Mela Sciences Reports Second Quarter 2014 Financial Results And Provides A Business Update
IRVINGTON, N.Y., Aug. 13, 2014 (GLOBE NEWSWIRE) -- MELA Sciences, Inc. (Nasdaq:MELA) (the Company), developer of the MelaFind® system, a non-invasive optical diagnostic tool that assists dermatologists in the diagnosis of melanoma at its most curable and cost-effective stage and that has received both FDA Pre-Market Approval (PMA) for the U.S. and CE Marking certification for the European Union, today announced financial results for the three and six months ended June 30, 2014. The Company also provided a business update.
Business Highlights for the Second Quarter and Subsequent Weeks:
- An application was submitted for a Current Procedural Terminology (CPT®) code, which is the first step in gaining Medicare Part B reimbursement from the Centers for Medicare and Medicaid Services (CMS). The Company's procedure could be eligible for payment under Part B as early as 2016. The Company will also commence efforts to obtain reimbursement from private insurance companies as the CMS review process proceeds.
- Additional studies demonstrating the effectiveness of MelaFind predictive probability information when used by dermatology residents and dermoscopists strongly correlate with previous study findings showing the benefit of MelaFind on dermatologists' decisions to biopsy.
- Significantly strengthened the balance sheet resulting from the previously announced closing of a private placement that will allow for continued efforts in obtaining reimbursement and the further commercialization of the MelaFind system.
- Completed a 1-for-10 reverse stock split and regained compliance with NASDAQ listing requirements.
- Named Michael R. Stewart to its Board of Directors, adding specific reimbursement and broad dermatology and medical device experience to the Board.
Rose Crane, MELA Sciences President and CEO, stated, "This has been a very productive quarter for MELA Sciences. We raised capital that will allow us to continue our progress and we took steps toward obtaining CMS reimbursement. As stated previously, our goal is to continue to expand the use of MelaFind toward becoming the standard of care."
Second Quarter Financial Results:
(Compares the second quarter of 2014 to the second quarter of 2013, unless otherwise stated)
- Revenue increased to $225,000 from $144,000 due to new MelaFind® system sales as we implement the change in the Company's business model from a lease-based model to a sales-based model. A reduction in placement fees partially offset the increase in system sales.
- Total expenses decreased by $2.6 million, consisting of $0.7 million in research and development expenses and $1.9 million in selling, general and administrative expenses in accordance with the cost reduction plan initiated in August 2013.
- The change in the fair value of the Company's warrant liability increased to a benefit of $4.9 million from an expense of $105,000 and in each period represents warrants accounted for as derivatives in separate transactions. The benefit results from the reduction in the Company's stock price for the period.
- Net income totaled $627,000, or $0.12 per share on a fully diluted basis, compared with a net loss of $7.4 million, or $1.72 per share on a fully diluted basis. The second quarter 2014 profitability resulted from the warrant liability benefit noted above. The operating loss, which is more reflective of the Company's operating activity, improved to $4.3 million compared with $7.0 million for the 2013 period.
- Cash and cash equivalents totaled $4.2 million, compared with $3.8 million at December 31, 2013.
Year to Date Financial Results:
(Compares the six months ended June 30, 2014 to the six months ended June 30, 2013, unless otherwise stated)
- Revenue increased to $323,000 from $288,000 due primarily to the change in business strategy from a lease-based model to a sales-based model, which resulted in sales for the current quarter and a decrease in placements of the MelaFind® systems quarter to quarter.
- Costs of revenue decreased to $2.2 million from $2.5 million, primarily due to a one-time charge for inventory obsolescence of MelaFind accessories taken during the six months ended June 30, 2013.
- R&D expenses decreased to $1.1 million from $2.4 million and SG&A expenses decreased to $6.0 million from $9.0 million, due to previously stated cost reduction measures, primarily due to headcount and related expense reductions.
- The change in fair value of the Company's warrant liability increased to a benefit of $5.0 million from an expense of $90,000 and in each period represents warrants accounted for as derivatives in separate transactions. Net loss totaled $7.4 million, or $1.46 per share on a fully diluted basis, compared with $13.9 million, or $3.38 per share on a fully diluted basis, for the same period in 2013. This reduction resulted from the $5.0 million benefit from the warrant liability offset by $3.4 million in liquidating damages from the February 2014 financing. The reduction in operating loss of $4.5 million from $13.5 million in 2013 to $9.0 million in 2014 is more reflective of operating activities and resulted from Company's cash conservation and cost reduction activities.
Conference Call and Webcast Details:
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About MelaFind www.melafind.com
MelaFind® is the first and only medical device with FDA Pre-Market Approval (PMA) for the U.S. and CE Marking certification for the European Union designed to assist dermatologists in the evaluation and diagnosis of melanoma at its most curable and cost-effective stage. The MelaFind® system utilizes innovative software driven technology and state-of-the-art 3-D optical imaging to non-invasively extract data 2.5 mm below the skin surface from patient's pigmented ambiguous moles and objectively analyzes them with proprietary algorithms. MelaFind provides important additional perspective to physicians to help them better understand the structural disorganization of a patient's pigmented ambiguous moles (before cutting the skin) for a more accurate biopsy management decision.
About MELA Sciences, Inc. www.melasciences.com
MELA Sciences is a medical technology company dedicated to designing and developing innovative software-driven technology for the clinical early detection and prevention of skin cancer. MELA Sciences conducted the largest, positive prospective study ever done on the melanoma disease, and is the first and only medical technology company to receive both FDA Pre-Market Approval (PMA) for the U.S. and CE Marking certification for the European Union for a device of this nature.
Safe Harbor
This press release includes "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995. These statements include but are not limited to the Company's plans, objectives, expectations and intentions and may contain words such as "could be," "will," "may," "seeks," "look forward," and "there seems" that suggest future events or trends. These statements, including the Company's ability to obtain a CPT code, gaining Medicare Part B reimbursement from CMS and reimbursement from private insurance companies, study results, acceptance of MelaFind by practitioners and the use of MelaFind in becoming the standard of care, are based on the Company's current expectations and are inherently subject to significant uncertainties and changes in circumstances. Actual results may differ materially from the Company's expectations due to financial, economic, business, competitive, market, regulatory and political factors or conditions affecting the Company and the medical device industry in general, as well as more specific risks and uncertainties set forth in the Company's SEC reports on Forms 10-Q and 10-K. Given such uncertainties, any or all of these forward-looking statements may prove to be incorrect or unreliable. The Company assumes no duty to update its forward-looking statements and urges investors to carefully review its SEC disclosures available at www.sec.gov and www.melasciences.com.
| MELA SCIENCES, INC. | ||
| CONDENSED BALANCE SHEETS | ||
| June 30, | December 31, | |
| 2014 | 2013 | |
| (unaudited) | * | |
| ASSETS | ||
| Current Assets: | ||
| Cash and cash equivalents | $ 4,202,279 | $ 3,782,881 |
| Accounts receivable (net of allowance of $43,080 and $46,130 as of June 30, 2014 and December 31, 2013, respectively) | 49,472 | 57,151 |
| Inventory (net of reserves of $863,559 as of June 30, 2014 and $325,000 as of December 31, 2013) | 3,946,852 | 5,631,205 |
| Prepaid expenses and other current assets | 332,327 | 879,698 |
| Total Current Assets | 8,530,930 | 10,350,935 |
| Property and equipment, net | 3,872,574 | 3,690,784 |
| Patents and trademarks, net | 39,257 | 41,795 |
| Other assets | 48,000 | 48,000 |
| Total Assets | $ 12,490,761 | $ 14,131,514 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current Liabilities: | ||
| Accounts payable (includes related parties of $35,554 and $32,902 as of June 30, 2014 and December 31, 2013, respectively) | $ 1,116,913 | $ 1,478,995 |
| Accrued expenses (includes related parties of $0 and $48,000 as of June 30, 2014 and December 31, 2013, respectively) | 302,834 | 844,131 |
| Deferred placement revenue | 151,508 | 243,605 |
| Warrant liability | 3,559,227 | 3,017,142 |
| Other current liabilities | 103,348 | 67,934 |
| Total Current Liabilities | 5,233,830 | 5,651,807 |
| Long-Term Liabilities: | ||
| Deferred placement revenue | 14,787 | 63,754 |
| Deferred rent | 100,102 | 120,120 |
| Total Long-Term Liabilities | 114,889 | 183,874 |
| Total Liabilities | 5,348,719 | 5,835,681 |
| COMMITMENTS AND CONTINGENCIES | ||
| Stockholders' Equity: | ||
| Preferred stock - $0.10 par value; authorized 10,000,000 shares: issued and outstanding: 12,300 at June 30, 2014 and 0 at December 31, 2013 | 1,230 | -- |
| Common stock - $0.001 par value; authorized 50,000,000 shares: issued and outstanding 5,213,969 shares at June 30, 2014 and 4,750,160 at December 31, 2013 | 5,214 | 4,750 |
| Additional paid-in capital | 182,637,024 | 176,438,961 |
| Accumulated deficit | (175,501,426) | (168,147,878) |
| Total Stockholders' Equity | 7,142,042 | 8,295,833 |
| Total Liabilities and Stockholders' Equity | $ 12,490,761 | $ 14,131,514 |
| * Derived from the audited balance sheet as of December 31, 2013 | ||
| MELA SCIENCES, INC. | ||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||
| (unaudited) | ||||
| Three months ended June 30, | Six months ended June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net revenues | $ 225,155 | $ 144,399 | $ 322,793 | $ 288,499 |
| Cost of revenue | 1,277,061 | 1,381,447 | 2,195,584 | 2,461,710 |
| Gross Profit | (1,051,906) | (1,237,048) | (1,872,791) | (2,173,211) |
| Operating expenses: | ||||
| Research and development | 370,648 | 1,122,962 | 1,078,472 | 2,384,963 |
| Selling, general and administrative | 2,835,548 | 4,672,540 | 6,039,081 | 8,959,768 |
| Total operating expenses | 3,206,196 | 5,795,502 | 7,117,553 | 11,344,731 |
| Operating Loss | (4,258,102) | (7,032,550) | (8,990,344) | (13,517,942) |
| Other income (expenses): | ||||
| Interest income | 688 | 2,710 | 1,306 | 4,815 |
| Interest expense | (1,158) | (291,622) | (2,357) | (340,385) |
| Change in fair value of warrant liability | 4,905,638 | (105,292) | 5,042,780 | (89,859) |
| Registration rights liquidated damages | (29,758) | -- | (3,419,698) | -- |
| Other income, net | 9,740 | 5,000 | 14,765 | 10,000 |
| Total Other Income/(Loss) | 4,885,150 | (389,204) | 1,636,796 | (415,429) |
| Net Income/(Loss) | $ 627,048 | $ (7,421,754) | $ (7,353,548) | $ (13,933,371) |
| Basic net income/(loss) per common share | $ 0.12 | $ (1.72) | $ (1.46) | $ (3.38) |
| Diluted net income/(loss) per common share | $ 0.12 | $ (1.72) | $ (1.46) | $ (3.38) |
| Basic weighted average number of common shares outstanding | 5,212,765 | 4,308,660 | 5,053,587 | 4,117,091 |
| Diluted weighted average number of common shares outstanding | 5,212,765 | 4,308,660 | 5,053,587 | 4,117,091 |
| MELA SCIENCES, INC. | ||
| CONDENSED STATEMENTS OF CASH FLOWS | ||
| (unaudited) | ||
| Six Months Ended June 30, | ||
| 2014 | 2013 | |
| Cash flows from operating activities: | ||
| Net loss | $ (7,353,548) | $ (13,933,371) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Depreciation and amortization | 881,535 | 1,107,009 |
| Bad debt expense | 700 | 40,290 |
| Inventory reserves | 538,559 | 325,000 |
| Non-cash interest expense | -- | 98,706 |
| Change in fair value of warrant liability | (5,042,780) | 89,859 |
| Write-off of unamortized financing costs | -- | 41,166 |
| Stock-based equity compensation | 332,115 | 1,097,106 |
| Gain on sale of fixed assets | (4,740) | -- |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 6,979 | (68,593) |
| Inventory | 21,509 | 74,100 |
| Melafind® systems sold | 62,238 | -- |
| Prepaid expenses and other current assets | 547,371 | 218,204 |
| Other assets | -- | (3,500) |
| Accounts payable and accrued expenses | (903,379) | 224,958 |
| Other current liabilities | 35,414 | 12,981 |
| Deferred revenue | (141,064) | 130,653 |
| Deferred rent | (20,018) | (11,826) |
| Long-term interest payable | -- | 51,922 |
| Net cash used in operating activities | (11,039,109) | (10,505,336) |
| Cash flows from investing activities: | ||
| Purchases of property and equipment | -- | (3,766,264) |
| Proceeds from the sale of fixed assets | 6,000 | -- |
| Net cash provided by (used in) investing activities | 6,000 | (3,766,264) |
| Cash flows from financing activities: | ||
| Net proceeds from private placements/public offerings | 11,452,507 | 15,789,873 |
| Net proceeds from long-term debt | -- | 6,000,000 |
| Expenses related to borrowings and issuance of warrant | -- | (245,358) |
| Proceeds from exercise of stock options | -- | 18,059 |
| Net cash provided by financing activities | 11,452,507 | 21,562,574 |
| Net increase in cash and cash equivalents | 419,398 | 7,290,974 |
| Cash and cash equivalents at beginning of period | 3,782,881 | 7,861,524 |
| Cash and cash equivalents at end of period | $ 4,202,279 | $ 15,152,498 |
| Non-cash investing activity: | ||
| Reclassification of warrant liability to stockholders' equity | $ -- | $ 652,442 |