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VirtualScopics Reports Fourth-Quarter and Full-Year 2012 Results

ROCHESTER, N.Y., Feb. 19, 2013 /PRNewswire/ -- VirtualScopics, Inc. (NASDAQ:   VSCP), a leading provider of quantitative imaging, today announced revenues of $12,963,164 for the year ended December 31, 2012 compared to $14,281,603 for the year ended December 31, 2011. Net loss for the twelve months ended December 31, 2012 was $1,528,652 compared to a net income of $703,295 for the twelve months ended December 31, 2011.

Other full-year 2012 results include:

  • Approximately $550,000 in investments made within its Personalized Medicine initiative, expenses included within research and development and general and administrative costs in 2012.
  • Gross margin of 41% compared to 44% for the full year of 2011.
  • Research and development expenditures of $1,524,721, representing a $200,258, or 15%, increase compared to prior year.
  • Earnings/(Loss) before interest, taxes, depreciation and amortization, and excluding stock compensation expense and gain/loss from derivative financial instrument ("Adjusted EBITDA") of ($207,512) for the year ended December 31, 2012 compared to Adjusted EBITDA of $1,407,118 for the comparable period in 2011.
  • Excluding investments made within the personalized medicine initiative, full-year Adjusted EBITDA of approximately $340,000.
  • Cash balance of $8,523,807 compared to $5,737,009 as of December 31, 2011.
  • Fourth quarter ended December 31, 2012 results were:

  • Revenues of $2,596,928 compared to $3,500,892 in the fourth quarter of 2011.
  • Gross margin of 40% compared to 39% in the fourth quarter of 2011.
  • Operating loss of $804,300 compared to a loss of $141,747 in the fourth quarter of 2011. Excluding investments made in personalized medicine, operating loss of $432,730.
  • Adjusted EBITDA loss of ($554,635) compared to $183,271 for the fourth quarter of 2011. Excluding investments made in personalized medicine, Adjusted EBITDA of ($183,065).
  • Jeff Markin, president and chief executive officer of VirtualScopics stated, "While the company continued to advance technically and operationally in 2012, we were disappointed with the lack of revenue growth which impacted our bottom line."  He continued, "As I have stated in previous comments, our 2012 top line numbers were impacted by a slowdown in new project awards and delays in the initiation of new studies. This drove an internal analysis to identify areas that would have the greatest impact on accelerating new contract awards while enhancing client satisfaction."  He stated, "I am proud of the commitment shown by our employees and am pleased to report that project wins in the fourth quarter were the greatest of any quarter last year."  He added, "I also remain encouraged about our opportunities heading into 2013 as our RFP (request for proposal) activity remains strong."  He further added, "We also saw a significant increase in the number of proposal requests generated through our PPD alliance as we continued to more fully integrate our sales and operations teams."  He concluded, "With the continued strengthening of the PPD alliance, strong relationships with existing clients, and a growing proposal pipeline we anticipate 2013 will show a rebound in new project activity."

    "During 2012, we made investments in several key areas, specifically, our software platform which is the basis of our image analysis services, our customer satisfaction program, and our personalized medicine initiative. In light of the softness we experienced in new project awards, we believe it is important to continue to invest in areas that will result in expanding our capabilities and focusing on the needs of our customers," stated Molly Henderson, chief business and financial officer of VirtualScopics. She added, "Certain investments have already yielded results; specifically our investments in enhancing customer satisfaction generated a noticeable increase in the number of repeat customers in 2012 when compared to 2011." She continued, "Additionally, 2012 was a very important year in the evolution of our personalized medicine business.  In April we announced a significant investment by the Merck Global Health Innovation Fund to support this initiative."  She concluded, "We continue to strongly believe in the opportunity and role that quantitative imaging will have in both the drug development and personalized medicine markets."

    Jeff Markin and Molly Henderson will provide a business update and discuss these results during the conference call today at 11:00 a.m. ET. 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 Generally Accepted Accounting Principles ("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-based compensation expense and the loss/gain on derivative instrument (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 Accounting Standards Codification ("ASC") 815-40 and the non-cash variable nature of stock-based 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 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 StatementsThe 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, 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 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.

    -Financial tables to follow-

     CONTACTS: 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, NYRochester, New York 14625+1 212 242 7777 Direct 

    +1 585   VirtualScopics, Inc. and SubsidiaryCondensed Consolidated Statements of Operations(unaudited)For the Three Months Ended December 31,For the Years Ended December 31,2012201120122011Revenues

    3,115,459Reimbursement revenues

    133,535359,0011,012,7171,166,144Total revenues

    2,596,9283,500,89212,963,16414,281,603Cost of services

    1,428,8441,785,1386,698,9926,841,321Cost of reimbursement revenues

    133,535359,0011,012,7171,166,144Total cost of services

    1,562,3792,144,1397,711,7098,007,465Gross profit

    1,034,5491,356,7535,251,4556,274,138Operating expenses  Research & development

    412,755339,7341,524,7211,324,463  Sales & marketing

    446,050235,1551,400,6551,099,565  General & administrative

    743,567607,3422,591,5762,490,207  Stock-based compensation expense

    135,745201,424556,837833,407  Depreciation & amortization

    100,732114,845420,733478,908Total operating expenses

    1,838,8491,498,5006,494,5226,226,550Operating (loss) income 

    ( 804,300 )( 141,747 )( 1,243,067 )47,588Other income (expense)  Other income

    1,2282,1993,40318,103  Other expense

    ( 11,480 )( 7,133 )( 24,401 )( 31,798 )  Unrealized gain(loss) on change in fair value of derivative liability

    41,660159,781( 264,587 )669,402Total other income (expense)

    31,408154,847( 285,585 )655,707  Net (loss) income

    ( 772,892 )13,100( 1,528,652 )703,295Preferred stock deemed dividend

    --1,806,919-Preferred stock dividends

    42,00012,000137,33348,989Net (loss) income available to common stockholders

    ( 814,892 )$
    ( 3,472,904 )$
    54,306Weighted average number of common shares outstanding  Basic

    29,752,26329,370,68729,644,77528,950,864  Diluted

    29,752,26331,873,97729,644,77533,413,824Basic and diluted (loss) earnings per common share

    ( 0.03 )$
    ( 0.11 )$
    .02* Cost of revenues includes non-cash stock-based compensation expense of $13,188 and $8,749 for the three months ended December 31, 2012 and 2011, respectively and $57,984 and $47,215 for the years ended December 31, 2012 and 2011, respectively. VirtualScopics, Inc. and SubsidiaryConsolidated Balance SheetsDecember 31,20122011Assets(unaudited)Current assetsCash

    5,737,009Accounts receivable, net of allowance for doubtful accounts of $15,000 

    1,762,5072,435,496Prepaid expenses and other current assets

    437,698361,376Total current assets

    10,724,0128,533,881Patents, net

    1,470,4361,582,938Property and equipment, net

    399,569514,230Other assets

    5,42827,140Total assets

    12,599,44510,658,189Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable and accrued expenses

    843,275Accrued payroll

    481,661759,470Unearned revenue

    272,509421,486Derivative liabilities

    15,950156,596Total current liabilities

    1,752,1552,180,827Commitments and ContingenciesStockholders' EquityConvertible preferred stock, $0.001 par value; 15,000,000 sharesauthorized;Series A; 8,400 shares authorized; issued and outstanding, 2,190 at December 31, 2012 and December 31, 2011, respectively, liquidation preference $1,000 per share

    22Series B; 6,000 shares authorized; issued and outstanding, 600 at December 31, 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 December 31, 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 December 31, 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, 29,799,523 and 29,370,687 shares at December 31, 2012 and December 31, 2011, respectively

    29,80029,371Additional paid in capital

    21,781,08417,882,936Accumulated deficit

    ( 10,963,600 )( 9,434,948 )Total stockholders' equity

    10,847,2908,477,362Total liabilities and stockholders' equity

    ,658,189 Three Months EndedThree Months EndedAdjusted EBITDA (non-GAAP measurement):December 31, 2012December 31, 2011(unaudited)Net (loss) income

    $ (772,892)$ 13,100Other expenses and interest income, net

    10,2524,934Depreciation and amortization

    100,732114,845Stock-based compensation expense

    148,933210,173Unrealized gain on change in fair value of derivative liabilities

    (41,660)(159,781)Adjusted EBITDA

    $ (554,635)$ 183,271Basic and diluted Adjusted EBITDA per common share, non-GAAP

    $ (0.02)$ 0.01Year EndedYear EndedAdjusted EBITDA (non-GAAP measurement):December 31, 2012December 31, 2011(unaudited)Net (loss) income

    $ (1,528,652)$ 703,295Other expenses and interest income, net

    20,99913,695Depreciation and amortization

    420,733478,908Stock-based compensation expense

    614,821880,622Unrealized loss (gain) on change in fair value of derivative liabilities

    264,587(669,402)Adjusted EBITDA

    $ (207,512)$ 1,407,118Basic Adjusted EBITDA per common share, non-GAAP

    $ (0.01)$ 0.05Diluted Adjusted EBITDA per common share, non-GAAP

    $ (0.01)$ 0.04 


    SOURCE VirtualScopics, Inc.
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