VirtualScopics Reports Fourth-Quarter and Full-Year 2012 Results

       VirtualScopics Reports Fourth-Quarter and Full-Year 2012 Results

PR Newswire

ROCHESTER, N.Y., Feb. 19, 2013

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:

  oApproximately $550,000 in investments made within its Personalized
    Medicine initiative, expenses included within research and development and
    general and administrative costs in 2012.
  oGross margin of 41% compared to 44% for the full year of 2011.
  oResearch and development expenditures of $1,524,721, representing a
    $200,258, or 15%, increase compared to prior year.
  oEarnings/(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.
  oExcluding investments made within the personalized medicine initiative,
    full-year Adjusted EBITDA of approximately $340,000.
  oCash balance of $8,523,807 compared to $5,737,009 as of December 31, 2011.

Fourth quarter ended December 31, 2012 results were:

  oRevenues of $2,596,928 compared to $3,500,892 in the fourth quarter of
    2011.
  oGross margin of 40% compared to 39% in the fourth quarter of 2011.
  oOperating 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.
  oAdjusted 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 www.virtualscopics.com 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
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 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. 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 Henderson
The Shoreham Group         Chief Business and Financial Officer, Sr. Vice
                            President
80 Eighth Ave, Ste 1107    500 Linden Oaks
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 Ended      For the Years Ended

                    December 31,                    December 31,
                    2012             2011           2012          2011
Revenues            $          $         $        $     
                    2,463,393         3,141,891    11,950,447    13,115,459
Reimbursement       133,535          359,001        1,012,717     1,166,144
revenues
 Total revenues 2,596,928        3,500,892      12,963,164    14,281,603
Cost of services    1,428,844        1,785,138      6,698,992     6,841,321
Cost of
reimbursement       133,535          359,001        1,012,717     1,166,144
revenues
 Total cost of  1,562,379        2,144,139      7,711,709     8,007,465
services
 Gross profit 1,034,549        1,356,753      5,251,455     6,274,138
Operating expenses
 Research &        412,755          339,734        1,524,721     1,324,463
development
 Sales & marketing 446,050          235,155        1,400,655     1,099,565
 General &         743,567          607,342        2,591,576     2,490,207
administrative
 Stock-based
compensation        135,745          201,424        556,837       833,407
expense
 Depreciation &    100,732          114,845        420,733       478,908
amortization
 Total        1,838,849        1,498,500      6,494,522     6,226,550
operating expenses
Operating (loss)    ( 804,300 )      ( 141,747 )    ( 1,243,067   47,588
income                                             )
Other income
(expense)
 Other income      1,228            2,199          3,403         18,103
 Other expense     ( 11,480 )       ( 7,133 )      ( 24,401 )    ( 31,798 )
 Unrealized
gain(loss) on
change in fair      41,660           159,781        ( 264,587 )   669,402
value of derivative
liability
Total other income  31,408           154,847        ( 285,585 )   655,707
(expense)
 Net (loss) income ( 772,892 )      13,100         ( 1,528,652   703,295
                                                    )
Preferred stock     -                -              1,806,919     -
deemed dividend
Preferred stock     42,000           12,000         137,333       48,989
dividends
Net (loss) income   $          $         $     (  $     
available to common ( 814,892 )                 3,472,904 )     654,306
stockholders                         1,100
Weighted average
number of common
shares outstanding
 Basic             29,752,263       29,370,687     29,644,775    28,950,864
 Diluted           29,752,263       31,873,977     29,644,775    33,413,824
Basic and diluted   $          $         $        $     
(loss) earnings per   ( 0.03 )                (          
common share                         0.00           0.11 )        0.02
* 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 Subsidiary
Consolidated Balance Sheets
                                      December 31,
                                      2012                 2011
Assets                                (unaudited)
Current assets
Cash                                  $    8,523,807   $    5,737,009
Accounts receivable, net of allowance 1,762,507            2,435,496
for doubtful accounts of $15,000
Prepaid expenses and other current    437,698              361,376
assets
 Total current assets          10,724,012           8,533,881
Patents, net                          1,470,436            1,582,938
Property and equipment, net           399,569              514,230
Other assets                          5,428                27,140
 Total assets                  12,599,445           10,658,189
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $      982,035  $      843,275
Accrued payroll                       481,661              759,470
Unearned revenue                      272,509              421,486
Derivative liabilities                15,950               156,596
 Total current liabilities     1,752,155            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
December 31, 2012 and December 31,    2                    2
2011, respectively, liquidation
preference $1,000 per share
Series B; 6,000 shares authorized;
issued and outstanding, 600 at
December 31, 2012 and December 31,    1                    1
2011, liquidation preference $1,000
per share
Series C-1; 3,000 shares authorized;
issued and outstanding, 3,000 and 0
shares at December 31, 2012 and       3                    -
December 31, 2011, respectively;
liquidation preference $1,000 per
share
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, 29,800               29,371
2012 and December 31, 2011,
respectively
 Additional paid in capital        21,781,084           17,882,936
 Accumulated deficit               ( 10,963,600 )       ( 9,434,948 )
 Total stockholders' equity    10,847,290           8,477,362
 Total liabilities and         $   12,599,445    $   10,658,189
stockholders' equity



                                        Three Months Ended  Three Months Ended
Adjusted EBITDA (non-GAAP measurement): December 31, 2012   December 31, 2011
                                        (unaudited)
Net (loss) income                       $ (772,892)         $ 13,100
Other expenses and interest income, net 10,252              4,934
Depreciation and amortization           100,732             114,845
Stock-based compensation expense        148,933             210,173
Unrealized gain on change in fair value (41,660)            (159,781)
of derivative liabilities
 Adjusted EBITDA                     $ (554,635)         $ 183,271
 Basic and diluted Adjusted EBITDA   $ (0.02)            $ 0.01
per common share, non-GAAP
                                        Year Ended          Year Ended
Adjusted EBITDA (non-GAAP measurement): December 31, 2012   December 31, 2011
                                        (unaudited)
Net (loss) income                       $ (1,528,652)       $ 703,295
Other expenses and interest income, net 20,999              13,695
Depreciation and amortization           420,733             478,908
Stock-based compensation expense        614,821             880,622
Unrealized loss (gain) on change in     264,587             (669,402)
fair value of derivative liabilities
 Adjusted EBITDA                     $ (207,512)         $ 1,407,118
 Basic Adjusted EBITDA per common    $ (0.01)            $ 0.05
share, non-GAAP
 Diluted Adjusted EBITDA per common  $ (0.01)            $ 0.04
share, non-GAAP





SOURCE VirtualScopics, Inc.

Website: http://www.virtualscopics.com
 
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