	$ 1,538

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts on trade accounts receivables	$ 73	$ 48
Property and equipment, net of accumulated depreciation and amortization	4,106	3,627
Intangible assets, accumulated amortization	$ 12,034	$ 10,744
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued
Common stock, par value	$ 0.01	$ 0.01
Common stock, share authorized	85,000,000	85,000,000
Common stock, share issued	11,036,075	10,993,933
Common stock, share outstanding	10,850,244	10,808,102
Treasury stock, shares	185,831	185,831

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Goodwill

9 Months Ended

Sep. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill

Note 9 - Goodwill

In accordance with FASB ASC Topic 350-20, “Intangibles - Goodwill and Other”, (“ASC 350-20”), the Company tests goodwill for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of the Company is less than the carrying value of the Company.

The Company’s goodwill arose in connection with its acquisitions in June 2002, December 2003 and December 2010.

The Company assesses the potential impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors management considers important, which could trigger an impairment of such asset, include the following:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner or use of the assets or the strategy for our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• a sustained decline in our market capitalization below net book value.

During the second quarter of 2013, the Company determined that it operated in two segments and, accordingly, determined that there are two reporting units. The Company is in the process of allocating the goodwill by reporting unit and will complete the analysis in conjunction with the annual impairment assessment. We do not expect the allocation of goodwill by reporting unit to have a material impact on the financial statements. In addition, the Company concluded there were no triggering events as of September 30, 2013.

The carrying amount of goodwill (in thousands) for the quarter ended September 30, 2013 was approximately $21,109.

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flow from operating activities:
Net loss	$ (3,198)	$ (6,672)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation	528	701
Amortization	1,291	1,472
Bad debt provision	35
Gain from change in fair value of warrant	(484)	(512)
Loss on disposal of assets	49	143
Stock-based compensation expense	908	731
Amortization of debt discount and debt costs	588	761
Interest on settlement obligations	214	313
Changes in operating assets and liabilities:
Accounts receivable	(3,474)	(1,712)
Inventory	116	178
Prepaid and other current assets	(145)	215
Accounts payable	78	1,106
Accrued expenses	(799)	(2,172)
Deferred revenue	1,110	818
Total adjustments	15	2,042
Net cash used for operating activities	(3,183)	(4,630)
Cash flow from investing activities:
Additions to patents, technology and other	(24)	(3)
Additions to property and equipment	(510)	(465)
Net cash used for investing activities	(534)	(468)
Cash flow from financing activities:
Issuance of common stock for cash	3
Taxes paid related to restricted stock issuance	(25)	(13)
Proceeds from debt financing, net		14,325
Net cash (used for) provided by financing activities	(22)	14,312
Increase (decrease) in cash and equivalents	(3,739)	9,214
Cash and equivalents, beginning of period	13,948	4,576
Cash and equivalents, end of period	10,209	13,790
Supplemental disclosure of cash flow information:
Interest paid	1,664	1,516
Taxes paid	117	43
Equipment purchased under capital lease	$ 409

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 10,209	$ 13,948
Trade accounts receivable, net of allowance for doubtful accounts of $73 in 2013 and $48 in 2012	8,419	4,980
Inventory, net	2,003	2,119
Prepaid expenses and other current assets	658	486
Total current assets	21,289	21,533
Property and equipment, net of accumulated depreciation and amortization of $4,106 in 2013 and $3,627 in 2012	1,825	1,483
Other assets	475	638
Intangible assets, net of accumulated amortization of $12,034 in 2013 and $10,744 in 2012	13,963	15,230
Goodwill	21,109	21,109
Total assets	58,661	59,993
Current liabilities:
Accounts payable	2,018	1,940
Accrued and other expenses	3,515	4,142
Interest payable	569	499
Capital lease - current portion	130
Warrant liability	1,054	1,538
Deferred revenue	7,498	6,520
Total current liabilities	14,784	14,639
Deferred revenue, long-term portion	1,633	1,502
Other long-term liabilities	1,313	1,341
Capital lease - long-term portion	279
Notes payable	15,299	14,846
Total liabilities	33,308	32,328
Commitments and Contingencies (see Note 6)
Stockholders' equity:
Preferred stock, $ .01 par value: authorized 1,000,000 shares; none issued.
Common stock, $ .01 par value: authorized 85,000,000 shares; issued 11,036,075 in 2013 and 10,993,933 in 2012; outstanding 10,850,244 in 2013 and 10,808,102 in 2012	110	110
Additional paid-in capital	166,302	165,416
Accumulated deficit	(139,644)	(136,446)
Treasury stock at cost, 185,831 shares in 2013 and 2012	(1,415)	(1,415)
Total stockholders' equity	25,353	27,665
Total liabilities and stockholders' equity	$ 58,661	$ 59,993

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Long Term Debt - Interest Included in Consolidated Income Statement (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest Expense Debt [Abstract]
Cash interest expense	$ 568	$ 564	$ 1,664	$ 1,516
Non-cash amortization of debt discount	130	180	453	596
Amortization of debt costs	46	42	588	761
Amortization of debt costs			135	124
Amortization of settlement obligations	62	97	214	313
Interest expense capital lease	1		1
Total interest expense	$ 807	$ 883	$ 2,467	$ 2,549

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Summary of Segment Revenues, Segment Operating Income, Segment Adjusted EBITDA and a Reconciliation of Segment Operating Income to Operating Loss

Segment revenues, segment operating income, segment adjusted EBITDA and a reconciliation of segment operating income to loss before income tax is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Segment revenues:
Detection	$	4,310		$	3,780		$	12,755		$	12,552
Therapy		3,980			4,403			11,177			7,905
Total Revenue	$	8,290		$	8,183		$	23,932		$	20,457
Segment operating income (loss):
Detection	$	1,485		$	611		$	4,111		$	2,804
Therapy		(288	)		458			(441	)		(2,460	)
Segment operating income (loss)	$	1,197		$	1,069		$	3,670		$	344
General and administrative expenses	$	(1,551	)	$	(1,773	)	$	(4,825	)	$	(4,971	)
Interest expense		(807	)		(883	)		(2,467	)		(2,549	)
Gain on fair value of warrant		624			126			484			512
Other income		4			9			16			27
Loss before income tax	$	(533	)	$	(1,452	)	$	(3,122	)	$	(6,637	)
Segment adjusted EBITDA:
Detection segment operating income	$	1,485		$	611		$	4,111		$	2,804
Stock compensation		98			84			292			245
Depreciation		45			34			131			107
Amortization		129			130			388			390
Detection adjusted EBITDA	$	1,757		$	859		$	4,923		$	3,546
Therapy segment operating income (loss)	$	(288	)	$	458		$	(441	)	$	(2,460	)
Stock compensation		34			24			101			71
Depreciation		95			166			321			473
Amortization		234			233			702			698
Therapy adjusted EBITDA	$	75		$	881		$	683		$	(1,218	)

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Segment Reporting - Summary of Segment Revenues, Segment Operating Income, Segment Adjusted EBITDA and a Reconciliation of Segment Operating Income to Operating Loss (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Segment revenues:
Total revenue	$ 8,290	$ 8,183	$ 23,932	$ 20,457
Segment operating income (loss):
Segment operating income (loss)	1,197	1,069	3,670	344
General and administrative expenses	(1,551)	(1,773)	(4,825)	(4,971)
Interest expense	(807)	(883)	(2,467)	(2,549)
Gain on fair value of warrant	624	126	484	512
Other income	4	9	16	27
Loss before income tax expense	(533)	(1,452)	(3,122)	(6,637)
Segment adjusted EBITDA:
Segment operating income (loss)	1,197	1,069	3,670	344
Stock compensation			908	731
Depreciation			528	701
Amortization			1,291	1,472
Detection [Member]
Segment revenues:
Total revenue	4,310	3,780	12,755	12,552
Segment operating income (loss):
Segment operating income (loss)	1,485	611	4,111	2,804
Segment adjusted EBITDA:
Segment operating income (loss)	1,485	611	4,111	2,804
Stock compensation	98	84	292	245
Depreciation	45	34	131	107
Amortization	129	130	388	390
Adjusted EBITDA	1,757	859	4,923	3,546
Therapy [Member]
Segment revenues:
Total revenue	3,980	4,403	11,177	7,905
Segment operating income (loss):
Segment operating income (loss)	(288)	458	(441)	(2,460)
Segment adjusted EBITDA:
Segment operating income (loss)	(288)	458	(441)	(2,460)
Stock compensation	34	24	101	71
Depreciation	95	166	321	473
Amortization	234	233	702	698
Adjusted EBITDA	$ 75	$ 881	$ 683	$ (1,218)

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Fair Value Measurements - Fair Value Warrant Liability (Detail) (Warrant [Member], USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Warrant [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Exercise price	$ 3.50	$ 3.50
Volatility	31.40%	82.40%
Equivalent term (years)	4 years 3 months 7 days	5 years
Risk-free interest rate	1.20%	0.80%

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Stock-Based Compensation - Aggregate Intrinsic Value (Detail) (USD $)	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value stock option	$ 2,194,000	$ 8,300
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value restricted stock	$ 1,143,000	$ 146,000

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Commitments and Contingencies - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended	12 Months Ended				3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		1 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Dec. 31, 2012 Patient	Dec. 31, 2011	Mar. 02, 2011	Feb. 18, 2011 Minimum [Member]	Sep. 30, 2013 Hologic [Member]	Sep. 30, 2012 Hologic [Member]	Sep. 30, 2013 Hologic [Member]	Sep. 30, 2012 Hologic [Member]	Sep. 30, 2013 Zeiss [Member]	Sep. 30, 2012 Zeiss [Member]	Sep. 30, 2013 Zeiss [Member]	Sep. 30, 2012 Zeiss [Member]	Feb. 28, 2010 CADx Medical Systems Inc. [Member]	Jul. 31, 2007 CADx Medical Systems Inc. [Member]
Loss Contingencies [Line Items]
Tax re-assessment received																	$ 6,800,000
Reduced tax re-assessment received																703,000
Minimum annual royalty payment	250,000		250,000
Fair value of patent license	100,000		100,000
Patent license, Estimated Amortizable Life		6 years
Minimum royalty obligations	770,000		770,000
Interest expense royalty obligation								33,000	38,000	94,000	110,000	28,000	59,000	119,000	203,000
Estimated value of liability					1,800,000
June 2015	500,000		500,000
June 2017	500,000		500,000
Litigation and settlement obligation, Total	1,000,000		1,000,000
Royalty obligation non-current	700,000		700,000
Purchase obligations to suppliers for future product deliverables	1,900,000		1,900,000
Minimum unlimited damages sought by plaintiffs							25,000
Aggregate amount of sought damages						$ 14,500,000
Number of patients treated using the Axxent Flexishield Mini as part of a clinical trial				29

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Income Taxes

9 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Note 8 - Income Taxes

At September 30, 2013, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740, “Income Taxes”. The Company does not expect that the unrecognized tax benefits will materially increase within the next twelve months. The Company did not recognize any interest or penalties related to uncertain tax positions at September 30, 2013. The Company files United States federal income tax returns and income tax returns in various states and local jurisdictions. The Company’s three preceding tax years remain subject to examination by federal and state taxing authorities. In addition, because the Company has net operating loss carry-forwards, the Internal Revenue Service and state jurisdictions are permitted to audit earlier years and propose adjustments up to the amount of net operating loss generated in those years. The Company is not under examination by any other federal or state jurisdiction for any tax years.

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Lease Commitments - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Leases [Abstract]
Rent expense under operating leases	$ 522,000	$ 610,000
Capital lease	409,000
Capital lease bargain purchase option amount	$ 1

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Goodwill - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013 Segment	Dec. 31, 2012
Goodwill And Intangible Assets Disclosure [Abstract]
Carrying value of goodwill	$ 21,109	$ 21,109
Number of operating segments	2
Number of reportable segments	2

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

Note 11 - Recent Accounting Pronouncements

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires the netting of unrecognized tax benefits (“UTBs”) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. UTBs are required to be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact on the Company’s consolidated financial statements

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 7 - Fair Value Measurements

The Company follows the provisions of ASC Topic 820, “Fair Value Measurement and Disclosures”, (“ASC 820”). This topic defines fair value, establishes a framework for measuring fair value under US GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities and our notes payable. The carrying amounts of our cash and cash equivalents (which are comprised primarily of deposit and overnight sweep accounts), accounts receivable, accounts payable and certain accrued liabilities approximate fair value due to the short maturity of these instruments. The carrying value of our notes payable approximates fair value.

The Company’s assets that are measured at fair value on a recurring basis relate to the Company’s money market accounts. The Company’s liabilities that are measured at fair value on a recurring basis relate to contingent consideration resulting from the acquisition of Xoft and the Warrants issued in connection with the Deerfield Facility Agreement.

The Company’s money market funds are included in cash and cash equivalents in the accompanying balance sheet, and are considered a Level 1 investment as they are valued at quoted market prices in active markets.

The following table sets forth Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy.

Fair value measurements using: (000’s) as of December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	12,336	$	—	$	—	$	12,336
Total Assets	$	12,336	$	—	$	—	$	12,336
Liabilities
Contingent Consideration	$	—	$	—	$	—	$	—
Warrant Liability		—		—		1,538		1,538
Total Liabilities	$	—	$	—	$	1,538	$	1,538

Fair value measurements using: (000’s) as of September 30, 2013
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	8,824	$	—	$	—	$	8,824
Total Assets	$	8,824	$	—	$	—	$	8,824
Liabilities
Contingent Consideration	$	—	$	—	$	—	$	—
Warrant Liability		—		—		1,054		1,054
Total Liabilities	$	—	$	—	$	1,054	$	1,054

The fair value of contingent consideration is a Level 3 liability and was determined to be $0 at December 31, 2012 and September 30, 2013, as the Company does not expect to meet the revenue thresholds for the Xoft transaction.

As discussed in Note 3, the Company issued 450,000 warrants which were immediately exercisable and therefore were valued as of the Funding Date. The warrant liability for the warrants associated with the debt was valued using the binomial lattice-based valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions in valuing the warrant liability were as follows as of December 31, 2012 and September 30, 2013.

	September 30, 2013			December 31, 2012
Warrants
Exercise price	$	3.50		$	3.50
Volatility		31.4	%		82.4	%
Equivalent term (years)		4.27			5.00
Risk-free interest rate		1.2	%		0.8	%

The volatility was determined based on the definition in the Warrants, and the risk-free interest rate was determined using the six year LIBOR rate as of the measurement date.

In addition the other significant assumptions include the probability of voluntary exercise versus a major transaction (as defined in the Warrants); and assuming a major transaction, the probability of cashless major exercise; and assuming a cashless major exercise, the annual probabilities for a major transaction. The Company has estimated a low probability of these items as of September 30, 2013.

The following sets forth a reconciliation of the changes in the fair value of warrants payable during the period:

Nine months ended September 30, 2013
Balance as of December 31, 2012	$	1,538
Fair value adjustment		(484	)
Balance as of September 30, 2013	$	1,054

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets, including our goodwill, are measured at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be impaired. We did not consider any assets to be impaired during the three months ended September 30, 2013.

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Net Loss per Common Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Net Loss per Common Share

Note 2 - Net Loss per Common Share

The Company’s basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period and, if there are dilutive securities, diluted loss per share is computed by including common stock equivalents which includes shares issuable upon the exercise of stock options, net of shares assumed to have been purchased with the proceeds, using the treasury stock method.

A summary of the Company’s calculation of net loss per share is as follows (in thousands except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net loss	$	(589	)	$	(1,465	)	$	(3,198	)	$	(6,672	)
Basic shares used in the calculation of net loss per share		10,849			10,805			10,835			10,792
Effect of dilutive securities:
Stock options		—			—			—			—
Restricted stock		—			—			—			—
Diluted shares used in the calculation of net loss per share		10,849			10,805			10,835			10,792
Net loss per share - basic	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)
Net loss per share - diluted	$	(0.05	)	$	(0.14	)	$	(0.30	)	$	(0.62	)

The shares of the Company’s common stock, issuable upon the exercise of stock options and warrants and vesting of restricted stock that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive is as follows:

	Period Ended
	September 30,
	2013		2012
Stock Options		1,389,897		1,351,117
Warrants		550,000		550,000
Restricted Stock		216,917		67,741
Stock options, warrants and restricted stock		2,156,814		1,968,858

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Stock-Based Compensation - Options Granted under the Company's Stock Incentive Plans, Valuation Assumptions and Fair Values (Detail) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average exercise price	$ 6.08	$ 2.25	$ 5.25	$ 2.46
Weighted average fair value	$ 2.53	$ 1.07	$ 2.28	$ 1.18
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average risk-free interest rate	0.64%	0.66%	0.53%	1.06%
Expected dividend yield
Expected life	3 years 6 months 0 days	3 years 6 months 0 days	3 years 6 months 0 days	3 years 6 months 0 days
Minimum [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	57.60%	66.50%	57.60%	66.50%
Maximum [Member] | Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	57.70%	67.10%	68.90%	68.80%

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Long Term Debt (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Amount Related to Facility and Revenue Purchase Agreements

The following amounts are included in the consolidated balance sheet as of September 30, 2013 related to the Facility Agreement and Revenue Purchase Agreement:

Principal Amount of Facility Agreement	$	15,000
Unamortized discount		(3,403	)
Carrying amount of Facility Agreement		11,597
Revenue Purchase Agreement		3,702
Notes payable total	$	15,299

Interest Included in Consolidated Income Statement

The following amounts comprise interest included in our consolidated statement of operations for the three and nine months ended September 30, 2013 and 2012:

	Three months ended September 30
	2013		2012
Cash interest expense	$	568	$	564
Non-cash amortization of debt discount		130		180
Amortization of debt costs		46		42
Amortization of settlement obligations		62		97
Interest expense capital lease		1		—
Total interest expense	$	807	$	883

	Nine months ended September 30
	2013		2012
Cash interest expense	$	1,664	$	1,516
Non-cash amortization of debt discount		453		596
Amortization of debt costs		135		124
Amortization of settlement obligations		214		313
Interest expense capital lease		1		—
Total interest expense	$	2,467	$	2,549

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Segment Reporting

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

Note 10 - Segment Reporting

In accordance with FASB Topic ASC 280, “Segments”, operating segments, are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

The Company now reports the results of two segments, Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). The Detection segment consists of our advanced image analysis and workflow products, and the Therapy segment consists of our radiation therapy (“Axxent”) products. The primary factors used by our CODM to allocate resources are based on revenues, operating income, and earnings before interest, taxes, depreciation, amortization, and other specific and non-recurring items (“Adjusted EBITDA”) of each segment. Included in segment operating income are stock compensation, amortization of technology and depreciation expense.

We do not track our assets by operating segment and our CODM does not use asset information by segment to allocate resources or make operating decisions.

Segment revenues, segment operating income, segment adjusted EBITDA and a reconciliation of segment operating income to loss before income tax is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Segment revenues:
Detection	$	4,310		$	3,780		$	12,755		$	12,552
Therapy		3,980			4,403			11,177			7,905
Total Revenue	$	8,290		$	8,183		$	23,932		$	20,457
Segment operating income (loss):
Detection	$	1,485		$	611		$	4,111		$	2,804
Therapy		(288	)		458			(441	)		(2,460	)
Segment operating income (loss)	$	1,197		$	1,069		$	3,670		$	344
General and administrative expenses	$	(1,551	)	$	(1,773	)	$	(4,825	)	$	(4,971	)
Interest expense		(807	)		(883	)		(2,467	)		(2,549	)
Gain on fair value of warrant		624			126			484			512
Other income		4			9			16			27
Loss before income tax	$	(533	)	$	(1,452	)	$	(3,122	)	$	(6,637	)
Segment adjusted EBITDA:
Detection segment operating income	$	1,485		$	611		$	4,111		$	2,804
Stock compensation		98			84			292			245
Depreciation		45			34			131			107
Amortization		129			130			388			390
Detection adjusted EBITDA	$	1,757		$	859		$	4,923		$	3,546
Therapy segment operating income (loss)	$	(288	)	$	458		$	(441	)	$	(2,460	)
Stock compensation		34			24			101			71
Depreciation		95			166			321			473
Amortization		234			233			702			698
Therapy adjusted EBITDA	$	75		$	881		$	683		$	(1,218	)

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Assets and Liabilities which are Measured at Fair Value on a Recurring Basis

The following table sets forth Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy.

Fair value measurements using: (000’s) as of December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	12,336	$	—	$	—	$	12,336
Total Assets	$	12,336	$	—	$	—	$	12,336
Liabilities
Contingent Consideration	$	—	$	—	$	—	$	—
Warrant Liability		—		—		1,538		1,538
Total Liabilities	$	—	$	—	$	1,538	$	1,538

Fair value measurements using: (000’s) as of September 30, 2013
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	8,824	$	—	$	—	$	8,824
Total Assets	$	8,824	$	—	$	—	$	8,824
Liabilities
Contingent Consideration	$	—	$	—	$	—	$	—
Warrant Liability		—		—		1,054		1,054
Total Liabilities	$	—	$	—	$	1,054	$	1,054

Fair Value Warrant Liability

Significant assumptions in valuing the warrant liability were as follows as of December 31, 2012 and September 30, 2013.

	September 30, 2013			December 31, 2012
Warrants
Exercise price	$	3.50		$	3.50
Volatility		31.4	%		82.4	%
Equivalent term (years)		4.27			5.00
Risk-free interest rate		1.2	%		0.8	%

Reconciliation of the Changes in the Fair Value of Warrants

The following sets forth a reconciliation of the changes in the fair value of warrants payable during the period:

Nine months ended September 30, 2013
Balance as of December 31, 2012	$	1,538
Fair value adjustment		(484	)
Balance as of September 30, 2013	$	1,054

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Lease Commitments (Tables)

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Lease Payments Under Non-cancelable Operating Leases

As of September 30, 2013, future minimum lease payments under non-cancelable operating leases were as follows:

Fiscal Year	Operating Leases
2013	$	131
2014		476
2015		473
2016		490
2017		255
	$	1,825

Future Minimum Lease Payments Under Non-cancelable Capital Leases

Future minimum lease payments under this lease are as follows:

Fiscal Year	Capital Leases
2013	$	42
2014		145
2015		145
2016		109
subtotal minimum lease obligation		441
less interest		(32	)
Total, net		409
less current portion		(130	)
long term portion	$	279

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 06, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Entity Registrant Name	ICAD INC
Entity Central Index Key	0000749660
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		10,850,244

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Options Granted under the Company's Stock Incentive Plans, Valuation Assumptions and Fair Values

Options granted under the Company’s stock incentive plans were valued utilizing the Black-Scholes model using the following assumptions and had the following fair values:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2013	2012	2013	2012
Average risk-free interest rate	0.64%	0.66%	0.53%	1.06%
Expected dividend yield	None	None	None	None
Expected life	3.5 years	3.5 years	3.5 years	3.5 years
Expected volatility	57.6% to 57.7%	66.5% to 67.1%	57.6% to 68.9%	66.5% to 68.8%
Weighted average exercise price	$6.08	$2.25	$5.25	$2.46
Weighted average fair value	$2.53	$1.07	$2.28	$1.18

Unrecognized Compensation Cost Related to Unexercisable Options and Unvested Restricted Stock and the Weighted Average Remaining Period

As of September 30, 2013 unrecognized compensation cost related to unexercisable options and unvested restricted stock and the weighted average remaining period is as follows:

Remaining expense	$	1,581,046
Weighted average term		1.0 years

Aggregate Intrinsic Value

The Company’s aggregate intrinsic value for stock options and restricted stock outstanding is as follows:

	Period Ended
	September 30,
Aggregate intrinsic value	2013		2012
Stock options	$	2,194,000	$	8,300
Restricted stock		1,143,000		146,000