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MELA Sciences Reports Second Quarter 2015 Financial Results

HORSHAM, Pa., Aug. 13, 2015 (GLOBE NEWSWIRE) -- MELA Sciences, Inc. (NASDAQ:MELA), a medical technology company dedicated to developing and commercializing innovative products for the diagnosis and treatment of serious dermatological disorders, today reported financial results for the second quarter ended June 30, 2015.

Second Quarter and Recent Corporate Highlights

  • XTRAC and VTRAC businesses of PhotoMedex, Inc. purchased on June 22, 2015, for $42.5 million in cash and the assumption of certain business-related liabilities.
  • Installed base of XTRAC systems in the U.S. expands to 664 systems placed, up from 554 at the end of the second quarter 2014, as reported to us by PhotoMedex.
  • Full quarter revenue results for the acquired businesses of $7.7 million in line with expectations, of which $0.6 million was included in the operating results of the Company.
  • Integration of the business into MELA is on schedule and proceeding smoothly.
  • A new version of the MelaFind unit is in development. The new design will afford dermatologists all the benefits and functionalities of the current version but with a smaller footprint, allowing for greater mobility and overall user-friendliness. The new version will also significantly lower production cost. The Company plans to complete development by the first half of 2016. A significant portion of the existing MelaFind inventories was determined to be excess and /or obsolete and therefore a charge was recorded in the second quarter of $4.8 million.

The operating results of the Company for the three and six months ended June 30, 2015 include activity from the XTRAC and VTRAC businesses from June 23, 2015 through June 30, 2015. As a result of purchase accounting rules, the operating results of the XTRAC and VTRAC businesses for the three and six months ended June 30, 2014 are not included in consolidated statements of operations for the periods ended June 30, 2014.

Commenting on the second quarter, Michael R. Stewart, President and CEO of MELA Sciences, Inc. stated: "Clearly, the most significant development for MELA during the second quarter was the completion of the acquisition of the XTRAC and VTRAC businesses. We believe that the addition of these businesses will be transformational for MELA and will provide not only existing quality revenue streams and cash flows for the Company, but will also support the MelaFind system's development. The assets acquired include a significant and capable sales organization augmented by a patient advocacy call center and reimbursement team, and I believe these assets and the significant customer base both domestically and internationally create a platform upon which we can build. We are looking forward to reporting our third quarter results, which will include a full quarter's activity from these businesses."

Continuing, Stewart added: "The integration activities are progressing well and as a result the back office operations of the Company will be enhanced. The organization is excited about our new company and about executing our plans for growth in the coming quarters."

Reported Financial Results

Revenues for the second quarter of 2015 were $0.6 million, an increase of 172% compared with revenues for the second quarter of 2014 of $0.2 million, which did not include revenues from the XTRAC and VTRAC businesses.

Net loss for the second quarter of 2015 was $7.8 million or ($0.97) per share, which included other income of $2.0 million for the change in fair value of warrant liability, $4.8 million in inventory obsolescence charges; $0.8 million in interest expense; $0.5 million in acquisition costs and $0.3 million in depreciation and amortization expenses. This compares with net income for the second quarter of 2014 of $0.6 million or $0.12 per share, which included other income of $4.9 million for the change in fair value of warrant liability and $0.2 million in depreciation and amortization expenses.

Revenues for the six months of 2015 were $0.7 million, an increase of 114% compared with revenues for the six months of 2014 of $0.3 million, which did not include revenues from the XTRAC and VTRAC businesses.

Net loss for the six months of 2015 was $15.1 million or ($2.08) per share, which included other income of $0.7 million for the change in fair value of warrant liability, $4.8 million in inventory obsolescence charges; $3.2 million in interest expense; $0.5 million in acquisition costs and $0.6 million in depreciation and amortization expenses. This compares with net loss for the six months of 2014 of $7.4 million or ($1.46) per share, which included other income of $5.0 million for the change in fair value of warrant liability, $3.4 million in registration rights liquidated damages and $0.9 million in depreciation and amortization expenses.

As of June 30, 2015 the Company had cash, cash equivalents and short-term investments of $5.6 million including $0.1 million of restricted cash, compared with $11.4 million of unrestricted cash as of December 31, 2014.

Non-GAAP Measures

To supplement the Company's consolidated financial statements, prepared in accordance with GAAP, the Company provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted income.

The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors' overall understanding of our current financial performance and to provide further information for comparative purposes.

Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company's core operating results and business outlook. In addition, the Company believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures included in this press release is as follows:

(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(000's) except per share amounts 2015 2014 2015 2014
Net (loss) income as reported ($7,847) $627 ($15,120) ($7,353)
Adjustments:
Depreciation and amortization expense 322 185 641 881
Interest expense, net 838 1 3,162 1
EBITDA (6,687) 813 (11,317) (6,471)
Stock-based compensation expense 246 168 476 332
Acquisition costs 456 -- 456 --
Change in fair value of warrants (1,985) (4,906) (651) (5,043)
Registration rights liquidated charges -- (30) -- 3,420
Impairment of property and equipment 920 -- 920 --
Inventory obsolescence charges 4,818 -- 4,818 --
Non-GAAP adjusted loss ($2,232) ($3,955) ($5,298) ($7,762)

MELA previously announced the scheduling of a conference call with investors to review the results of the Second quarter. The following is the pertinent information for accessing that call.

Conference Call Detail:
Date: Thursday, August 13
Time: 4:30pm Eastern Time
Toll Free: 888-337-8169
International: 719-457-2689
Passcode: 3537662
Webcast: http://public.viavid.com/player/index.php?id=115368
Replays, available through August 27, 2015
Toll Free: 877-870-5176
International: 858-384-5517
Replay PIN: 3537662

About MELA Sciences, Inc. (www.melasciences.com)

MELA Sciences is a medical technology company focused on the dermatology market. Through its acquisition of the XTRAC and VTRAC businesses, MELA Sciences markets those products for the treatment of psoriasis, vitiligo and other skin conditions. The Company is also in the early commercialization stages of the MelaFind® system, an innovative software-driven technology that provides additional information to dermatologists in the management of melanoma skin cancer.

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 "will," "may," "seeks," and "expects," that suggest future events or trends. These statements, including the Company's ability to generate the anticipated revenue stream from the acquired business, the Company's ability to generate sufficient cash flow to fund the Company's ongoing operations beginning in 2015 or at any time in the future, including support for the MelaFind system through the reimbursement process and the Company's ability to integrate and transition the acquired business effectively and build a leading franchise in medical dermatology, 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. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, 2015 December 31, 2014
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $5,553 $11,434
Restricted cash 100 --
Accounts receivable, net 3,663 220
Inventories, net 3,409 5,275
Other current assets 678 274
Property and equipment, net 14,769 1,961
Goodwill and other intangible assets 25,062 37
Other non-current assets, net 1,178 869
Total assets $54,412 $20,070
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Senior Note payable and other notes payable $7,238 $ --
Accounts payable and accrued current liabilities 6,147 2,144
Current portion of deferred revenues 362 43
Warrant liability 2,806 499
Senior secured convertible debentures, net 10,413 5,001
Other long term liabilities 193 106
Stockholders' equity 27,253 12,277
Total liabilities and stockholders' equity $54,412 $20,070
MELA SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Revenues $611 $225 $692 $323
Cost of revenues 6,474 1,277 7,185 2,196
Gross loss (5,863) (1,052) (6,493) (1,873)
Operating expenses:
Engineering and product development 282 371 521 1,078
Selling and marketing 910 1,089 1,937 2,161
General and administrative 1,950 1,746 3,686 3,878
3,142 3,206 6,144 7,117
Operating loss before other income (expense), net (9,005) (4,258) (12,637) (8,990)
Other income (expense), net:
Interest expense, net (838) (1) (3,162) (1)
Change in fair value of warrant liability 1,985 4,906 651 5,043
Registrations rights liquidated damages -- (30) -- (3,420)
Other income, net 11 10 28 15
1,158 4,885 (2,483) 1,637
Net income (loss) ($7,847) $627 ($15,120) ($7,353)
Basic and diluted net income (loss) per share ($0.97) $0.12 ($2.08) ($1.46)
Shares used in computing basic and diluted net income (loss) per share 8,067,991 5,212,765 7,274,358 5,053,587
MELA SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
For the Six Months Ended June 30,
2015 2014
Cash Flows From Operating Activities:
Net loss ($15,120) ($7,354)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 641 881
Stock-based compensation 476 332
Impairment of long-lived assets 920 --
Amortization of debt discount 2,662 --
Amortization of deferred financing costs 219 --
Change in fair value of warrant liability (651) (5,043)
Other -- (4)
Changes in operating assets and liabilities:
Current assets 4,849 1,176
Current liabilities 349 (1,029)
Net cash used in operating activities (5,655) (11,039)
Cash Flows From Investing Activities:
Lasers placed-in-service, net (123) --
Acquisition costs, net of cash received (42,500) --
Other -- 6
Net cash (used in) provided by investing activities (42,623) 6
Cash Flows From Financing Activities:
Proceeds from convertible debentures 32,500 --
Proceeds from senior notes 10,000 --
Proceeds from credit facilities -- 11,452
Other financing activities (105) --
Net cash provided by financing activities 42,395 11,452
Effect of exchange rate changes on cash 2 --
Net (decrease)/increase in cash and cash equivalents (5,881) 419
Cash and cash equivalents, beginning of period 11,434 3,783
Cash and cash equivalents, end of period $5,553 $4,202
Supplemental information:
Cash paid for interest $250 $ --
Supplemental information of non-cash investing and financing activities
Conversion of convertible preferred stock into common stock $5,283 $ --
Conversion of senior secured convertible debentures into common stock $2,308 $ --
Reclassification of property and equipment to inventory, net $107 $ --
Reclassification of warrant liability to stockholders' equity $ -- $652

CONTACT: Investor Contacts: Robert W. Cook MELA Sciences, Inc. 914-373-6936 rcook@melasciences.com Andrew McDonald LifeSci Advisors, LLC 646-597-6987 Andrew@LifeSciAdvisors.comSource:MELA Sciences