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VirtualScopics Reports 3rd Quarter 2012 Results
Date:11/9/2012

ROCHESTER, N.Y., Nov. 9, 2012 /PRNewswire/ -- VirtualScopics, Inc. (NASDAQ:  VSCP), a leading provider of quantitative medical imaging, today reported revenues of $3,328,217 for the third quarter of 2012 compared to revenues of $3,268,807 in the third quarter of 2011. Gross profit for the quarter ended September 30, 2012 was $1,462,056 compared to $1,496,626 for the quarter ended September 30, 2011. Operating loss for the third quarter of 2012 was $53,293 compared to operating income of $19,559 in the third quarter of 2011. Earnings before interest, taxes, depreciation and amortization, and excluding stock compensation expense and gain (loss) from derivative financial instrument ("Adjusted EBITDA") for the third quarter of 2012 was $192,045 compared to $341,669 in the comparable period in 2011.

Year to date, ending September 30, 2012, results were as follows:

  • Total revenues of $10,366,236 compared to $10,780,710 for the first nine months of 2011.
  • Gross profit of $4,216,907 compared to $4,917,385 in first nine months of 2011.
  • Adjusted EBITDA of $347,124 compared to $1,223,846 in the comparable period in 2011.
  • Working capital as of September 30, 2012 was $9,510,696 compared to $6,353,054 at December 31, 2011.
  • "In the third quarter we continued to experience the impact of the slowdown in new project awards, delays in the initiation of new studies, and the resulting impact on our top line," said Jeff Markin, president and chief executive officer of VirtualScopics.  He stated, "While our third quarter revenues exceeded our prior year third quarter revenues, the rate of growth and the overall level of revenue are below our capability and expectation. Accordingly we have made, and will continue to make, changes to our selling and operational processes to maximize new project bookings and overall client satisfaction." He concluded, "We are optimistic that because of our strong client relationships, the strengthening of the PPD alliance, and our industry reputation, this slowdown will be temporary and we anticipate returning to our historical growth rates."

    "In light of the softness in our revenues during 2012, we are continuing to actively monitor our level of necessary expenditures," stated Molly Henderson, chief business and financial officer of VirtualScopics. She added, "We believe the softness in the level of new project awards will improve and, therefore, anticipate continuing to make the important investments in market opportunities that will support our long-term strategic growth." She continued, "This includes our efforts in the field of personalized medicine which we are continuing to advance." She concluded, "We have a significant amount of projects awaiting decisions and anticipate that we will receive word on these projects prior to the end of this year, thereby, giving us confidence as we enter 2013."

    Jeff Markin and Molly Henderson will provide a business and third quarter 2012 financial update during the conference call this morning at 11:00 a.m. ET.  Interested participants should dial 877.407.8035 when calling within the United States or +1 201 689 8035 when calling internationally. This call can also be accessed at www.virtualscopics.com 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 and further adjusted to exclude stock compensation expense and the unrealized gain (loss) on the change in fair value of derivative liabilities (mark to market adjustment for warrants).  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 ASC 815-40 and the non-cash variable nature of stock compensation expense 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 (loss)/income.

    About VirtualScopics, Inc.
    VirtualScopics, Inc. is a leading provider of quantitative imaging solutions to accelerate drug and medical device development in addition to improving patient care.  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 www.virtualscopics.com.

    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 efforts to maximize new project bookings, 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, 2011 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 www.sec.gov. 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; and, the risk that the Company may not receive contract awards which it has sought.  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-CONTACT:Investor Relations:Company Contact:Tim RyanMolly HendersonThe Shoreham GroupChief Business and Financial Officer, Sr. Vice President80 Eighth Ave, Ste 1107500 Linden OaksNew York, NY 10011

    Rochester, New York 14625+1 212 242.7777 Direct

    +1 585 249.6231tryan@shorehamgroupllc.comVirtualScopics, Inc. and SubsidiaryCondensed Consolidated Statements of Operations (unaudited)For the Three Months Ended September 30,For the Nine Months Ended September 30,2012201120122011Revenues$
    3,095,080$
    3,047,704$
    9,487,055$
    9,973,568Reimbursement revenues233,137221,103879,181807,142Total revenues3,328,2173,268,80710,366,23610,780,710Cost of revenues1,633,0241,551,0785,270,1485,056,183Cost of reimbursement revenues

    233,137221,103879,181807,142Total cost of services1,866,1611,772,1816,149,3295,863,325Gross profit1,462,0561,496,6264,216,9074,917,385Operating expensesResearch and development397,803320,0241,111,967984,730Sales and marketing312,140254,696954,605864,409General and administrative578,107594,6831,848,0071,882,865Stock-based compensation expense125,906194,050421,092631,984Depreciation and amortization101,393113,614320,003364,062Total operating expenses1,515,3491,477,0674,655,6744,728,050Operating (loss) income (53,293)19,559(438,767)189,335Other income (expense)Interest income1,0441,6712,17415,903Other expense(7,206)(6,724)(12,920)(24,665)Unrealized (loss) gain on change in   fair value of derivative liabilities(19,794)548,420(306,247)509,621Total other (expense) income(25,956)543,367(316,993)500,859Net (loss) income(79,249)562,926(755,760)690,194Preferred stock deemed dividend--1,806,919-Preferred stock dividends42,00012,00095,33336,989Net (loss) income available to common stockholders$
    (121,249)$
    550,926$
    (2,658,012)$
    53,205Weighted average number of common shares outstandingbasic 29,747,26229,329,81629,608,68428,809,385diluted29,747,76232,524,65829,608,68433,471,117Basic and diluted (loss) earnings per common share$
    .00$
    .02$
    (0.09)$
    .02*

    Cost of revenues includes non-cash stock-based compensation expense of $18,039 and $14,446 for the three months endedSeptember 30, 2012 and 2011, respectively and $44,796 and $38,465 for the nine months ended September 30, 2012 and 2011, respectively.VirtualScopics, Inc. and SubsidiaryCondensed Consolidated Balance SheetsSeptember 30,December 31,20122011Assets(unaudited)Current assetsCash 

    $
    8,060,832$
    5,737,009Accounts receivable, net

    2,728,6632,435,496Prepaid expenses and other current assets

    406,438361,376Total current assets

    11,195,9338,533,881Patents, net

    1,497,9221,582,938Property and equipment, net

    418,976514,230Other assets

    10,85627,140Total assets

    $
    3,123,687$   10,658,189Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable and accrued expenses

    $
    913,262$
    843,275Accrued payroll

    474,099759,470Unearned revenue

    240,266421,486 Derivative liabilities

    57,610156,596Total current liabilities

    1,685,2372,180,827Commitments and Contingencies

    --Stockholders' EquityConvertible preferred stock, $0.001 par value; 15,000,000 shares authorized;Series A 8,400 shares authorized; issued and outstanding, 2,190 at September 30, 2012 and December 31, 2011; liquidation preference $1,000 per share

    22Series B 6,000 shares authorized; issued and outstanding, 600 at September 30, 2012 and December 31, 2011; liquidation preference $1,000 per share

    11Series C-1 3,000 shares authorized; issued and outstanding, 3,000 and 0 shares at September 30, 2012 and December 31, 2011, respectively; liquidation preference $1,000 per share

    3-Series C-2 3,000 shares authorized; issued and outstanding, 0 shares at September 30, 2012 and December 31, 2011; liquidation preference $1,000 per share

    --Common Stock, $0.001 par value; 85,000,000 shares authorized; issued and outstanding, 29,747,762 and 29,370,687 shares at September 30, 2012 and December 31, 2011, respectively 

    29,74829,371Additional paid-in capital

    21,599,40417,882,936Accumulated deficit

    (10,190,708)(9,434,948)Total stockholders' equity

    11,438,4508,477,362Total liabilities and stockholders' equity

    $
    3,123,687$   10,658,189Three Months EndedThree Months EndedAdjusted EBITDA (non-GAAP measurement):September 30, 2012September 30, 2011(unaudited)

    (unaudited)Net (loss) income$
    (79,249)

    $
    562,926Interest income and other expenses6,162

    5,053Depreciation and amortization101,393

    113,614Stock-based compensation expense 143,945

    208,496Unrealized loss (gain) on change in fair value of derivative liabilities19,794

    (548,420)  Adjusted EBITDA$
    92,045

    $
    341,669  Basic and diluted Adjusted EBITDA per common share, non-GAAP$
    .01

    $
    .01Nine Months EndedNine Months EndedAdjusted EBITDA (non-GAAP measurement):September 30, 2012September 30, 2011(unaudited)

    (unaudited)Net (loss) income$
    (755,760)

    $
    90,194Interest income and other expenses10,746

    8,762Depreciation and amortization320,003

    364,062Stock-based compensation expense 465,888

    670,449Unrealized loss (gain) on change in fair value of derivative liabilities306,247

    (509,621)  Adjusted EBITDA$
    347,124

    $
    ,223,846  Basic and diluted Adjusted EBITDA per common share, non-GAAP$
    .01

    $
    .04 

     


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    SOURCE VirtualScopics, Inc.
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