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Mela Sciences (MELA) Reports Its First Quarter 2014 Business And Financial Results

5/14/2014 9:48:44 AM

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IRVINGTON, NY--(Marketwired - May 13, 2014) -

MELA Sciences, Inc. (NASDAQ: MELA), developer of the MelaFind® system, an optical diagnostic device approved for use in the United States and the European Union to assist dermatologists in melanoma diagnosis, today announced results for its fiscal 2014 first quarter (Q1'14) ended March 31, 2014. MELA will host a conference call today at 4:30 pm EDT to review its results and recent progress.

CEO Overview

Rose Crane, President and CEO, commented, "The MELA team made strong progress the past quarter against our strategic initiatives. We are focused on key strategies for 2014 and will review these efforts in greater detail in today's conference call."

The highlights include:

  • Introducing the MelaFind system in key medical institutions where leading dermatologists treat high-risk patients. Most recently we have expanded our system placements to include Baylor University, Stanford University and The Ohio State University;

  • Conducting further clinical trials to build our research base and further illustrate the value of the MelaFind system. This includes our Post-Approval Study now underway and a Predictive Probability Study conducted with 191 dermatologists that demonstrated the benefit of our system in the diagnosis of melanoma;

  • Advancing our technology through design enhancements, including a new user interface introduced in the U.S. and Germany;

  • Redirecting our small sales force to focus on key institutions and physicians as well as areas of high incidence of melanoma, in addition to moving from a rental-based model to a sales-based revenue model as previously disclosed, including third-party medical lease financing to help physicians purchase our systems;

  • Initiating the process to seek insurance reimbursement codes and status for the MelaFind system, which we believe should become a significant driver of future system demand; and

  • Continuing our disciplined management of cash and our other resources to best support our key initiatives.

"I am very excited by our technology as I believe it is vital to the health of thousands," added Ms. Crane. "A person dies every hour from melanoma, sixteen people are diagnosed every hour and 75% of all skin cancer deaths are from melanoma. If caught early and treated, melanoma is curable and MELA Sciences is bringing to market a powerful new solution in support of this cause."

Financial and Operating Highlights

MELA Sciences reported a Q1'14 net loss of approximately $8.0 million, or $0.16 per share, compared with a net loss of approximately $6.5 million, or $0.17 per share for the comparable period last year. Included in the Q1'14 financial results were liquidated damages of approximately $3.4 million incurred and paid in connection with the Company's financing completed in February 2014.

Total operating expenses of $3.9 million in Q1'14 declined more than 29% from Q1'13, with significant declines in both research and development expenses and selling, general and administrative expenses. The decrease resulted primarily from salary and headcount reductions in accordance with the cost reduction plan initiated in August 2013. The Company intends to institute actions during 2014 that may further reduce its quarterly rate of SG&A expense.

Net revenues and cost of sales were adversely affected during Q1'14 by the Company's change in business strategy from a rental-based revenue model to a sales-based revenue model. No revenue from sales of the MelaFind system were recorded during Q1'14, however sales contracts signed during the first quarter have been completed during the second quarter. The Company believes that once it obtains the necessary reimbursement codes and insurer approvals revenues from the sales of the MelaFind system could increase significantly.

Net cash used in operations was approximately $7.1 million in Q1'14 as compared with approximately $6.1 million in Q1'13. Net cash used in operations in Q1'14 includes $3.4 million in liquidated damages paid to investors in connection with the February 2014 financing.


In connection with the February 2014 financing, MELA granted registration rights with respect to the shares of common stock underlying both the Series A Preferred Stock and the warrants pursuant to the terms of a Registration Rights Agreement. The investors were entitled to receive liquidated damages upon the occurrence of a number of events relating to filing, effectiveness and maintaining an effective registration statement covering the shares underlying the securities issued in the February financing. The Company was unable to meet certain filing and effectiveness requirements and as a result paid approximately $3.4 million in liquidated damages to the investors.

MELA's cash balance at March 31, 2014 was $8.1 million compared with $3.8 million at December 31, 2013. The Company believes that its existing cash on hand and the actions it expects to take to reduce expenses will support the Company's operations into the fourth quarter of 2014. The Company continues to assess the effects of its previously announced cost reduction plan and will reduce various costs as necessary. The Company will need to raise additional capital during the upcoming months, the timing and amount of which will be affected by numerous factors, many of which are not under its control.

Conference Call and Webcast Details:

Conference Call: 845-675-0437 or 866-519-4004 - Passcode: 42498987

Telephone Replay: 855-452-5696 or 646 254 3697 - Available May 13th - May 21st

Live Webcast & Replay:

About MELA Sciences, Inc.

MELA Sciences is a medical device company developing dermatology diagnostics utilizing state-of-the-art optical imaging. The Company's flagship product is the MelaFind® system, a non-invasive diagnostic tool to aid dermatologists in melanoma evaluation and diagnosis, which has secured FDA Pre-Market Approval (PMA) for the U.S. and CE Marking certification for the European Union. The MelaFind® system uses a variety of visible to near-infrared light waves to evaluate skin lesions from the surface to 2.5 mm beneath the skin. It provides images and data on the relative disorganization of a lesion's cell structure that provides substantial additional perspective to aid melanoma diagnosis. MELA is also exploring new potential uses for its core imaging technology and algorithms.

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 our plans, objectives, expectations and intentions and may contain words such as "seeks," "look forward," and "there seems" that suggest future events or trends. These statements are based on our current expectations and are inherently subject to significant uncertainties and changes in circumstances. Actual results may differ materially from our 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. MELA Sciences assumes no duty to update its forward-looking statements and urges investors to carefully review its SEC disclosures available at and

                            MELA SCIENCES, INC.                             
                               BALANCE SHEETS                               
                                                 March 31,     December 31, 
                                                    2014           2013     
                                               -------------  ------------- 
                                                (unaudited)         *       
Current Assets:                                                             
  Cash and cash equivalents                    $   8,122,709  $   3,782,881 
  Accounts receivable (net of allowance of                                  
   $43,080 and $46,130 as of March 31, 2014                                 
   and December 31, 2013, respectively)               34,121         57,151 
  Inventory (net of reserve of $325,000 as of                               
   March 31, 2014 and December 31, 2013)           5,648,020      5,631,205 
  Prepaid expenses and other current assets          465,140        879,698 
                                               -------------  ------------- 
    Total Current Assets                          14,269,990     10,350,935 
  Property and equipment, net                      2,995,253      3,690,784 
  Patents and trademarks, net                         40,526         41,795 
  Other assets                                        48,000         48,000 
                                               -------------  ------------- 
Total Assets                                   $  17,353,769  $  14,131,514 
                                               =============  ============= 
                    LIABILITIES AND STOCKHOLDERS' EQUITY                    
Current Liabilities:                                                        
  Accounts payable (includes related parties                                
   of $85,972 and $32,902 as of March 31, 2014                              
   and December 31, 2013, respectively)        $   1,311,174  $   1,478,995 
  Accrued expenses (includes related parties                                
   of $23,129 and $48,000 as of March 31, 2014                              
   and December 31, 2013, respectively)              819,851        844,131 
  Deferred placement revenue                         201,864        243,605 
  Warrant liability                                8,464,865      3,017,142 
  Other current liabilities                           61,815         67,934 
                                               -------------  ------------- 
    Total Current Liabilities                     10,859,569      5,651,807 
Long Term Liabilities:                                                      
  Deferred placement revenue                          28,834         63,754 
  Deferred rent                                      110,111        120,120 
                                               -------------  ------------- 
    Total Long Term Liabilities                      138,945        183,874 
                                               -------------  ------------- 
Total Liabilities                                 10,998,514      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 March 31, 2014 and 0                              
   at December 31, 2013                                1,230              - 
  Common stock - $0.001 par value; authorized                               
  Issued and outstanding 52,107,465 shares at                               
   March 31, 2014 and 47,501,596 at December                                
   31, 2013                                           52,108         47,502 
  Additional paid-in capital                     182,430,391    176,396,209 
  Accumulated deficit                           (176,128,474)  (168,147,878)
                                               -------------  ------------- 
    Total Stockholders' Equity                     6,355,255      8,295,833 
                                               -------------  ------------- 
Total Liabilities and Stockholders' Equity     $  17,353,769  $  14,131,514 
                                               =============  ============= 
* Derived from the audited balance sheet as of                              
December 31, 2013                                                           
                            MELA SCIENCES, INC.                             
                          STATEMENTS OF OPERATIONS                          
                                               Three months ended March 31, 
                                                    2014           2013     
                                               -------------  ------------- 
Net revenues                                   $      97,638  $     144,100 
Cost of revenue                                      918,523      1,080,263 
                                               -------------  ------------- 
    Gross profit                                    (820,885)      (936,163)
Operating expenses:                                                         
  Research and development                           707,824      1,262,001 
  Selling, general and administrative              3,203,533      4,287,228 
                                               -------------  ------------- 
  Total operating expenses                         3,911,357      5,549,229 
                                               -------------  ------------- 
    Operating loss                                (4,732,242)    (6,485,392)
Other income (expenses):                                                    
  Interest income                                        618          2,105 
  Interest expense                                    (1,199)       (48,763)
  Change in fair value of warrant liability          137,142         15,433 
  Registration rights liquidated damages          (3,389,940)             - 
  Other income, net                                    5,025          5,000 
                                               -------------  ------------- 
                                                  (3,248,354)       (26,225)
                                               -------------  ------------- 
                                               -------------  ------------- 
    Net loss                                   $  (7,980,596) $  (6,511,617)
                                               =============  ============= 
Basic and diluted net loss per common share    $       (0.16) $       (0.17)
                                               =============  ============= 
Basic and diluted weighted average number of                                
 common shares outstanding                        48,926,409     39,233,943 
                                               =============  ============= 

Diana Garcia Redruello
MELA Sciences, Inc.

David Collins, Eric Lentini
Catalyst Global

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