Some companies slide under the radar of the average investor. This can happen for a variety of reasons including the business strategy of the company, lack of funding for investor relations campaigns or, like it or not, some companies simply do not have the growth potential or products that make them desirable to investors. This does not mean that there aren’t plenty of solid potential investment opportunities presenting themselves— they just are not commonly known. An investor simply has to look for it through due diligence and keep several guidelines intact that identify the opportunity. Benchmarks such as share structure, revenue potential, competition and management need to be researched and understood.

While searching for one such company, CNS Response (OTCBB: CNSO) was discovered. Recently, we spent a few minutes with George Carpenter, Chief Executive Officer of the company. Topics of discussion included the aforementioned benchmarks with a primary focus on their Referenced-EEG (rEEG) tool.

rEEG is a patented tool that provides physicians information about the brains of patients they are treating. rEEG uses a statistical analysis of brain function generated by a non-invasive quantitative EEG test along with other patient information to compare a patient’s brain abnormalities with those of patients whose clinical outcomes on medications are known and stored in CNS Response’s database. The end result is a report that provides qualified physicians a tool to help them better manage and personalize medication regimens for their patients suffering from illnesses such as depression, anxiety, ADHD, bipolar, anorexia, bulimia or substance abuse.

Understand that rEEG is not a diagnostic tool to determine if a person suffers from an illness such as depression; rather, it is agnostic in nature. Its goal is to reduce the trial and error in prescribing medications for mental health disorders.

There are presently more than 20 FDA-approved medications for the treatment of depression on the market today. These include categories of SSRI’s (Selective Serotonin Reuptake Inhibitors) such as Luvox, Paxil and Prozac; MAOI’s (Monoamine Oxidase Inhibitors) such as Nardil and Parnate; and TCA’s (tricyclic antidepressants) such as Elavil and Norpramin. Medications such as Wellbutrin fall into a completely different category. Each category of medication has well-documented common side effects. Without access to objective information about their patients’ neurophysiology, physicians must go through the trial and error process of prescribing medications, without knowing how an individual will be affected with one or more of these side effects. CNS Response, with its rEEG, can help physicians reduce this trial and error process.

CNS has conducted 12 clinical studies researching the benefits of rEEG with the results nothing shy of staggering. The most recent study concluded in late 2009, pitting the rEEG system against the best results of the famous STAR*D. STAR*D is a collaborative study funded by the National Institute of Mental Health on the treatment of depression, designed to identify which medication (or combination of) would perform best on different individuals. The results from CNS Response’s latest study showed the rEEG to be approximately 50 to 100 percent more effective than the best results obtained in STAR*D as published in the Journal of Psychiatric Research.

An interesting fact about the process: patients must completely “wash-out” of all medications before being tested. It has been noted that in some cases, the patient feels better after having the drugs cleaned from their system and does not require medications. Also notable is that rEEG research has primarily targeted the toughest of patients, those with treatment resistant disorders who have not responded to at least two different prescribed medications.

Mr. Carpenter explained that even though there are more than 38,000 psychiatrists in the United States, CNS will be very selective as to which organizations and physicians they will market their rEEG. Quite simply, it is about quality. While revenues will be generated from the sale of each rEEG report, the goal is to maintain close control and actively work with participating doctors. When questioned about the value of the data that CNS possesses, Mr. Carpenter indicated that the data is of great value and will potentially be a source of monthly revenues as the company expands its marketing into the pharma industry. He commented that they have also been approached by large pharma with regards to their technology which may be beneficial in clinical trial performance efficiency, new indications for existing compounds or, through the use of biomarkers, the rescue of previously failed drugs.

While the rEEG system was clearly the main topic in the conversation, we also verified several other things. CNSO only has 56 million shares issued and outstanding. Form 3 and Form 4 filings with the SEC show that there is a 49% insider holding of these shares. Institutions hold an additional 4% and mutual funds hold 8%. The low outstanding shares of 56 million bodes well for potential investment gains, based on revenues that can be generated from rEEG, as CNSO is presently trading in the area of $.50 per share. Granted, the volume is low, but that is reflective of the small float and, by definition, a product of being a stock that is “flying under the radar.”

Competition in the industry is a factor in all investment decisions. In the case of CNS Response, there is little to none known competition. CNS holds four patents on the rEEG platform and there is no other company in the industry with the data compilation that even remotely resembles the level of CNS.

With regards to leadership, CNS has people in place to take the Company to the next level as they are led by a team of forward-thinking executives. CEO George Carpenter is a results-oriented executive with a passion for leading high growth and turnaround companies. Before joining CNS Response Inc., George ran WorkWell Systems Inc., an international physical medicine firm and 2004 winner of the ABL Innovation in Healthcare Award. From 1990 to 2002, George served as Chairman and CEO of CORE, Inc. (Nasdaq: CORE) after leading the management buyout of this division of Baxter Healthcare. George was a Vice President of Operations with Baxter Healthcare before founding CORE. A finalist in the E&Y Entrepreneur of the Year program, Carpenter led CORE to a series of clinical software innovations and business developments that, in the words of one Wall Street analyst, “created an industry.” CORE was acquired in 2001 by Assurant Inc. His career began at Inland Steel in manufacturing process control and sales. Serving on various biomedical advisory and fiduciary boards, he is a frequent speaker and writer on healthcare technology and financing issues. His book “The Shape of Things” (LRP Publications, 2006) focused on the neurochemistry of obesity and its impact on the American workforce. He holds an MBA in Finance from the University of Chicago and a BA with Distinction in International Policy & Law from Dartmouth College.

After approximately an hour of discussion with Mr. Carpenter, we asked him, “If you could pass one message on to your shareholders, what would that be?” His response was, “Be patient. We have worked diligently to align our business strategies and know who we work for: our shareholders.” Mr. Carpenter continued, “The development of rEEG is virtually behind us and we are excited about our future. We believe that the loyalty of our shareholders will soon be rewarded.”

More information on CNS Response can be found on the Company’s website at