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VirtualScopics Reports 3rd Quarter 2010 Results; Revenues Increase 28%

ROCHESTER, N.Y., Nov. 11, 2010 /PRNewswire-FirstCall/ -- VirtualScopics, Inc. (Nasdaq: VSCP), a leading provider of quantitative imaging for clinical trials, today reported revenues of $3,590,591 for the third quarter of 2010 compared to revenues of $2,797,680 in the third quarter of 2009, a 28% increase. Excluding work performed in 2009 for the Department of Defense under projects that ended in 2009, the company posted a 39% increase in revenues during the first three quarters of 2010 compared to the same period in 2009. Gross profit for the quarter ended September 30, 2010 was $1,894,312 compared to $1,596,327 for the quarter ended September 30, 2009. Operating income for the third quarter of 2010 was $400,235 compared to $189,326 during the third quarter of 2009, a 111% increase. Net income for the quarter ended September 30, 2010 was $628,699 compared to a net loss of $215,907 for the quarter ended September 30, 2009.

Highlights for the first nine months of 2010 include:

  • Total revenues of $9,883,190, an increase of $2,409,824, or 32%, compared to the same period in 2009.
  • Gross profit of $5,147,102 compared to $4,109,450 in the first three quarters of 2009, a 25% increase.
  • Operating income of $624,143 compared to an operating loss of $371,790 in the first nine months of 2009, a $995,933 improvement.
  • Earnings before interest, taxes, depreciation and amortization, and excluding stock compensation expense and unrealized gain (loss) from derivative financial instrument ("Adjusted EBITDA") was $1,627,342 compared to $815,957 in the comparable period in 2009, a 99% improvement.
  • Net income was $977,815 compared to a net loss of $1,385,143 during the first three quarters of 2009.
  • Backlog (the amount remaining to be recognized from active projects) of $42 million compared to $37 million at the same point in 2009, a 14% increase.

  • "We are extremely pleased to deliver to our stockholders another quarter of solid financial performance delivering significant growth in revenue and gross profit," stated Jeff Markin, chief executive officer of VirtualScopics.  He added, "In addition to our financial results, we are excited about our recent announcement regarding the strategic alliance we formed with PPD which was a visible result of the strategic plan we put into place earlier in the year. They are well respected in the industry and we share many of the core principles and values that have made us each a leader in the industry." He concluded, "The joint solution resulting from the alliance presents a very strong value proposition for our collective clients and it presents us with a broader opportunity to expand our business and underscores our commitment to delivering value to our stockholders."

    "2010 has been a pivotal year for VirtualScopics," said Molly Henderson, chief business and financial officer of VirtualScopics. She added, "We have successfully executed several of our key strategic initiatives including achieving our nine-month financial goals.  Of significant note, during three quarters we generated nearly $1.0 million more in year over year operating income and surpassed the total Adjusted EBITDA we earned throughout all of 2009." She concluded, "Our focus for the remainder of 2010 will be towards a strong close to the year and preparing for what we expect to be a robust 2011."

    Jeff Markin and Molly Henderson will provide a business and third quarter 2010 financial update during the conference call today at 11:00 a.m. EST.  Interested participants should call 877-407-8035 when calling within the United States or +1 201 689 8035 when calling internationally.  This call can also be accessed at and will be available for 30 days after the call.

    The Company provides Adjusted EBITDA as a supplemental measure to GAAP regarding the Company's operational performance. The Company defines Adjusted EBITDA as earnings less interest, taxes (if any), depreciation and amortization as further adjusted to exclude stock compensation expense, the unrealized gain (loss) on derivative instrument (mark to market adjustment for warrants) and interest income and other expenses.  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 Accounting Standards Codification ("ASC") 815-40 and the non-cash variable nature of stock compensation expense (ASC 718) and their very substantial impact on the overall reported net income (loss), 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 ASC 815-40 and ASC 718 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 income (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, 2009 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.CONTACT:Investor Relations:Company Contact:Tim Ryan

    Molly HendersonThe Shoreham Group

    Chief Business and Financial Officer, Sr. Vice President80 Eighth Ave, Ste 1107

    500 Linden OaksNew York, NY 10011

    Rochester, New York 14625+1 212 242 7777 Direct

    +1 585 tables to follow-

    VirtualScopics, Inc. and SubsidiaryCondensed Consolidated Statements of Operations (unaudited)For the Three Months Ended September 30,For the Nine Months Ended September 30,2010200920102009Revenues$  3,590,591$  2,797,680$  9,883,190$  7,473,366Cost of services1,696,2791,201,3534,736,0883,363,916Gross profit1,894,3121,596,3275,147,1024,109,450Gross margin53%57%52%55%Operating expensesResearch and development270,280255,755789,517749,490Sales and marketing263,198238,112904,522877,788General and administrative602,198516,3721,825,7211,666,215Stock-based compensation expense228,989282,055621,774836,403Depreciation and amortization129,412114,707381,425351,344 Total operating expenses1,494,0771,407,0014,522,9594,481,240Operating income (loss)400,235189,326624,143(371,790)Other income (expense)Interest income1,0586688,4173,948Other expense(9,316)(4,226)(14,602)(12,303)Gain (Loss) on derivative financial instrument236,722(401,675)359,857(1,004,998)Total other income (loss)228,464(405,233)353,672(1,013,353)Net Income (Loss)628,699(215,907)977,815(1,385,143)Series B preferred stock cash dividend40,52075,476140,577244,516Net income (loss) attributable to common stockholders$  588,179$  (291,383)$  837,238$  (1,629,659)Basic and diluted net income (loss) per common share$ 0.02$  (0.01)$  0.03$  (0.07)Weighted average number of common shares outstandingbasic 26,313,93724,129,04525,975,86423,802,742diluted31,039,28424,129,04530,794,87423,802,742VirtualScopics, Inc. and SubsidiaryCondensed Consolidated Balance SheetsSeptember 30, 2010December 31, 2009Assets(unaudited)Current assetsCash

    $   4,009,477$   4,327,410Accounts receivable, net

    2,558,3231,481,381Prepaid expenses and other current assets

    358,376387,247Total current assets

    6,926,1766,196,038Patents, net

    1,739,6671,832,560Property and equipment, net

    428,833456,169Other assets

    -33,258Total assets

    $  9,094,676$  8,518,025Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable and accrued expenses

    $  930,687$  658,430Accrued payroll

    654,455837,177Unearned revenue

    276,9731,011,498Derivative liability

    780,0961,139,953Total current liabilities

    2,642,2113,647,058Commitments and Contingencies

    --Stockholders' EquityConvertible preferred stock, $0.001 par value; 15,000,000 shares authorized; Series A 8,400 shares authorized; issued and outstanding, 3,188 and 3,438 shares at September 30, 2010 and December 31, 2009, respectively; liquidation preference $1,000 per share

    33Series B 6,000 shares authorized; issued and outstanding, 2,026 and 2,910 at September 30, 2010 and December 31, 2009, respectively; liquidation preference $1,000 per share

    23Common stock, $0.001 par value; 85,000,000 shares authorized; issued and outstanding, 26,313,937 and 25,233,255 shares at September 30, 2010 and December 31, 2009, respectively

    26,31425,233Additional paid-in capital

    14,957,53214,354,929Accumulated deficit

    (8,531,386)(9,509,201)Total stockholders' equity

    6,452,4654,870,967Total liabilities and stockholders' equity

    $  9,094,676$  8,518,025Three Months Ended September 30,Adjusted EBITDA (non-GAAP measurement):20102009Net income (loss)$  628,699

    $  (215,907)Interest income and other expenses8,258

    3,558Depreciation and amortization129,412

    114,707Stock-based compensation expense 228,989

    282,055(Gain) Loss on derivative financial instrument (236,722)

    401,675  Adjusted EBITDA$  758,636

    $  586,088  Basic Adjusted EBITDA per common share, non-GAAP$  0.03

    $  0.02  Diluted Adjusted EBITDA per common share, non-GAAP$  0.02

    $  0.02Nine Months Ended September 30,Adjusted EBITDA (non-GAAP measurement):20102009Net income (loss)$  977,815

    $  (1,385,143)Interest income and other expenses6,185

    8,355Depreciation and amortization381,425

    351,344Stock-based compensation expense 621,774

    836,403(Gain) Loss on derivative financial instrument (359,857)

    1,004,998  Adjusted EBITDA$  1,627,342

    $  815,957  Basic Adjusted EBITDA per common share, non-GAAP$  0.06

    $  0.03  Diluted Adjusted EBITDA per common share, non-GAAP$  0.05

    $  0.03

    SOURCE VirtualScopics, Inc.
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    All rights reserved

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