iCAD, Inc.

Thank you. Good morning, everyone.

This is Bruce Voss with LHA. Thank you all for participating in today's call.

Joining me from iCAD are Ken Ferry, Chief Executive Officer; and Kevin Burns, Executive Vice President, Finance and Chief Financial Officer.

Following the market close yesterday, iCAD announced financial results for the 2011 fourth quarter and full year. If you have not received this news release or if you would like to be added to the company's distribution list, please call LHA in New York at (212) 838-3777 and speak with Carolyn Curran.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of iCAD. I encourage you to review the company's past and future filings with the Securities and Exchange Commission, including, without limitation, the company's Forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, February 28, 2012. iCAD undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to Ken Ferry. Ken?

Thanks, Bruce. Good morning, everyone, and thank you for joining us.

I'd like to begin my remarks with some commentary on where we're taking the company in the near-term and provide some examples to support this direction. I'll then turn the call over to Kevin Burns, iCAD's CFO, who will provide more detail on the fourth quarter and full year 2011 financial results.

I will then come back on and update you on our key product programs.

As of 2011, it was a year of significant challenge, change and progress. We continue to transform iCAD from a cancer detection company to an oncology solutions provider.

Simply put, our business is now software and therapy. On the software front, we are beginning our transition from a business model that has had significant reliance on securing new customers to one with a higher mix of recurring revenue.

We believe this more balanced approach will expand our market opportunity considerably to upgrades and new support offerings to our installed base, in addition to new sales. And with a large mammography CAD installed base, combined with a new product platform MRI and CT, we are well-positioned to secure revenues from new and existing customers.

In the therapy area, our brachytherapy technology has tremendous potential to play a major role in changing and improving long-standing health care paradigms with significant potential benefits to the patients and the payers as well. As an example, approximately 100,000 women who were diagnosed with early-stage breast cancer each year in the United States are candidates for intraoperative radiation therapy at the time that they undergo breast-conserving surgery or lumpectomy.

This single dose of radiation delivered directly to the tumor's site while the patient is still under anesthesia can be used as an alternative to 6 to 8 weeks of external beam radiation therapy, which is delivered on an outpatient basis 5 days per week.

Another example of the use of this innovative technology is in the treatment of non-melanoma skin cancers. Electronic brachytherapy has been proven to be clinically effective, with significant cosmetic benefits, when compared to most surgery or standard of care that is frequently used today for basal cell carcinoma.

To further accelerate adoption, we need to continue to make good progress with ongoing clinical studies, combined with securing equitable reimbursement for the health care providers offering this treatment option.

Overall, I believe we're making solid progress in the breast and skin brachytherapy markets. And over time, this progress should enable procedure volumes to grow considerably both domestically and internationally.

This achievement should represent a considerable business opportunity for new therapy systems and procedure-based consumables.

And with these opening remarks, I'll turn things over to Kevin.

Thank you, Ken, and good morning, everyone. Fourth quarter top line results were softer than expected.

But with continued ongoing expense discipline, adjusted EBITDA was in line with what we discussed during our Q3 conference call. In addition, our cash burn decreased dramatically throughout the year.

And in early January, we further strengthened our balance sheet with a $15 million facility agreement with Deerfield Management, a leading health care investment fund.

We do anticipate a number of important catalysts and programs that should further enhance our top line that Ken will further focus on. But I will first take a few minutes to walk through our 2011 financials in a little more detail.

Total revenue for the fourth quarter of 2011 was $6.6 million, representing a 4% increase from $6.4 million in the same quarter last year. Revenues for the full year increased 17% to $28.7 million from $24.6 million in 2010.

Highlighting revenue by line item, digital and MRI CAD product revenues for the fourth quarter were $2.5 million, down 36% from $3.9 million in the year ago quarter. For all of 2011, we recognized $13.3 million in digital and MRI CAD product revenues, a decrease of 14% from 2010.

This decrease was due to the soft market for full field digital mammography systems throughout the year, and in particular, in the fourth quarter. These numbers reflect similar softness in the MQSA data, which tracks U.S.

sales of full field digital mammography systems and which shows the marketplace transition from film-based to digital technology is nearly complete.

With this transition, sales of film-based products continued to contract, as one would expect. Fourth quarter revenue in this category was $692,000, a decrease of 15% versus the prior year.

And for the year, film-based revenue of $2.4 million was down approximately 29% compared to 2010.

Revenue for the Axxent electronic brachytherapy platform in the fourth quarter was $1.6 million, which consisted of $1.1 million in product revenue and $478,000 in service and supply revenue. For the full year, the Xoft platform contributed $5.9 million in revenue, consisting of $4.2 million in product sales and $1.7 million in service and supply revenue.

Total service and supply revenue for both CAD and Xoft increased 40% from the fourth quarter of last year to $2.3 million, and increased 52% to $8.9 million on a year-over-year basis. Our CAD service and supply revenue has increased nicely, as new customers purchased service agreements.

And for the fourth quarter of 2011, CAD service and supply revenue increased 11% to $1.8 million, and 22% for the full year to $7.1 million.

Now turning to the rest of the P&L. Gross profit for the fourth quarter of 2011 was $4.5 million or 68.1% of revenue.

This compares with gross profit of $5 million or 79.2% of revenue for the fourth quarter of 2010. Gross profit for the year was $20 million or 69.9% of revenue, and this compares with gross profit of $19.7 million or 80.1% of revenue in 2010.

The decline in gross margin percentage for both the quarter and the year is attributable to the acquisition of the Xoft business, which has a lower overall margin due to the fixed cost of our manufacturing facility combined with additional amortization expenses, which were $231,000 in the fourth quarter and $931,000 for the year.

Moving on to operating expenses. As we previously reported, we implemented a number of cost saving initiatives in the second quarter.

And since then, we have continued to reduce expenses and expect these measures to positively impact our bottom line. We continue to evaluate and monitor all areas of our spending for additional opportunities for savings and synergies while balancing this with additional investments required for the long-term growth of the organization.

As a result of these initiatives, total operating expense including sales and marketing, R&D and G&A for the fourth quarter was $6.7 million, down 15% from $7.9 million in the third quarter of 2011, and also down approximately 33% from the first half of 2011 run rate.

At this point, we believe we have the right balance of spend across our organization and do not expect material operating expense increases in the short term.

Moving on to our profit metrics. Adjusted EBITDA as outlined in our press release was a loss of $1.2 million for the fourth quarter of 2011, which compared with positive adjusted EBITDA of $523,000 for the fourth quarter of 2010.

Again, for the fourth quarter, our adjusted EBITDA was in line with what we discussed during our last call, and has improved dramatically from the first half of 2011.

On a per-share basis, our non-GAAP adjusted net loss for the fourth quarter was a loss of $0.04 per share, compared with an adjusted net loss of $0.00 per share for the fourth quarter of 2010.

Moving on to the balance sheet. We ended the year with $4.6 million in cash and cash equivalents and this compares with $16.3 million at the end of 2010.

For the quarter, we used approximately $678,000 of cash to fund operations, down from an average quarterly use of approximately $3.2 million per quarter for the first 3 quarters of 2011. During 2011, we used approximately $11.7 million of cash to fund the acquisition, integration and investments in the Xoft business.

In addition, at end of December, we entered into a settlement agreement related to the ongoing patent litigation that we acquired as part of the Xoft acquisition. The settlement includes a $2.5 million royalty payment that will be paid in installments through the middle of 2017.

At the same time, as there was an indemnification agreement in place with the former Xoft shareholders, we were able to recover a small cash escrow, as well as approximately 850,000 shares of iCAD common stock.

Although we remain confident in the strength of our patent position, the cost to litigate the matter would likely have been far in excess of the settlement cost, would have taken considerably more time, and we look forward to spending more time on the core operations of our business.

Finally, as I mentioned earlier, in early January, we closed a 5-year $15 million facility agreement with Deerfield Management. This financing significantly strengthens our cash position and enables us to focus on achieving our long-term objectives for growth and expansion.

We were also very pleased that this agreement has a minimal diluted impact to our shareholders.

With respect to 2012 guidance as we noted in our press release, at this time, we will not be providing financial guidance. The primary factor in this decision is the ongoing uncertainty related to IORT breast brachytherapy reimbursement.

As a result of this uncertainty, it is extremely difficult to provide a reasonable level of guidance for 2012 at this time. We will continue to review this decision and provide a further update on our next call as appropriate.

Overall, we are entering 2012 in a stronger position. We settled ongoing patent litigation, significantly reduced our operating expenses while continuing to invest in our future, and we further strengthened our balance sheet.

We remain confident in our business strategy to drive revenues in both our diagnostic and therapeutic product lines and expect that rising revenues combined with our ongoing financial improvement plans will put us on the road to profitability.

With that financial overview, let me now turn the call back over to Ken to discuss some of the key programs and drivers for growth. Ken?

Thanks, Kevin. Let me begin my discussion with a review of our digital mammography CAD product line.

Digital mammography CAD sales were weaker than expected in the fourth quarter. This was somewhat of a surprise in that the U.S.

business had been slightly ahead of 2010 on a year-to-date comparative basis going into the fourth quarter. This performance, combined with continued weak performance internationally, led to the year-over-year softer numbers.

Moving forward, we've now implemented a number of new business programs that should allow us to maximize sales with our OEM partners as part of a new digital mammography system sale. And in addition, by midyear, we plan to introduce an upgrade plan to our growing installed base.

At the end of 2011, our mammography CAD system was installed with over 3,400 digital mammography systems in United States alone. The upgrade opportunity should substantially increase our addressable market with our customer base.

Over time, our goal is to transform this business into more of a traditional software model, where substantial recurring revenue can be generated each year from upgrading sold to a growing installed base. Moving on to MRI.

Sales in Q4 were weak by comparison to the prior quarter as a number of transactions slipped to 2012. Overall, however, we experienced greater than 70% sales growth in 2011 for MRI versus 2010.

Also, we continue to receive positive feedback on the introduction of our new MRI product platform, which features a thin client [ph] architecture, additional workflow tools, enhanced viewing and user interface. Consequently, we feel we are well-positioned to compete and grow in this market.

Part of our growth strategy for MRI product suite is to collaborate with OEM partners, in addition to direct selling efforts. At the end of the year, we were pleased to announce our global distribution agreement with Carestream Health.

Under the agreement, our MRI product suite of SpectraLook, PrecisionPoint, VividLook, OmniLook, as well as VersaVue Enterprise and SecondLook Digital Multi-Vendor mammography CAD solution will be available for purchase with CareStream's market-leading Vue PACS. We expect that collaboration such as this, and the one we announced earlier in the year with Hitachi, will enhance market adoption and increase revenue growth.

We continue discussions with other potential OEM partners in the MRI space and look forward to expanding our reach with additional agreements.

Another element of our growth strategy is to market directly to the physicians who use our products. Toward that end, we are looking forward to showcase our innovative image analysis solutions from the mammography, MRI and CT at the upcoming European Congress of Radiology taking place in Vienna the first week of March.

In addition to highlighting our suite of products in enhanced radiologist workflow image analysis in a variety of cancers, we will be hosting a symposium entitled Dynamic Contrast-Enhanced Breast and Prostate MRI, an integrated approach and a multi-parametric MRI protocol. We also will be hosting hands-on workshops led by key opinion leaders that will focus on breast and prostate MRI case reviews.

We expect that the workshop experience with the radiologists who utilize our CAD products will be catalyst for future growth, as these specialists come to the annual meeting as a means of keeping up with leading-edge technologies in their field. This is particularly true in emerging areas like MRI and breast and prostate, where education is key to accelerating adoption.

Over time, we believe that breast and prostate MRI can be sizable markets, offering significant revenue opportunity.

And now an update on CT CAD for virtual colonoscopy. We're pleased to see a new analysis of the data from the 2008 national CT colonography trial, also known as ACRIN 6664 found no significant differences in the diagnostic performance of virtual colonoscopy in older patients versus younger ones.

These findings reported in the Journal of Radiology on February 22. These positive data are renewing hopes among advocates of virtual colonoscopy that the exam will be moving closer to Medicare coverage.

Should Medicare coverage become a reality in the not-too-distant future, we believe this will address a major impediment to adoption. And with the anticipated growth and procedure volume expected to follow, CAD demand should increase substantially as well.

We did recently make some progress with our partner, Vital Images, as they booked business recently for VeraLook CAD in the United States, as well as Europe.

Turning to brachytherapy. Throughout 2011, we invested considerably into the commercialization of this important technology.

Although there were some challenges along the way, we continue to remain highly confident of this therapy and market opportunity. In October 2011, the American Medical Association issued reimbursement codes for intraoperative radiation therapy or IORT.

As we discussed during our last quarterly call, in setting the reimbursement rates for these codes, CMS set appropriate rates for the treatment planning code for IORT but bungled the reimbursement for the procedure itself, as part of the breast surgery. We've been working closely with CMS and are bringing all of our resources to bear to rectify this situation, including lobbying and congressional assistance.

We expect this situation to be clarified by the July 1 CMS communication on preliminary reimbursement levels for CPT codes effective January 1, 2013, and may have a chance to have it addressed sooner. As a result, we believe that IORT system sales in the fourth quarter were impacted by the confusion over reimbursement rates.

That said, growing procedure volumes in the quarter reflect the increasing demand for the Axxent eBx system for breast IORT as an alternative to external beam radiation in the treatment of early-stage breast cancers. In addition, we continue to interface with medical specialists who are involved in the treatment paradigm for breast cancer.

And last week, we participated in the annual meeting of the American College of Radiation and Oncology. It was a gratifying note to see the increased foot traffic at our exhibit booth, and importantly, the number of potential customers now in our sales funnel.

We look forward to translating this interest into system sales and increased procedure volumes.

In addition, we sponsored the inaugural Southern California IORT symposium on Thursday, February 16 in Newport Beach. Chaired and moderated by Dr.

Melvin Silverstein, the symposium attracted 65 leading breast surgeons, radiation oncologists, medical physicists and hospital administrators from more than 20 leading health care facilities in the Southern California region. Presentations on IORT clinical experience, technique advancements and the most current data were presented by Dr.

Silverstein, Dr. Dennis Holmes of the Los Angeles Center for Women's Health; and Dr.

Nasir Syed of Long Beach Memorial Hospital. The panel discussions featured rich dialogue supporting the growing body of evidence for IORT as an excellent alternative to external beam, as well as the need for enhanced federal reimbursement.

The symposium was a key first step as we build out our global medical education strategy in support of IORT market development. Based on the tremendous success of this event, we're considering additional symposia in other key markets within and outside of the United States.

We understand the widespread adoption of our IORT will be driven by a combination of compelling, long-term clinical data and clinical -- and equitable reimbursement. As I said, by mid-year, we expect CMS to issue appropriate reimbursement values for IORT procedure codes, and believe that the combination of this event in addition to more favorable patient follow-up data from ongoing studies, will accelerate the adoption of IORT for early-stage breast cancer patients.

So in closing the comments portion of the call, 2011 was a year of transition for iCAD, and with the transition comes challenges. And we believe we have met these challenges well, and we stayed the course with our strategy to be a broader solutions provider to the oncology market by delivering targeted technologies throughout the continuum of the cancer care cycle.

We believe our investments in Xoft and new CAD platforms and products, and the programs to promote them will deliver significant revenue growth over time, which should significantly enhance shareholder values.

With that said, operator, we're ready to take questions.

Certainly, encouraging to hear the news on the ACRIN paper. Can you -- is there any granularity you might add to that?

What the implications there might be in the CTC go-to-market time line in either scale or timing to see you've finally got some business going in Vital Images. What might this do for us as we get in toward the further end of this year?

Good question, Jeff. I think what we are very encouraged by was that this ACRIN trial which had about 2,600 patients finally was analyzed for the -- essentially the Medicare population.

And there are about 500 older subjects that participated. And essentially, the performance was thought to be comparable to the non-Medicare population and 500 patients is a significant number.

So we think that the results were very, very compelling. Also in support of increased screening, to be noted, is that 87% of these patients had no polyps whatsoever.

So again, this notion that you may have to go in twice certainly exists as it relates to polyp detection and excision. But the reality is that in a high percent of the patients, they do not need to.

So given if this is the second-leading cause of cancer death is the most preventable and only about 1/2 of patients at age 50 are complying, we would like to think this is a huge catalyst towards increased compliance. There's also some additional benefits throughout extra colonic findings, particularly in this Medicare population which tends to have more -- so other benefits as well in detecting other types of potential illnesses or cancers is also one of the side benefits.

The other point I would make, too, is that they are now at a point where they're essentially providing about 25% of the normal CT dose that would be given for an abdominal scan to do virtual colonoscopy. So the notion that the radiation exposure is a problematic issue really has been diminished quite significantly based on the dosaging.

So with all that said, we're very enthused about this. And it's been a long period of time and waiting for this information to come out.

So really what we think has to happen in the United States, of course, is that we need to get national Medicare coverage. And as we understand it, the American College of Radiology and their subcommittee that has been focusing on this topic for years is going to be essentially meeting with that body in the April timeframe.

And I believe, and we all hoped that this compelling data really will be the catalyst for reimbursement. With that said, we also are talking about a process and a timeline where there has to be a technical assessment.

There needs to be advisory committee input. There needs to be public comment and so on and so forth.

So it could literally take 9 months, but it would be very encouraging if the meeting in April translated into coverage for Medicare by, say, January 1, 2013. Our sense is that, that will have a noticeable impact on procedure volume growth.

Also, all of the different concerns that people have as it relates to one procedure versus likely having to need more, the fact that 87% of the patients didn't have any polyps in this 500-patient Medicare population is also a very encouraging to say that the benefits far outweigh the slight risk of having to go through a second procedure if a polyp is found that needs to be removed. So we're encouraged.

And I think that -- as we're talking to some of our larger partners in the CT space, there's some very strong interest in having CAD available around the first of 2013, anticipating that the demand for the procedures and the need for CAD will grow significantly with reimbursements. So we're extremely optimistic.

With that said, this is just a process that could take 6 to 9 months easily before it comes to fruition. So we will remain very optimistic, but we need to see the final result of the submission to the Medicare coverage group in April and how that plays out before we're certain as to what we're going to get for opportunity.

And regarding the upgrade that exists in CAD, I know you've submitted that to the FDA. What are your thoughts on timing of that?

And then can you address what's been the take rate or the acceptance of that particular upgrade version in the outside of U.S. sites that might help us understand how fast it might be picked up once FDA approve?

Sure. Let me try to just describe the business strategy around mammography CAD for a moment.

We all went through a very exciting period, particularly back in 2006, 2007 and the majority of 2008, where the conversion from film-based mammography to digital mammography was at a very, very high growth rate. And that allowed us to grow our business tremendously and strengthen the company in many, many ways.

And with any new technology, there is going to be an adoption and somewhat of a saturation curve. Very, very normal in many product life cycles.

So now we're in a position where about 80% to 85%, let's say, of the installed base in the United States is digital mammography. And roughly 2,000 systems or 15% is still using film.

So obviously, the opportunity for growth in digital mammography for us is in harvesting business from our growing installed base. And as I said in my opening comments, we have about 3,400 systems at the end of 2011 in the United States that are using our CAD.

So that's the good news. The bad news is only about 25% of those 3,400 are on any kind of maintenance agreement with us.

What that essentially means, Jeb, is that 75% of our installed base is not giving us any revenue or whatsoever beyond their initial purchase of CAD. Or if they are, it's on a time and material basis, which doesn't really add up to a significant amount.

So what we are doing is transforming this into really a software model business where we will bring to the market new functionality, and we will obviously sell that functionality as part of a service agreement or as part of an annual license as opposed to a perpetual license where someone essentially buys it and owns it for the life of the product. And when you think about the potential, let's say, there's 2,500 customers in the United States that are not buying anything from us today, let's just use an average annual agreement of, say, $8,000 or $9,000, I mean you're looking at a $20 million to $25 million annual opportunity just with the customers that essentially don't buy anything from us today.

And that's a big number. Just by comparison, it kind of makes some comparison here, when we do sell a service contract today, we roughly sell it for about $7,000 a year.

So asking a customer to give you $8,000 or $9,000 or $10,000 and to get continued new functionality as it's available in conjunction with perpetual warranty. We think it's a very compelling value proposition for not a lot more than customers are spending today.

So we think for our current customers, they'll pay a little bit more but they'll get a lot more. We think for the customers that are using our algorithm today, the 2,500 using a product that was introduced in 2006, there's going to be significant additional capability and benefits for them to move on to some sort of structured agreement with us going forward.

So that's kind of the business model we're moving to. We have begun, literally, in the month of February, selling this new annual agreement, which will include all of the -- capabilities as they come over time.

What we are planning though in terms of a more significant release is really a 2-step process. Probably in early Q3, we're going to introduce a new platform in CAD.

It's going to be a new hardware platform that has a number of different benefits from hosting third-party capabilities to a richer DICOM communication capability. And in the context of, say, third parties, we're going to be offering a breast density capability, an FDA-approved product by the name of OPAR, which is made by a company -- an international company named Madikina [ph].

So just as an example, we will have our current product that's available today with new capabilities, and some additional capabilities what we would describe as CAD Metrics. CAD Metrics being things like automatic detection measurements, position of the nipple, breast geometry, detection geometry and so forth.

So we're going to be essentially bringing out an enhanced version of our current CAD product in this probably early Q3 time frame with some additional third-party opportunity for our customers. So that new kind of platform, if you will, will be available in early Q3.

Now we do have a new next-generation mammography algorithm under development. With the FDA process, we don't anticipate that until sometime probably late in the year.

But again, that could be added to existing agreements. When it is commercially available via FDA clearance.

So we're building a product roadmap in mammography CAD. We're starting in July with an enhanced product.

We're targeting both renewing our current customers on service agreements, but more importantly, we're targeting the 2,500 addresses that essentially, we don't do business with. And we think when you add this all together, combining with our existing customer base on service, this is probably a $30-ish million to $35 million opportunity on an annual basis.

So we need to execute. We need to reach the customers and articulate the value position.

And we think we will see fairly rapid adoption. We do intend over some reasonable window of time to obsolete the current product.

And while we don't have immediate plans to do that, we will, over a reasonable period with proper notice, obsolete our current generation. So ultimately customers who have had this product 5, 6, 7 years or less are going to have to move on to another platform with more capability or they risk having less support than they would have for a product that is in service today, if you will, and an active product in our product catalog.

So we really see this transformation has begun. It's going to take some time to get the kind of traction, but I would like to think by next year, 2013, we may start to really turn the corner where we're seeing material business coming from our installed base, particularly the sites that are not buying something today.

We're getting in higher average selling price from the sites that are buying from us today on a service level because they're getting more value. And we're also seeing new business continuing from the several thousand sites that are still film in the United States.

And hopefully, some additional traction internationally. And this could take a business that, as Kevin said earlier, roughly a $13 million or $14 million digital mammography CAD business to a much higher level than we're seeing today.

And that's really the strategy for this business. The last comment I'd make is it's a great gross margin business as well.

And for a lot of customers, our ability to add this new capability can be done very, very cost effectively. And we see this as a really significant component of a growth strategy as we transform to more of a software model.

So if I heard you right, then there's things you can start doing in this program before the FDA approval? That's different from what I understood before.

That's correct, yes. We've decided that we believe we have enough incremental functionality that we have tested with customers to roll this new platform out early in the third quarter.

And then probably plus or minus 6 months later, we'll bring the new algorithm in as part of that offering. It will obviously and then become even more attractive to new customers, and it will be part of the term of what the customer that signs an agreement, let's say, between now and its release, they will get that product as part of being on this annual agreement with us.

I see. So going to Xoft, Kevin said, you spent I think $11 million on Xoft in 2011, and apparently, the reimbursement has been an issue.

But can you discuss what's going on at the grassroots level in terms of procedures and take rates? Notwithstanding the things outside of your control?

I mean what I would say is that the good news as it relates to the murky dynamic around reimbursement at the moment is that the sites that we're doing IORT and getting paid are still getting paid. So one of the positives, I think, would be our recurring revenue as it relates to balloon volume was the highest it's ever been in the fourth quarter.

And I think that's pretty significant. And it actually -- in the fourth quarter, equaled the volume we did in the first 3 quarters' sum.

So when you think about that, that's very, very encouraging to be in a position where you've got this challenging reimbursement dynamic, but those sites that have been doing IORT, as well as the relatively newer ones that came on board in the third quarter, have seen the procedure growth to be that significant in spite of something that's a bit challenging. So that to us was a very, very encouraging signal.

That the adoption, the interest, the level of participation in customers has grown significantly from the beginning of the year to the end of the year. With that said, we commented earlier in the opening remarks that we had at least 3 or 4, 5 deals that did not happen in the fourth quarter because customers were looking for that definitive information on reimbursement, and recognizing that it's the beginning of a more productive process to get paid as opposed to the endpoint, they were very confused as we all were, when the decision was announced on November 1.

So we've had on one hand, very nice procedure volume growth, as indicated by our balloon volumes and our sources that deliver the dosage. And at the same time, we've had some challenges with getting new customers.

So what we're hoping for is that this lobbying effort, our discussions with a number of Congressional people that have had a history of being strong advocates for women's health is going to get this turned around quickly. To be frank, we met with CMS in early December, and they all but admitted that they made a big mistake as it relates to reimbursement here.

They misunderstood the delivery of the brachytherapy and ended up bundling it with the lumpectomy. Never in the past has therapy and surgery been combined, even though bundling reimbursement cost is a trend that obviously makes sense in many respects.

And I think quite frankly, they would like to be able to do something about it. The real question is there's latitude to do something prior to July 1, when the preliminary reimbursement is published for 2013.

So we're going to continue our efforts. We're putting a lot of pressure through Congressional and lobbying groups, and we think that the encouraging part of this is increased procedure volume in spite of this speed bump.

As we get this reimbursement circumstance ironed out, we're very encouraged that the overall business should grow a lot more substantially than we have seen in the last quarter or so since this was announced.

So am I to understand that the prior payers, though, there is pretty much status quo out there that they did not change their practice in light of the CMS confusion?

That is correct. I think clearly the majority of the increase in balloon sales have been to an installed based or relatively new installed base based on the number of systems we were selling into 2011.

They already have reimbursement established. And so that has not gone backwards in those centers with the progress we've made in 2011 as we did place more systems in 2010.

The adoption and the amount of procedures that they're doing is growing, which is very, very encouraging and supports the fact that there is a lot more confidence in the data around the efficacy of this technology, and as the reimbursement hurdle gets addressed, it's a very, very compelling value proposition for the patient. In particular, if they fit a certain criteria in early breast cancer.

Actually my question has been answered.

Well, in summary, I want to thank everybody for joining the call today. We, at iCAD, are extremely enthusiastic and confident about our future.

I think our product platforms are showing tremendous potential and while we're at the early stage in various markets and can't always predict as perfectly as we'd like to as to when the adoption revenues will flow, we have a number of investments that we think have tremendous potential. And I think back to the mammography discussion this notion of getting at 2,500 customers that we essentially don't do business with today, with a robust capability in our new mammography CAD platform, is opportunity for significant revenue.

In the MRI space, I mentioned we grew 70% last year, which shows that we're really doing well. And more than 50% of those sales were by the way in prostate, which shows you how we're making progress through education in the prostate area.

In CT, we waited for some time to have the right data to go back to Medicare and try to get reimbursement for the Medicare population, which as we all know is a leading indicator of how the private payers pay. We are in discussions informally with the American College of Radiology.

Since this has been published, feel there's a lot of the enthusiasm and optimism that reimbursement will come. With that said, we actually are starting to see some nice traction with Vital Images in the United States, and also some business in Europe.

So I think on the CT front, we're feeling very good. And in brachytherapy, we've made a big investment over the last year, there's no question.

But we look at the value proposition of breast IORT alone, not to mention the other capabilities of this platform technology, and we think that the potential is tremendous. And we think with the maturing of follow-up data, combined with near-term clarity on reimbursement that this could grow to be the single largest growth driver in our overall company over the next 3 to 5 years.

And so we're very enthused, very excited about the future. I think we've done a good job in managing our expenses and trying to get our balance sheet in a stronger position just to be able to sustain the proper investments, as Kevin talked about earlier.

And we're very much looking forward to sharing our progress with you as we come on board and discuss our first quarter results sometime in the next several months. So thank you all for joining us, and have a good day.