VirtualScopics Reports 3rd Quarter 2011 Results; YTD Revenues Rise 9%

510k Submitted to FDA for its first Personalized Medicine Application

Nov 10, 2011, 08:00 ET from VirtualScopics, Inc.

ROCHESTER, N.Y., Nov. 10, 2011 /PRNewswire/ -- VirtualScopics, Inc. (NASDAQ: VSCP), a leading provider of quantitative imaging for clinical trials, today reported year to date revenues of $10,780,710 for the nine months ended September 30, 2011 compared to $9,883,190 in the comparable period in 2010, a 9% increase. Third quarter 2011 revenues were $3,268,807 compared to revenues of $3,590,591 in the third quarter of 2010, a 9% decrease. Gross profit for the quarter ended September 30, 2011 was $1,496,626 compared to $1,887,281 for the quarter ended September 30, 2010. Operating income for the third quarter of 2011 was $19,559 compared to $400,235 in the third quarter of 2010. Earnings before interest, taxes, depreciation and amortization, and excluding stock compensation expense and gain on derivative financial instrument ("Adjusted EBITDA") for the third quarter of 2011 was $341,669 compared to $758,636 in the comparable period in 2010. Net income for the quarter ended September 30, 2011 was $562,926 compared to $628,699 for the quarter ended September 30, 2010. The cash balance as of September 30, 2011 was $5,172,413 compared to $4,576,060 as of December 31, 2010.

"During the third quarter we were pleased with advancements we made both operationally and within our R&D initiatives," stated Jeff Markin, president and chief executive officer of VirtualScopics. He added, "Our third quarter revenue was negatively impacted by the slower than anticipated ramp-up of several studies initiated earlier in the year, the delay of studies due to start in the third quarter, and the slowdown of a large phase III study that is moving towards registration with the regulatory authorities earlier than anticipated due to strong patient response."  He further stated, "The impact of these events and the overall softness in the economy are unfortunate, but we are optimistic we will see an uptick in the first half of 2012 given our sales pipeline and the progress we are seeing in our relationship with PPD."  He further stated, "Even with the lower revenues we are pleased to show positive Adjusted EBITDA and an increase to our cash balance."

"Our cash position remains strong and further enables us to invest in market opportunities that support our long-term growth initiatives," said Molly Henderson, chief business and financial officer of VirtualScopics. "As such, we continue to invest in research and development, including new market opportunities, in order to stay innovative with our technology while being prudent with our capital on-hand." She added, "Of significant importance, is that we have filed a 510k with the FDA relative to our first personalized medicine application and accordingly, we've been engaged in several rounds of discussions with potential development partners. We believe quantitative imaging can play a critical role within medical practice and therefore are working towards a broader use of our applications outside of the clinical trial market."  She concluded, "In light of the softness in our third quarter revenues, we are adjusting our 2011 revenue guidance to $14 - $14.5 million, and estimate that our Adjusted EBITDA will range between $1.5 -1.7 million for the full year of 2011 which is in line with the guidance of $1.7 million."

Jeff Markin and Molly Henderson will provide a business and third quarter 2011 financial update during the conference call today at 9:00 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 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 compensation expense, the gain (loss) on derivative instrument (mark to market adjustment for warrants) and interest income and other expenses.  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 (ASC 718) 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, 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, 2010 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-

CONTACT:

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 September 30,

For the Nine Months Ended September 30,

2011

2010

2011

2010

Revenues

$ 3,047,704

$ 3,347,205

$ 9,973,568

$ 9,159,000

Reimbursement revenues

221,103

243,386

807,142

724,190

Total revenues

3,268,807

3,590,591

10,780,710

9,883,190

Cost of services

1,551,078

1,459,924

5,056,183

4,034,589

Cost of reimbursement revenues

221,103

243,386

807,142

724,190

Total cost of services

1,772,181

1,703,310

5,863,325

4,758,779

Gross profit

1,496,626

1,887,281

4,917,385

5,124,411

46%

53%

46%

52%

Operating expenses

Research and development

320,024

270,280

984,730

789,517

Sales and marketing

254,696

263,198

864,409

904,522

General and administrative

594,683

602,198

1,882,865

1,825,721

Stock-based compensation expense

194,050

221,958

631,984

599,083

Depreciation and amortization

113,614

129,412

364,062

381,425

Total operating expenses

1,477,067

1,487,046

4,728,050

4,500,268

Operating income

19,559

400,235

189,335

624,143

Other income (expense)

Other income

1,671

1,058

15,903

8,417

Other expense

(6,724)

(9,316)

(24,665)

(14,602)

Gain on derivative financial instrument

548,420

236,722

509,621

359,857

Total other income

543,367

228,464

500,859

353,672

Net income

562,926

628,699

690,194

977,815

Series B preferred stock cash dividend

12,000

40,520

36,989

140,577

Net income attributable to common stockholders

$     550,926

$     588,179

$     653,205

$     837,238

Basic and diluted earnings per common share

$          0.02

$          0.02

$          0.02

$          0.03

Weighted average number of common shares outstanding

Basic

29,329,816

26,313,937

28,809,385

25,975,864

Diluted

32,524,658

31,039,284

33,471,117

30,794,874

*

Cost of services includes non-cash stock-based compensation expense of $14,446 and $7,031 for the

three months ended September 30, 2011 and 2010, respectively, and $38,465 and $22,691 for the six months ended

September 30, 2011 and 2010, respectively.

VirtualScopics, Inc. and Subsidiary

Condensed Consolidated Balance Sheets

September 30,

December 31,

2011

2010

Assets

(unaudited)

Current assets

Cash

$       5,172,413

$     4,576,060

Accounts receivable, net

2,718,675

2,727,525

Prepaid expenses and other current assets

443,758

305,079

Total current assets

8,334,846

7,608,664

Patents, net

1,620,532

1,711,501

Property and equipment, net

566,078

404,426

Total assets

$     10,521,456

$     9,724,591

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable and accrued expenses

$          780,623

$     1,099,838

Accrued payroll

507,390

821,107

Unearned revenue

642,103

214,508

  Derivative liability

316,377

2,609,708

Total current liabilities

2,246,493

4,745,161

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 and 3,188 at September 30, 2011 and December 31, 2010, respectively; liquidation preference $1,000 per share

2

3

Series B 6,000 shares authorized; issued and outstanding, 600 and 800 at September 30, 2011 and December 31, 2010, respectively; liquidation preference $1,000 per share

1

1

Common Stock, $0.001 par value; 85,000,000 shares authorized; issued and outstanding, 29,370,687 and 27,414,620 shares at September 30, 2011 and December 31, 2010, respectively

29,371

27,415

Additional paid-in capital

17,693,638

15,090,254

Accumulated deficit

(9,448,049)

(10,138,243)

Total stockholders' equity

8,274,963

4,979,430

Total liabilities and stockholders' equity

$     10,521,456

$     9,724,591

Three Months Ended

Three Months Ended

September 30, 2011

September 30, 2010

(unaudited)

(unaudited)

Adjusted EBITDA (non-GAAP measurement):

Net income

$                      562,926

$                      628,699

Interest income and other expenses, net

5,053

8,258

Depreciation and amortization

113,614

129,412

Stock-based compensation expense

208,496

228,989

Gain on derivative financial instrument

(548,420)

(236,722)

 Adjusted EBITDA

$                      341,669

$                      758,636

 Basic Adjusted EBITDA per common share, non-GAAP

$                            0.01

$                            0.03

 Diluted Adjusted EBITDA per common share, non-GAAP

$                            0.01

$                            0.02

Nine Months Ended

Nine Months Ended

September 30, 2011

September 30, 2010

(unaudited)

(unaudited)

Adjusted EBITDA (non-GAAP measurement):

Net income

$                      690,194

$                      977,815

Interest income and other expenses, net

8,762

6,185

Depreciation and amortization

364,062

381,425

Stock-based compensation expense

670,449

621,774

Gain on derivative financial instrument

(509,621)

(359,857)

 Adjusted EBITDA

$                   1,223,846

$                   1,627,342

 Basic Adjusted EBITDA per common share, non-GAAP

$                            0.04

$                            0.06

 Diluted Adjusted EBITDA per common share, non-GAAP

$                            0.04

$                            0.05

SOURCE VirtualScopics, Inc.



RELATED LINKS

http://www.virtualscopics.com