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VirtualScopics Reports First Quarter 2013 Results

              VirtualScopics Reports First Quarter 2013 Results

Awards and Bookings Advance 40% over Year to Date 2012

PR Newswire

ROCHESTER, N.Y., May 15, 2013

ROCHESTER, N.Y., May 15, 2013 /PRNewswire/ --VirtualScopics, Inc.
(NASDAQ:VSCP), a leading provider of quantitative imaging, today announced
revenues of $2,532,587 for the quarter ended March 31, 2013 compared to
$3,702,159 for the quarter ended March 31, 2012. Net loss for the three months
ended March 31, 2013 was $1,112,948 compared to a net loss of $613,544 for the
three months ended March 31, 2012.

Other first quarter ended March 31, 2013 results were:

  oGross margin of 31% compared to 38% in the first quarter of 2012.
  oOperating loss of $1,117,456 compared to an operating loss of $218,780 in
    the first quarter of 2012. Excluding investments made in personalized
    medicine, operating loss of $772,898 in the first quarter of 2013.
  oAdjusted EBITDA of ($880,356) compared to $82,106 for the first quarter of
    2012. Excluding investments made in personalized medicine, Adjusted EBITDA
    of ($535,798) in the first quarter of 2013.

Jeff Markin, president and chief executive officer of VirtualScopics stated,
"While our revenues continue to suffer due to our low new project bookings in
2012 we are encouraged with our sales performance this year." He added,
"Included in year to date project awards is the analysis of a significant
Phase III study that will occur primarily in the second quarter. This project,
along with others awarded to date, demonstrates a greater than 40% increase in
awards and bookings over the same period in 2012." He continued, "While our
softness in 2012 bookings will continue to impact near term revenue we are
optimistic that the measures we put in place last year are now showing
increased sales activity." He further stated, "Another example of our
improving sales efforts is seen in the number of individual project awards in
the first quarter of 2013 which has doubled versus those won during the same
period of 2012. Additionally, over the last two quarters we were awarded more
projects during a two-quarter period than at any time over the past two
years." He concluded, "We believe this sales momentum will continue as the
year progresses."

"In light of the continued softness in our top line, we remain diligent in
monitoring our costs," stated Molly Henderson, chief business and financial
officer of VirtualScopics. She added, "Although the analysis of the Phase III
study is occurring later than we anticipated, we are confident in our ability
to meet the condensed timeline and that we will see a positive impact to
second quarter results." She continued, "In addition to the increase in the
number of project awards in 2013 we are encouraged by the nature of the new
business we have experienced." She further added, "Of note, seven of our year
to date 2013 project awards came from new customers. This number exceeds the
amount of new customers we secured in all of 2012." She stated, "Incoming
requests for proposal (RFPs) remain strong as we received a greater number
during the first quarter of 2013 than any previous first quarter in the
company's history, which gives us confidence on the health of the industry and
the interest in our services." She concluded, "While we are optimistic in our
ability to translate these RFPs into awarded projects, we believe it's
critical for us to ensure our cost structure is in line with our opportunities
in order to minimize the amount of cash consumed during these times of
fluctuating revenue."

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 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 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, 2012 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
                                                                Chief Business
The Shoreham Group                      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 March 31,
                                          2013                 2012
Revenues                                  $             $      
                                          2,282,831            3,293,659
Reimbursement revenues                    249,756              408,500
           Total revenues                 2,532,587            3,702,159
Cost of revenues                          1,497,539            1,882,745
Cost of reimbursement revenues            249,756              408,500
           Total cost of services         1,747,295            2,291,245
                  Gross profit            785,292              1,410,914
Operating expenses
    Research and development              433,846              356,326
    Sales and marketing                   354,609              331,072
    General and administrative            890,035              654,741
    Stock-based compensation expense      127,945              175,936
    Depreciation and amortization         96,313               111,619
                  Total operating         1,902,748            1,629,694
                  expenses
Operating loss                            (1,117,456)          (218,780)
Other income (expense)
    Interest income                       1,010                416
    Other expense                         (1,372)              (268)
    Unrealized gain (loss) on change in   4,870                (394,912)
    fair value of derivative liabilities
Total other income (expense)              4,508                (394,764)
    Net loss                              (1,112,948)          (613,544)
Preferred stock dividends                 42,000               12,000
Net loss available to common              $              $       
stockholders                              (1,154,948)          (625,544)
Basic and diluted net loss per common     $           $       
share                                      (0.04)               (0.02)
Weighted average number of common shares
outstanding
    basic and diluted                     29,799,523           29,370,687
*   Cost of revenues includes non-cash stock-based compensation expense of
    $12,842 and $13,331 for the
    three months ended March 31, 2013 and 2012, respectively.





VirtualScopics, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
                                             March 31,          December 31,
                                             2013               2012
Assets                                       (unaudited)
Current assets
Cash                                        $   7,265,060   $  8,523,807
Accounts receivable, net                     2,168,984          1,762,507
Prepaid expenses and other current assets    460,116            437,698
Total current assets                         9,894,160          10,724,012
Patents, net                                 1,428,511          1,470,436
Property and equipment, net                  360,416            399,569
Other assets                                 -                  5,428
Total assets                                 $  11,683,087    $ 12,599,445
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses        $     991,762  $   856,702
Accrued payroll                              431,484            481,661
Unearned revenue                             248,299            272,509
Dividends payable                            167,333            125,333
 Derivative liabilities                    11,080             15,950
Total current liabilities                    1,849,958          1,752,155
Commitments and Contingencies                -                  -
Stockholders' Equity
Convertible preferred stock, $0.001 par value; 15,000,000
shares authorized;
Series C-1; 3,000 shares authorized; issued
and outstanding, 3,000 at
March 31, 2013 and December 31, 2012;        3                  3
liquidation preference $1,000 per
share
Series B 6,000 shares authorized; issued and
outstanding, 600 at March 31,                1                  1
2013 and December 31, 2012; liquidation
preference $1,000 per share
Series A 8,400 shares authorized; issued and
outstanding, 2,190 at March                  2                  2
31, 2013 and December 31, 2012; liquidation
preference $1,000 per share
Series C-2 3,000 shares authorized; none
issued and outstanding, at March             -                  -
31, 2013 and December 31, 2012; liquidation
preference $1,000 per share
Common Stock, $0.001 par value; 85,000,000
shares authorized; issued
29,958,795 and 29,799,523 shares at March
31, 2013 and December 31,                    29,800             29,800
2012, respectively; outstanding, 29,799,523
shares at March 31, 2013 and
December 31, 2012, respectively
Additional paid-in capital                   21,879,871         21,781,084
Accumulated deficit                          (12,076,548)       (10,963,600)
Total stockholders' equity                   9,833,129          10,847,290
Total liabilities and stockholders' equity   $  11,683,087    $ 12,599,445





                                 Three Months Ended      Three Months Ended
Adjusted EBITDA (non-GAAP        March 31, 2013          March 31, 2012
measurement):
                                 (unaudited)             (unaudited)
Net loss                         $                 $         
                                 (1,112,948)            (613,544)
Interest income and other        362                     (148)
expenses
Depreciation and amortization    96,313                  111,619
Stock-based compensation         140,787                 189,267
expense
Unrealized (gain) loss on
change in fair value of          (4,870)                 394,912
derivative liabilities
 Adjusted EBITDA                $               $          
                                 (880,356)               82,106
 Basic and diluted Adjusted     $            $          
EBITDA per common share,         (0.03)                    0.00
non-GAAP

SOURCE VirtualScopics, Inc.

Website: http://www.virtualscopics.com
 
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