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VirtualScopics, Inc. Reports a Record Breaking Quarter

ROCHESTER, N.Y., Aug. 12 /PRNewswire-FirstCall/ -- VirtualScopics, Inc. (Nasdaq: VSCP), a leading provider of quantitative imaging for clinical trials, today announced its financial results for the quarter and six months ended June 30, 2009.

Highlights include:

  • Revenues for the second quarter of 2009 increased 47% to $2.5 million, compared to prior year's second quarter revenues of $1.7 million.
  • Gross profit for the second quarter of 2009 increased 96% to $1.4 million, compared to $0.7 million in the second quarter of 2008.
  • Gross margin increased to 55% in the second quarter ended June 30, 2009, compared to 41% in the second quarter of 2008, a 34% improvement.
  • Earnings before interest, taxes, deprecation and amortization, and excluding stock compensation of $269,016 and a loss from derivative financial instrument of $205,914 ("Adjusted EBITDA"), was $180,846 for the quarter ended June 30, 2009 compared to an Adjusted EBITDA loss of ($467,119) for the comparable period in 2008.
  • For the six months ended June 30, 2009, Adjusted EBITDA was $221,791 compared to a loss of ($899,727) for the first six months of 2008.
  • Net loss for the quarter ended June 30, 2009 was ($413,123) compared to a net loss of ($851,110) for the second quarter of 2008. For the six months ended June 30, 2009, net loss was ($1,169,236) compared to a net loss of ($1,775,623) for the six months ended June 30, 2008.

"This has been a transformational year for VirtualScopics," stated Jeff Markin, president and chief executive officer of VirtualScopics. "We have successfully progressed the company from a consumer of cash to a generator of cash. I am especially pleased that we have accomplished this by building a strong operational foundation with a talented and committed team that is focused on our customers and returning value to our stockholders."

"The second quarter of 2009 was the strongest financial quarter of the company's history," said Molly Henderson, chief business and financial officer of VirtualScopics, Inc. She continued, "On all significant comparative financial metrics, we demonstrated solid results. Our year to date Adjusted EBITDA improved over $1,100,000 compared to the same period last year. This significant improvement captures the essence of our progress over the past twelve months as well as the strength of our business." She concluded, "We are very pleased with our financial results for the first half of 2009 and remain optimistic on our outlook for 2009."

Jeff Markin and Molly Henderson will provide a business update and discuss these results during a conference call on Thursday, August 13, 2009 at 11:00 a.m. EDT. Interested participants should call 888-352-6795 when calling within the United States or 719-325-2192 when calling internationally. The call can also be accessed at and will be available for 30 days after the call.

The Company defines Adjusted EBITDA as earnings less interest, taxes (if any), depreciation and amortization as further adjusted to exclude stock compensation expense and the loss on derivative instrument (mark to market adjustment for warrants). The Company provides Adjusted EBITDA as a supplemental measure to GAAP regarding the Company's operational performance. This financial measure excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP. The Company's method of calculating Adjusted EBITDA, however, may differ from methods used by other companies, and, as a result, Adjusted EBITDA measures disclosed herein may not be comparable to other similarly titled measures used by other companies. The Company continues to provide information in accordance with GAAP, however, with the adoption of EITF 07-05 and the non-cash variable nature of stock compensation expense and their very substantial impact on the overall reported net losses, the Company believes it is also helpful for investors to receive additional information relating more specifically to the Company's operating results. Accordingly, the Company has presented Adjusted EBITDA which excludes the non-cash effects of EITF 07-05 and FAS 123R on its financial results. Management uses Adjusted EBITDA (a) to evaluate the Company's financial performance, (b) to set internal spending budgets, and (c) to measure operational profitability. In addition, investors have requested these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, net loss, below.

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 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-K for the fiscal year ended December 31, 2008 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 contract 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.

-Financial tables to follow-

                        VirtualScopics, Inc. and Subsidiary
                 Condensed Consolidated Statements of Operations

                              For the Three Months      For the Six Months
                                  Ended June 30,           Ended June 30,
                                 2009        2008        2009         2008

    Revenues                 $2,541,316  $1,733,299   $4,675,685  $3,367,402
    Cost of services          1,147,980   1,021,536    2,162,564   2,051,520
                              ---------   ---------    ---------   ---------
          Gross profit        1,393,336     711,763    2,513,121   1,315,882
                              ---------     -------    ---------   ---------
          Gross margin               55%         41%          54%         39%

    Operating expenses
       and development          258,180     212,825      493,735     464,654
      Sales and
       marketing                357,222     384,237      639,676     673,111
      General and
       administrative           590,496     580,435    1,149,843   1,074,876
       compensation expense     269,016     284,228      554,348     687,291
      Depreciation and
       amortization             119,126     116,765      236,636     234,332
                                -------     -------      -------     -------
          Total operating
           expenses           1,594,040   1,578,490    3,074,238   3,134,264
                              ---------   ---------    ---------    ---------
    Operating loss             (200,704)   (866,727)    (561,117) (1,818,382)

    Other income (expense)
      Interest income                87      17,002        3,280      45,727
      Other expense              (6,592)     (1,385)      (8,076)     (2,968)
      Loss on derivative
       financial instrument    (205,914)          -     (603,323)          -
                               --------         ---     --------         ---
    Total other
     (expense) income          (212,419)     15,617     (608,119)     42,759
                               --------      ------     --------      ------
      Net Loss                 (413,123)   (851,110)  (1,169,236) (1,775,623)

    Series B preferred
     stock cash dividend         84,520      84,520      169,040     169,760
                                 ------      ------      -------     -------
    Net loss attributable
     to common stockholders   $(497,643)  $(935,630) $(1,338,276)$(1,945,383)
                              =========   =========  ===========  ==========

    Basic and diluted
     net loss per common share   $(0.02)     $(0.04)      $(0.06)     $(0.08)
                                 ======      ======       ======      ======

    Weighted average number
     of common shares
      basic and diluted      23,738,855  23,358,625   23,636,886  23,302,346
                             ==========  ==========   ==========  ==========

                     VirtualScopics, Inc. and Subsidiary
                    Condensed Consolidated Balance Sheets

                                                June 30,   December 31,
                                                 2009          2008
                      Assets                  (unaudited)

    Current assets
      Cash and cash equivalents                $3,157,927    $3,143,904
      Accounts receivable                       1,395,565     1,021,110
      Prepaid expenses and other current
       assets                                     355,104       263,297
                                                  -------       -------
          Total current assets                  4,908,596     4,428,311
    Patents, net                                1,877,522     1,920,446
    Property and equipment, net                   428,960       355,479
    Other assets                                   95,023       156,788
                                                   ------       -------
          Total assets                         $7,310,101    $6,861,024
                                               ==========    ==========

       Liabilities and Stockholders' Equity

    Current liabilities
      Accounts payable and accrued expenses      $984,035      $659,009
      Accrued payroll                             452,081       554,425
      Unearned revenue                            609,493       291,594
       Derivative liability                     1,026,231             -
                                                ---------             -
          Total current liabilities             3,071,840     1,505,028
                                                ---------     ---------

    Stockholders' Equity
    Convertible preferred stock, $0.001 par
     value; 15,000,000 shares authorized;
     8,400 shares designated Series A; issued
     and outstanding: 3,773 at June 30,
     2009, 3,976 at December 31, 2008;
     liquidation preference $1,000 per share            4             4
    6,000 shares designated Series B; issued
     and outstanding: 4,226 at June 30, 2009
     and December 31, 2008; liquidation
     preference $1,000 per share                        4             4
    Common Stock, $0.001 par value;
     85,000,000 shares authorized; issued
     and outstanding, 23,758,632 at June
     30, 2009 and 23,502,352 at December
     31, 2008                                      23,759        23,503
    Additional paid-in capital                 13,881,704    16,546,550
    Accumulated deficit                        (9,667,210)  (11,214,065)
                                               ----------   -----------
          Total stockholders' equity            4,238,261     5,355,996
                                                ---------     ---------
          Total liabilities and stockholders'
           equity                              $7,310,101    $6,861,024
                                               ==========    ==========

                                               Three Months    Three Months
                                                   Ended           Ended
    Adjusted EBITDA (non-GAAP measurement):    June 30, 2009    June 30, 2008

       Net loss                                  ($413,123)      ($851,110)
       Interest income                                ($87)       ($17,002)
       Depreciation and Amortization              $119,126        $116,765
       Stock-based compensation expense
        (non-cash)                                $269,016        $284,228
       Loss on derivative financial instrument
        (non-cash)                                $205,914               -
                                                  --------             ---
          Adjusted EBITDA                         $180,846       ($467,119)
                                                  --------       ---------
         Basic and diluted, Adjusted EBITDA per
          common share, non-GAAP
                                                     $0.01          ($0.02)
                                                     =====          ======

                                                Six Months     Six Months
                                                  Ended          Ended
    Adjusted EBITDA (non-GAAP                 June 30, 2009   June 30, 2008

       Net loss                                ($1,169,236)   ($1,775,623)
       Interest income                             ($3,280)      ($45,727)
       Depreciation and Amortization              $236,636       $234,332
       Stock-based compensation expense
        (non-cash)                                $554,348       $687,291
       Loss on derivative financial
        instrument (non-cash)                     $603,323              -
                                                  --------            ---
         Adjusted EBITDA                          $221,791      ($899,727)
                                                  --------      ---------
         Basic and diluted, Adjusted EBITDA
          per common share, non-GAAP
                                                     $0.01         ($0.04)
                                                     =====         ======

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

SOURCE VirtualScopics, Inc.
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