MELA Sciences Reports Third Quarter 2014 Financial Results

IRVINGTON, N.Y., Nov. 12, 2014 (GLOBE NEWSWIRE) -- MELA Sciences, Inc. (Nasdaq:MELA), developer of the MelaFind® system, a non-invasive software-driven image analysis device intended to provide a dermatologist with objective data of clinically irregular pigmented moles when they choose to obtain additional info to help them decide whether or not to biopsy (at the most curable and cost-effective stage), today announced financial results for the three and nine months ended September 30, 2014.

Business Highlights for the Third Quarter and Subsequent Weeks:

  • Announced that in the 2013 Outcomes for Cleveland Clinic's Dermatology & Plastic Surgery Institute report the use of MelaFind reduced by 61% benign biopsies of the clinically suspicious pigmented lesions in an at-risk population, indicating that MelaFind analysis may prevent overly aggressive biopsy decisions. There may also be an overall improvement in biopsy risk.
  • Increased to four the number of sponsored "reader" studies conducted in the U.S., with the most recent occurring in October at the Fall Clinical in Las Vegas. These studies measure the impact of MelaFind on physician biopsy management and support the use of MelaFind as a tool to improve the dermatologist's overall accuracy in finding more melanomas and in reducing the number of benign biopsies. The number of dermatologists who have participated in the reader studies currently totals 592, or nearly 8 percent of the U.S. dermatology population.
  • Announced collaboration with Columbia University to explore potential next generation MelaFind enhancements.
  • Raised approximately $13.8 million in net proceeds through the issuance of 4% senior secured convertible debentures due July 2019, convertible into 5.8 million shares, and refinanced its existing Series A Convertible Preferred Stock with a new issue of Series B Convertible Preferred Stock, convertible into 4.8 million shares. The debt and preferred stock issuances are convertible into the Company's common stock at a conversion price of $2.565 per share. Issued common stock purchase warrants at an effective exercise price of $2.45 per share, with warrants to purchase 4.8 million shares expiring in 18 months from the date of issuance, and warrants to purchase 6.2 million shares expiring five years from the date of issuance.

Rose Crane, MELA Sciences President and CEO, stated, "I am very pleased with the progress we made over the course of the last several months in advancing MelaFind's value proposition in support of the early detection of melanoma. During the quarter, we added to the growing body of evidence showing the MelaFind system is an effective tool not only for reducing health care costs, but also for saving patients from unnecessary medical biopsies with the third party data presented by Cleveland Clinic as well as additional Company-sponsored reader studies. MelaFind exemplifies the positive shift in healthcare outcomes that can be achieved when innovative technology is implemented and its progress is quantified."

Third Quarter Financial Results (All comparisons to the third quarter of 2013):

  • Revenue doubled to $0.2 million. New MelaFind® system sales revenues were partially offset by a decrease in placement and usage fees as a result of the change in the Company's business model from a lease-based model to a sales-based model.
  • Total operating expenses decreased 39% to $2.7 million resulting from a decrease across all expense categories. In addition, other income (expense) benefited by the change in fair value of the Company's warrant liability of $2.1 million. There was no warrant liability recorded for the same period in 2013. The current benefit is directly related to the decline in the Company's stock price during the period.
  • Net loss for the quarter decreased 69% to $2.3 million, or $0.44 per basic and diluted share, compared with $7.4 million, or $1.72, per basic and diluted share in 2013.

Year to Date Financial Results (All comparisons to the nine-month ended September 30, 2013):

  • Net loss for the nine months decreased 55% to $9.6 million.
  • Revenue increased $0.1 million to $0.5 million, as a result of the Company's change in business strategy from a lease-based model to a sales-based model.
  • Total operating expenses decreased 38% to $9.8 million as costs were reduced across all expense categories primarily due to cost reduction initiatives companywide. Other income(expense) benefited by the change in fair value of the Company's warrant liability of $7.2 million, primarily as a result of a decline in the Company's stock price during the period.

The Company had cash and cash equivalents totaling $14.5 million at September 30, 2014, compared to $3.8 million at December 31, 2013.

Conference Call and Webcast Details:

The Company will host a conference call today at 4:30 p.m. Eastern Time by dialing 800-481-9591, or 719-325-2356 from outside the U.S. and using Passcode: 7718908. There will also be a webcast at: Mela 3Q14 Webcast. A replay of the call will be available through November 26 by dialing 877-870-5176 from the U.S. or 858-384-5517 for international callers and using replay PIN: 7718908.

About MelaFind www.melafind.com

MelaFind® is the first and only medical device with FDA Pre-Market Approval (PMA) for the U.S. and Conformite Europeenne ("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 technologies that assist physicians during the clinical evaluation and detection 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 its flagship product, MelaFind®.

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 Current Procedural Terminology code, gaining Medicare Part B reimbursement from the Centers for Medicare and Medicaid Services and reimbursement from private insurance companies, study results, acceptance of MelaFind by practitioners and key opinion leaders, the use of MelaFind in becoming the standard of care, and the Company's ability to develop and launch its products, 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
September 30, December 31,
2014 2013
(unaudited) *
ASSETS
Current Assets:
Cash and cash equivalents $14,466,227 $3,782,881
Accounts receivable (net of allowance of $43,080 and $46,130 as of September 30, 2014 and December 31, 2013, respectively) 85,230 57,151
Inventory (net of reserves of $1,401,333 as of September 30, 2014 and $325,000 as of December 31, 2013, respectively) 5,363,787 5,631,205
Prepaid expenses and other current assets 617,185 879,698
Total Current Assets 20,532,429 10,350,935
Property and equipment, net 2,713,083 3,690,784
Patents and trademarks, net 37,988 41,795
Deferred financing costs 981,950 --
Other assets 48,000 48,000
Total Assets $24,313,450 $14,131,514
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable (includes related parties of $0 and $32,902 as of September 30, 2014 and December 31, 2013, respectively) $1,271,877 $1,478,995
Accrued expenses (includes related parties of $0 and $48,000 as of September 30, 2014 and December 31, 2013, respectively) 1,010,666 844,131
Deferred placement revenue 85,278 243,605
Warrant liability 1,451,121 3,017,142
Other current liabilities 134,072 67,934
Total Current Liabilities 3,953,014 5,651,807
Long-Term Liabilities:
Deferred placement revenue 13,725 63,754
Deferred rent 90,093 120,120
Senior secured convertible debentures, (net of discount of $9,967,564 and $0 as of September 30,2014 and December 31, 2013, respectively) 5,032,441 --
Total Long-Term Liabilities 5,136,259 183,874
Total Liabilities 9,089,273 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 September 30, 2014 and 0 at December 31, 2013, respectively 1,230 --
Common stock -- $0.001 par value; authorized 50,000,000 shares: issued and outstanding 5,217,742 shares at September 30, 2014 and 4,750,160 at December 31, 2013, respectively 5,218 4,750
Additional paid-in capital 193,007,017 176,438,961
Accumulated deficit (177,789,288) (168,147,878)
Total Stockholders' Equity 15,224,177 8,295,833
Total Liabilities and Stockholders' Equity $24,313,450 $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
September 30,
Nine months ended
September 30,
2014 2013 2014 2013
Net revenues $217,902 $107,707 $540,695 $396,206
Cost of revenue 1,559,502 1,976,501 3,755,086 4,438,211
Gross Profit (1,341,600) (1,868,794) (3,214,391) (4,042,005)
Operating expenses:
Research and development 344,525 856,764 1,422,997 3,241,727
Selling, general and administrative 2,314,712 3,480,689 8,353,793 12,440,457
Total operating expenses 2,659,237 4,337,453 9,776,790 15,682,184
Operating Loss (4,000,837) (6,206,247) (12,991,181) (19,724,189)
Other income (expenses):
Interest income 3,874 2,508 5,180 7,323
Interest expense (530,542) (222,758) (532,899) (563,143)
Change in fair value of warrant liability 2,108,106 -- 7,150,886 (89,859)
Write-off of unamortized loan costs -- (983,330) -- (983,330)
Gain on sale of fixed assets 11,000 -- 15,740 --
Registration rights liquidated damages -- -- (3,419,698) --
Other income, net 120,537 5,400 130,562 15,400
Total Other Income/(Loss) 1,712,975 (1,198,180) 3,349,771 (1,613,609)
Net Loss $(2,287,862) $(7,404,427) $(9,641,410) $(21,337,798)
Basic net loss per common share $(0.44) $(1.72) $(1.89) $(5.10)
Diluted net loss per common share $(0.44) $(1.72) $(1.89) $(5.10)
Basic weighted average number of common shares outstanding 5,216,290 4,312,118 5,108,418 4,182,814
Diluted weighted average number of common shares outstanding 5,216,290 4,312,118 5,108,418 4,182,814
MELA SCIENCES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended September 30,
2014 2013
Cash flows from operating activities:
Net loss $(9,641,410) $(21,337,798)
Adjustments to reconcile net loss to net cash used in operating activities:
Write-off of unamortized loan costs -- 983,330
Depreciation and amortization 1,370,802 1,790,037
Impairment of long-lived assets -- 1,010,712
Bad debt expense 700 52,097
Write-off of unamortized financing costs -- 41,166
Stock-based compensation 447,295 1,256,754
Amortization of deferred financing costs 37,689 163,569
Inventory reserves 1,076,333 325,000
Change in fair value of warrant liability (7,150,886) 89,859
Amortization of debt discount 385,359 --
Gain on sale of fixed assets (15,740) --
Changes in operating assets and liabilities:
Accounts receivable (28,779) 76,944
Inventory (1,362,391) 79,014
Melafind® systems sold 162,922 --
Prepaid expenses and other current assets 262,513 300,528
Other assets -- 4,000
Accounts payable and accrued expenses (40,583) (503,345)
Other current liabilities 66,138 17,017
Deferred revenue (208,356) 69,364
Deferred rent (30,027) (17,739)
Long-term interest payable -- 86,042
Net cash used in operating activities (14,668,421) (15,513,449)
Cash flows from investing activities:
Purchases of property and equipment -- (4,865,358)
Proceeds from the sale of fixed assets 17,000 --
Net cash provided by (used in) investing activities 17,000 (4,865,358)
Cash flows from financing activities:
Net proceeds from private placements/public offerings 11,457,831 15,789,873
Net proceeds from long-term debt 15,000,005 6,000,000
Expenses related to borrowings and issuance of warrant (1,123,069) (245,358)
Repayment of long-term debt -- (6,425,000)
Proceeds from exercise of stock options -- 18,059
Net cash provided by financing activities 25,334,767 15,137,574
Net increase/(decrease) in cash and cash equivalents 10,683,346 (5,241,233)
Cash and cash equivalents at beginning of period 3,782,881 7,861,524
Cash and cash equivalents at end of period $14,466,227 $2,620,291
Non-cash investing and financing activity:
Reclassification warrant liability to stockholders' equity $ -- $ 652,442
Recognition of debt discount on long-term debt $ 5,787,573 $ --
Recognition of beneficial conversion feature on long-term debt $ 4,565,350 $ --
Exchange of Series A convertible preferred stock for Series B convertible preferred stock $ 12,300,000 $ --

CONTACT: Media Diana Garcia Redruello MELA Sciences, Inc. 212-518-4226 dgarcia@melasciences.com Investors Andrew McDonald LifeSci Advisors, LLC 646-597-6987 Andrew@LifeSciAdvisors.comSource:MELA Sciences