VirtualScopics Reports 3rd Quarter 2012 Results

               VirtualScopics Reports 3rd Quarter 2012 Results

Earnings call scheduled for 11am ET today

PR Newswire

ROCHESTER, N.Y., Nov. 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:

  oTotal revenues of $10,366,236 compared to $10,780,710 for the first nine
    months of 2011.
  oGross profit of $4,216,907 compared to $4,917,385 in first nine months of
    2011.
  oAdjusted EBITDA of $347,124 compared to $1,223,846 in the comparable
    period in 2011.
  oWorking 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 Ryan  Molly Henderson
                                                   Chief Business and
              The Shoreham Group Financial Officer, Sr. Vice
                                                   President
              80 Eighth Ave, Ste                   500 Linden Oaks
              1107
              New York, NY 10011                   Rochester, New York 14625
              +1 212 242.7777 Direct               +1 585 249.6231
              tryan@shorehamgroupllc.com



VirtualScopics, Inc. and Subsidiary
Condensed Consolidated Statements of Operations
(unaudited)
                         For the Three Months       For the Nine Months Ended
                         Ended September 30,        September 30,
                         2012          2011         2012           2011
                         $        $          $         $     
Revenues                            3,047,704   9,487,055      9,973,568
                         3,095,080
Reimbursement revenues   233,137       221,103      879,181        807,142
       Total revenues    3,328,217     3,268,807    10,366,236     10,780,710
Cost of revenues         1,633,024     1,551,078    5,270,148      5,056,183
Cost of reimbursement    233,137       221,103      879,181        807,142
revenues
       Total cost of     1,866,161     1,772,181    6,149,329      5,863,325
       services
           Gross profit  1,462,056     1,496,626    4,216,907      4,917,385
Operating expenses
    Research and         397,803       320,024      1,111,967      984,730
    development
    Sales and marketing  312,140       254,696      954,605        864,409
    General and          578,107       594,683      1,848,007      1,882,865
    administrative
    Stock-based
    compensation         125,906       194,050      421,092        631,984
    expense
    Depreciation and     101,393       113,614      320,003        364,062
    amortization
           Total
           operating     1,515,349     1,477,067    4,655,674      4,728,050
           expenses
Operating (loss)         (53,293)      19,559       (438,767)      189,335
income
Other income (expense)
    Interest income      1,044         1,671        2,174          15,903
    Other expense        (7,206)       (6,724)      (12,920)       (24,665)
    Unrealized (loss)
    gain on change in
     fair value of
    derivative           (19,794)      548,420      (306,247)      509,621
    liabilities
Total other (expense)    (25,956)      543,367      (316,993)      500,859
income
    Net (loss) income    (79,249)      562,926      (755,760)      690,194
Preferred stock deemed   -             -            1,806,919      -
dividend
Preferred stock          42,000        12,000       95,333         36,989
dividends
Net (loss) income        $        $        $          $     
available to common                550,926     (2,658,012)     653,205
stockholders             (121,249)
Weighted average number
of common shares
outstanding
    basic               29,747,262    29,329,816   29,608,684     28,809,385
    diluted              29,747,762    32,524,658   29,608,684     33,471,117
Basic and diluted        $        $       $        $     
(loss) earnings per                0.02       (0.09)       
common share               0.00                                  0.02
*   Cost of revenues includes non-cash stock-based compensation expense of
    $18,039 and $14,446 for the three months ended
    September 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 Subsidiary
Condensed Consolidated Balance Sheets
                                           September 30,      December 31,
                                           2012               2011
Assets                                     (unaudited)
Current assets
Cash                                      $   8,060,832   $   5,737,009
Accounts receivable, net                   2,728,663          2,435,496
Prepaid expenses and other current assets  406,438            361,376
Total current assets                       11,195,933         8,533,881
Patents, net                               1,497,922          1,582,938
Property and equipment, net                418,976            514,230
Other assets                               10,856             27,140
Total assets                               $  13,123,687    $  10,658,189
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses      $     913,262  $    843,275
Accrued payroll                            474,099            759,470
Unearned revenue                           240,266            421,486
Derivative liabilities                    57,610             156,596
Total current liabilities                  1,685,237          2,180,827
Commitments and Contingencies              -                  -
Stockholders' Equity
Convertible 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,    2                  2
2012 and December 31, 2011; liquidation
preference $1,000 per share
Series B 6,000 shares authorized; issued
and outstanding, 600 at September 30, 2012 1                  1
and December 31, 2011; liquidation
preference $1,000 per share
Series C-1 3,000 shares authorized; issued
and outstanding, 3,000 and 0 shares at
September 30, 2012 and December 31, 2011,  3                  -
respectively; liquidation preference
$1,000 per share
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        29,748             29,371
September 30, 2012 and December 31, 2011,
respectively
Additional paid-in capital                 21,599,404         17,882,936
Accumulated deficit                        (10,190,708)       (9,434,948)
Total stockholders' equity                 11,438,450         8,477,362
Total liabilities and stockholders' equity $  13,123,687    $  10,658,189



                                   Three Months Ended    Three Months Ended
Adjusted EBITDA (non-GAAP          September 30, 2012    September 30, 2011
measurement):
                                   (unaudited)           (unaudited)
Net (loss) income                  $            $        
                                   (79,249)              562,926
Interest income and other          6,162                 5,053
expenses
Depreciation and amortization      101,393               113,614
Stock-based compensation expense  143,945               208,496
Unrealized loss (gain) on change
in fair value of derivative        19,794                (548,420)
liabilities
 Adjusted EBITDA                  $             $        
                                   192,045              341,669
 Basic and diluted Adjusted       $           $          
EBITDA per common share, non-GAAP   0.01                0.01
                                   Nine Months Ended     Nine Months Ended
Adjusted EBITDA (non-GAAP          September 30, 2012    September 30, 2011
measurement):
                                   (unaudited)           (unaudited)
Net (loss) income                  $             $        
                                   (755,760)             690,194
Interest income and other          10,746                8,762
expenses
Depreciation and amortization      320,003               364,062
Stock-based compensation expense  465,888               670,449
Unrealized loss (gain) on change
in fair value of derivative        306,247               (509,621)
liabilities
 Adjusted EBITDA                  $             $       
                                   347,124              1,223,846
 Basic and diluted Adjusted       $           $          
EBITDA per common share, non-GAAP   0.01                0.04





SOURCE VirtualScopics, Inc.

Website: http://www.virtualscopics.com