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VirtualScopics Achieves Operating Cash Flow Breakeven in the Fourth Quarter 2008; Reports Record 2008 Revenue and Gross Profit

4th quarter gross profit grows by nearly 90%, operating loss reduced by 73%

ROCHESTER, N.Y., Feb. 25 /PRNewswire-FirstCall/ -- VirtualScopics, Inc. (Nasdaq: VSCP), a leading provider of quantitative imaging for clinical trials, announced today that revenues for the fourth quarter of 2008 were over $1.9 million, a 33% increase over prior year's fourth quarter. Revenues for the year ended December 31, 2008 were approximately $7.1 million compared to $5.6 million in the comparable period in 2007. The gross profit for the fourth quarter of 2008 was $973,522 compared to $513,361 in the fourth quarter of 2007, representing a 90% increase. Gross margin increased to 50%, in the fourth quarter ended December 31, 2008 compared to 35% in the fourth quarter of 2007, a 43% improvement. The Company's operating loss for the quarter ended December 31, 2008 was reduced by $828,536, or 73%, to $313,915 compared to $1,142,451 for the prior year's comparable period.

"We are extremely proud of the significant accomplishments we have made across many fronts in 2008," stated Jeff Markin, president and chief executive officer of VirtualScopics. "From a client perspective, we have expanded our customer base by securing contracts with an additional three leading pharmaceutical companies and have demonstrated a greater than 65% increase in the average size of new projects which now stands at $350,000. These two items, we believe, provide the best validation of our value proposition to the industry." He added, "On top of this confidence we are seeing from our customers, we also achieved our 2008 guidance in delivering a 50% gross margin in the fourth quarter, demonstrating the strength in our business model as we enter 2009."

The company announced additional highlights during 2008, including:

  • Greater than 80% year over year increase in project backlog (as announced on December 2, 2008)
  • Six phase III contracts under award
  • Issuance of its 10th and 11th patents
  • Opening of a European office
  • Development of a new cardiovascular system which automates the detection of high risk plaques for both ultrasound and magnetic resonance imaging

"In early 2008, we announced that we had targeted the fourth quarter of 2008 for the company to be cash flow breakeven on an operating basis(1), I am very pleased to announce that we have achieved this objective," stated Molly Henderson, chief business and financial officer of VirtualScopics, Inc. She continued, "Not only is this an essential milestone for the company, especially in light of the volatility within the financial markets, but also provides us the ability to be self sufficient from a cash perspective which is extremely important for the company and our stockholders." She concluded, "This accomplishment, coupled with meeting our revenue and gross margin targets, has resulted in us delivering our strongest financial quarter and full year in the company's history."

Jeff Markin and Molly Henderson will provide a business and 2009 update and discuss these results during the conference call on Thursday, February 26, 2009 at 11:00 a.m. EST. Interested participants should call 877-407-0778 when calling within the United States or 201-689-8565 when calling internationally. There will be a playback available until March 26, 2009. To listen to the playback, please call 877-660-6853 when calling within the United States or 201-612-7415 when calling internationally. For the replay, please use account number: 286, conference ID number: 313687.

About VirtualScopics, Inc.

VirtualScopics, Inc. is a leading provider of imaging solutions to accelerate drug and medical device development. VirtualScopics has developed a robust software platform for analysis and modeling of both structural and functional medical images. In combination with VirtualScopics' industry-leading experience and expertise in advanced imaging biomarker measurement, this platform provides a uniquely clear window into the biological activity of drugs and devices in clinical trial patients, allowing sponsors to make better decisions faster. For more information about VirtualScopics, visit

Forward-Looking Statements

The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby. These forward-looking statements include, but are not limited to, statements regarding the expected benefits of the Company's investment in infrastructure and new customer contract signings and awards in 2008 and/or statements preceded by, followed by or that include the words "believes," "could," "expects," "anticipates," "estimates," "intends," "plans," "projects," "seeks," or similar expressions. Forward-looking statements deal with the Company's current plans, intentions, beliefs and expectations. Investors are cautioned that all forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Many of these risks and uncertainties are discussed in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 filed with the Securities and Exchange Commission (the "SEC"), and in any subsequent reports filed with the SEC, all of which are available at the SEC's website at These include without limitation: the risk of cancellation or delay of customer contracts or specifically as it relates to contact awards, the risk that they may not get signed. Other risks include the company's dependence on its largest customers and risks of contract performance, protection of our intellectual property and the risks of infringement of the intellectual property rights of others. All forward-looking statements speak only as of the date of this press release and the Company undertakes no obligation to update such forward-looking statements.

(1) Operating cash flow breakeven = Operating loss less depreciation, amortization and stock compensation expense

-Financial tables to follow-

                         VirtualScopics, Inc. and Subsidiary
                       Consolidated Statements of Operations

                             For the Three Months       For the Year Ended
                               Ended December 31,           December 31,
                              2008         2007         2008         2007
                            (unaudited)  (unaudited)  (unaudited)

    Revenues                $1,947,501   $1,462,336   $7,130,518   $5,647,049
    Cost of services           973,979      948,975    4,031,198,   3,680,409
          Gross profit         973,522      513,361    3,099,320    1,966,640

    Operating expenses
      Research and
       development             243,553      315,706      941,193    1,440,312
      Sales and marketing      282,854      193,546    1,219,882      749,329
      General and
       administrative          446,054      580,490    2,035,077    2,268,668
       compensation expense    199,392      443,428    1,123,283    1,484,884
      Depreciation and
       amortization            115,584      122,642      466,149      485,520
          Total operating
           expenses          1,287,437    1,655,812    5,785,584    6,428,713
    Operating loss            (313,915)  (1,142,451)  (2,686,264)  (4,462,073)
    Other income (expense)
      Interest income           13,920       39,324       73,599      153,968
      Other expense             (4,541)      (4,349)     (16,077)     (13,279)
    Total other income           9,379       34,975       57,522      140,689

      Net Loss                (304,536)  (1,107,476)  (2,628,742)  (4,321,384)

    Preferred stock deemed
     dividend                        -    1,381,163            -    1,381,163
    Series B preferred
     stock cash dividend        84,520       12,567      338,827       99,433
    Net loss attributable
     to common stockholders  $(389,056) $(2,501,206) $(2,967,569) $(5,801,980)

    Basic and diluted net
     loss per common share      $(0.02)      $(0.11)      $(0.13)      $(0.25)

    Weighted average number
     of common shares
      Basic and diluted     23,492,651   23,148,152   23,389,705   23,058,820

                        VirtualScopics, Inc. and Subsidiary
                            Consolidated Balance Sheets

                                                            December 31,
                                                          2008        2007
                          Assets                      (unaudited)

    Current assets
      Cash and cash equivalents                        $3,143,904  $3,955,835
      Restricted cash                                           -     455,583
      Accounts receivable                               1,021,110     648,300
      Prepaid expenses and other assets                   263,297     306,301
          Total current assets                          4,428,311   5,366,019
    Restricted cash                                             -      43,216
    Patents, net                                        1,920,446   1,948,785
    Property and equipment, net                           355,479     542,679
    Other assets                                          156,788     280,317
          Total assets                                 $6,861,024  $8,181,016

           Liabilities and Stockholders' Equity

    Current liabilities
      Accounts payable and accrued expenses              $659,009    $626,693
      Accrued payroll                                     554,425     221,013
      Unearned revenue                                    291,594     279,275
          Total current liabilities                     1,505,028   1,126,981

    Commitments and Contingencies

    Stockholders' Equity
    Convertible preferred stock, $0.001 par value;
     15,000,000 shares authorized;
       8,400 shares designated Series A; issued and
        outstanding: 3,976 at December 31, 2008, 4,001
        at December 31, 2007; liquidation preference
        $1,000 per share                                        4           4
       6,000 shares designated Series B; issued and
        outstanding: 4,226 at December 31, 2008, 4,230
        at December 31, 2007; liquidation preference
        $1,000 per share                                        4           4
    Common Stock, $0.001 par value; 85,000,000
     shares authorized; shares issued and
     outstanding: 23,502,352 at December 31, 2008,
     23,225,664 at December 31, 2007                       23,503      23,226
    Additional paid-in capital                         16,546,550  15,715,557
    Accumulated deficit                               (11,214,065) (8,684,756)
          Total stockholders' equity                    5,355,996   7,054,035
          Total liabilities and stockholders' equity   $6,861,024  $8,181,016

    CONTACT:  Company Contact:
              Molly Henderson
              Chief Business and Financial Officer
              500 Linden Oaks
              Rochester, New York 14625

SOURCE VirtualScopics, Inc.
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All rights reserved

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