VirtualScopics, LLC Reports 3rd Quarter 2010 Results; Revenues Increase 28%

ROCHESTER, N.Y., Nov. 11, 2010 /PRNewswire-FirstCall/ -- VirtualScopics, Inc. (Nasdaq: VSCP), a leading provider of quantitative imaging for clinical trials, today reported revenues of $3,590,591 for the third quarter of 2010 compared to revenues of $2,797,680 in the third quarter of 2009, a 28% increase. Excluding work performed in 2009 for the Department of Defense under projects that ended in 2009, the company posted a 39% increase in revenues during the first three quarters of 2010 compared to the same period in 2009. Gross profit for the quarter ended September 30, 2010 was $1,894,312 compared to $1,596,327 for the quarter ended September 30, 2009. Operating income for the third quarter of 2010 was $400,235 compared to $189,326 during the third quarter of 2009, a 111% increase. Net income for the quarter ended September 30, 2010 was $628,699 compared to a net loss of $215,907 for the quarter ended September 30, 2009.

Highlights for the first nine months of 2010 include:

• Total revenues of $9,883,190, an increase of $2,409,824, or 32%, compared to the same period in 2009.
• Gross profit of $5,147,102 compared to $4,109,450 in the first three quarters of 2009, a 25% increase.
• Operating income of $624,143 compared to an operating loss of $371,790 in the first nine months of 2009, a $995,933 improvement.
• Earnings before interest, taxes, depreciation and amortization, and excluding stock compensation expense and unrealized gain (loss) from derivative financial instrument (“Adjusted EBITDA”) was $1,627,342 compared to $815,957 in the comparable period in 2009, a 99% improvement.
• Net income was $977,815 compared to a net loss of $1,385,143 during the first three quarters of 2009.
• Backlog (the amount remaining to be recognized from active projects) of $42 million compared to $37 million at the same point in 2009, a 14% increase.

“We are extremely pleased to deliver to our stockholders another quarter of solid financial performance delivering significant growth in revenue and gross profit,” stated Jeff Markin, chief executive officer of VirtualScopics. He added, “In addition to our financial results, we are excited about our recent announcement regarding the strategic alliance we formed with PPD which was a visible result of the strategic plan we put into place earlier in the year. They are well respected in the industry and we share many of the core principles and values that have made us each a leader in the industry.” He concluded, “The joint solution resulting from the alliance presents a very strong value proposition for our collective clients and it presents us with a broader opportunity to expand our business and underscores our commitment to delivering value to our stockholders.”

“2010 has been a pivotal year for VirtualScopics,” said Molly Henderson, chief business and financial officer of VirtualScopics. She added, “We have successfully executed several of our key strategic initiatives including achieving our nine-month financial goals. Of significant note, during three quarters we generated nearly $1.0 million more in year over year operating income and surpassed the total Adjusted EBITDA we earned throughout all of 2009.” She concluded, “Our focus for the remainder of 2010 will be towards a strong close to the year and preparing for what we expect to be a robust 2011.”

Jeff Markin and Molly Henderson will provide a business and third quarter 2010 financial update during the conference call today at 11:00 a.m. EST. 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 unrealized 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 Accounting Standards Codification (“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 (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, 2009 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-