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MELA Sciences, a Leader in the Fight Against Melanoma, Announces Second Quarter 2013 Financial Results; Announces Restructuring



MELA Sciences, a Leader in the Fight Against Melanoma, Announces Second
Quarter 2013 Financial Results; Announces Restructuring

IRVINGTON, N.Y., Aug. 7, 2013 (GLOBE NEWSWIRE) -- MELA Sciences, Inc.
(Nasdaq:MELA), the medical device company that has developed and is
commercializing MelaFind^®, the first and only FDA approved optical diagnostic
device for melanoma detection used by dermatologists in their fight against
melanoma, today announced financial results for the second quarter ended June
30, 2013. The company also announced a restructuring of operations.

Second Quarter 2013 and Recent Performance Highlights:

-- Achieved revenue of $144,400 for second quarter 2013.

  * Ended the second quarter with an installed base of 145 MelaFind systems
    and continue to work with dermatology customers to successfully
    incorporate MelaFind into their practices;
  * Ended the second quarter with signed user agreements for 168 MelaFind
    systems in the US and Germany, of which 23 were pending installation.

-- Successful summer dermatology meetings:

  * 8th World Congress of Melanoma meeting in Hamburg, Germany

    * MELA Sciences held a symposium with over 100 attendees, many of whom are
      considered leaders within dermatology.

  * Summer American Academy of Dermatology (AAD) meeting in New York

    * Hosted several meetings with leading experts in dermatology to formalize
      our Key Opinion Leader (KOL) and User Advisory Boards

MELA Sciences is effecting a restructuring of its operations to focus on
improving commercial execution and to position the company to support
sustainable revenue growth and eventual profitability. Through the
restructuring, management is establishing a cost structure that is more
commensurate with the current and projected level of revenues, and will
reallocate resources within commercial sales and marketing initiatives
intended to improve business processes and support accelerated revenue growth.
The restructuring is expected to reduce headcount by approximately 25%
percent.

As a result of the restructuring, MELA Sciences expects to take a
non-recurring charge of approximately $100,000 in the third quarter of 2013.
The company expects payroll and related cost savings of approximately $2.7
million per year compared to fiscal 2012, with initial impact benefitting
third quarter 2013 results. Additional operating savings will also be realized
starting immediately.

"While we are not pleased with the commercial traction that MelaFind has
gained to date, we have embarked on the restructuring announced today along
with several strategic initiatives to build a successful and profitable
business. Based on continued strong clinician feedback, the significant market
opportunity and meaningful advantages MelaFind offers to the dermatologist,
along with cost-improving activities that are underway, we are more
enthusiastic about our long term prospects than ever before," said Robert
Coradini, Interim Chief Executive Officer of MELA Sciences. "We are developing
a strategic plan to increase utilization and drive adoption. The bottom line
is that the technology is robust and the cost improvements are clear. We are
striving to achieve commercial success of MelaFind, drive meaningful revenue
acceleration and manage expenses thoughtfully and with discipline, all with an
eye toward eventual profitability."

MelaFind is the Company's breakthrough non-invasive and objective automated
point of care system for use when a dermatologist chooses to obtain additional
information for a decision to biopsy clinically atypical pigmented skin
lesions with one or more clinical or historical characteristics of melanoma.

Second Quarter 2013 Financial Results

Revenues for the three months ended June 30, 2013 were $144,400 compared to
$75,760 reported for the same period in 2012. Deferred revenues reported as of
June 30, 2013 were $434,030 versus deferred revenues of $87,980 reported as of
June 30, 2012. Revenues for the second quarter 2013 were based on 145
installed MelaFind systems, 19 of which were placed in the second quarter.
Reported revenues do not account for 23 additional user agreements that were
signed in the quarter that are pending installation and training of staff.
Deferred revenues reflect the timed recognition of the installation fee
revenue over the term of the user agreement, which is generally two years.

The Company's net loss for the three months ended June 30, 2013 was $7.4
million, or $0.17 per diluted share, compared to a net loss of $5.5 million,
or $0.18 per diluted share, for the same period in 2012. The increase in the
net loss was primarily attributable to Selling, General and Administrative
expenses related to the expansion of the Company's sales force and the
Company's incremental marketing costs as well as the increase in direct costs
associated with the placement of MelaFind systems in dermatologists' offices.

As of June 30, 2013, the Company's cash and cash equivalents were $15.2
million.

Year to Date 2013 Financial Results

Revenues for the six months ended June 30, 2013 were $288,500 compared to
$87,000 reported for the same period in 2012. The Company's net loss for the
six months ended June 30, 2013 was $13.9 million, or $0.34 per diluted share,
compared to a net loss of $11.2 million, or $0.37 per diluted share, for the
same period in 2012. The increase in the net loss was primarily attributable
to Selling, General and Administrative expenses related to the expansion of
the Company's sales force and the Company's incremental marketing costs as
well as the increase in direct costs associated with the placement of MelaFind
systems in dermatologists' offices.

Conference Call

MELA Sciences will host a conference call today at 4:30 PM EDT to discuss
second quarter 2013 quarterly results. To participate in the call, dial
1-877-303-9205 approximately 10 minutes before the conference call is
scheduled to begin. To listen via live webcast, please go to the investor
relations section of the MELA Sciences website at http://www.melasciences.com
approximately 10 minutes prior to the teleconference start time. If you are
unable to participate during the live conference call and webcast, the
conference call audio cast will be archived and available for replay for
approximately 90 days.

About MELA Sciences, Inc.

MELA Sciences is a medical device company focused on the commercialization of
its flagship product, MelaFind^®, and its further design and development.
MelaFind is a non-invasive tool to provide additional information to
dermatologists during melanoma skin examinations. The device uses light from
visible to near-infrared wavelengths to evaluate skin lesions up to 2.5 mm
beneath the skin. The device provides information on a lesion's level of
morphologic disorganization to provide additional objective information that
may be used by dermatologists in the biopsy decision-making process. MelaFind
has been approved by the US Food and Drug Administration for use in the US. In
addition, MelaFind has received CE Mark approval and is approved for use in
the European Union.

For more information on MELA Sciences, visit www.melasciences.com.

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 other
statements that contain words such as "expects," "contemplates,"
"anticipates," "plans," "intends," "believes," "assumes," "predicts" and
variations of such words or similar expressions that predict or indicate
future events or trends, or that do not relate to historical matters. These
statements are based on our current beliefs or expectations and are inherently
subject to significant known and unknown uncertainties and changes in
circumstances, many of which are beyond our control. There can be no assurance
that our beliefs or expectations will be achieved. Actual results may differ
materially from our beliefs or 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 facing the company such as those set
forth in its reports on Forms 10-Q and 10-K filed with the US Securities and
Exchange Commission (the "SEC"). Factors that might cause such a difference
include whether MelaFind^® achieves market acceptance. Given the uncertainties
affecting companies in the medical device industry such as the Company, any or
all of these forward-looking statements may prove to be incorrect. Therefore,
you should not rely on any such factors or forward-looking statements. The
Company urges you to carefully review and consider the disclosures found in
its filings with the SEC which are available at www.sec.gov and
www.melasciences.com.

MELA SCIENCES, INC.
CONDENSED BALANCE SHEETS
                                                                  
                                                                  
                                                   June 30,      December 31,
                                                   2013          2012
                                                   (unaudited)   *
ASSETS                                                            
Current Assets:                                                   
Cash and cash equivalents                          $15,152,498   $7,861,524
Accounts receivable, net                           208,259       179,956
Inventory, net                                     276,502       675,602
Prepaid expenses and other current assets          747,420       965,624
                                                                  
Total Current Assets                               16,384,679    9,682,706
Property and equipment, net                        10,011,761    7,349,531
Patents and trademarks, net                        44,333        47,308
Deferred financing costs                           71,364        106,141
Other assets                                       87,627        84,127
                                                                  
Total Assets                                       $26,599,764   $17,269,813
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY                              
Current Liabilities:                                              
Accounts payable                                   $1,809,242    $1,850,102
Accrued expenses                                   1,222,359     956,541
Loan payable                                       353,283       —  
Deferred placement revenue                         290,740       171,726
Other current liabilities                          53,792        40,811
                                                                  
Total Current Liabilities                          3,729,416     3,019,180
                                                                  
Long Term Liabilities:                                            
Deferred placement revenue                         143,290       131,651
Loan payable                                       5,008,846     —  
Long-term interest payable                         51,922        —  
Deferred rent                                      131,946       143,772
                                                                  
Total Long Term Liabilities                        5,336,004     275,423
                                                                  
Total Liabilities                                  9,065,420     3,294,603
                                                                  
                                                                  
Stockholders' Equity                                              
Preferred stock — $.10 par value; authorized                      
10,000,000 shares; issued and outstanding: none
Common stock — $.001 par value; authorized
95,000,000 shares; issued and outstanding          43,112        32,205
43,112,144 shares at June 30, 2013 and 32,204,720
at December 31, 2012 
Additional paid-in capital                         173,624,471   156,142,873
Accumulated deficit                                (156,133,239) (142,199,868)
                                                                  
Stockholders' Equity                               17,534,344    13,975,210
                                                                  
Total Liabilities and Stockholders' Equity         $26,599,764   $17,269,813
                                                                  
* Derived from the audited balance sheet as of December 31, 2012 

 
MELA SCIENCES, INC. 
CONDENSED STATEMENTS OF OPERATIONS 
(unaudited) 
                                                                
                 Three months ended June 30,   Six months ended June 30,
                 2013           2012           2013            2012
                                                                
Revenue          $144,399       $75,757        $288,499        $87,007
Cost of revenue  1,381,447      372,048        2,461,710       502,458
                                                                
                 (1,237,048)    (296,291)      (2,173,211)     (415,451)
                                                                
Operating                                                       
expenses: 
Research and     1,122,962      1,673,338      2,384,963       4,108,096
development 
Selling, general
and              4,672,540      3,528,575      8,959,768       6,746,066
administrative 
                                                                
Operating loss   (7,032,550)    (5,498,204)    (13,517,942)    (11,269,613)
                                                                
Interest income  2,710          9,021          4,815           22,405
Interest         (291,622)                     (340,385)        
expense 
Change in fair
value of warrant (105,292)                     (89,859)         
liability 
Other income     5,000          4,996          10,000          9,996
                                                                
Net loss:         $ (7,421,754)  $ (5,484,187)  $ (13,933,371)  $ (11,237,212)
                                                                
Basic and
diluted net loss  $ (0.17)       $ (0.18)       $ (0.34)        $ (0.37)
per common
share 
                                                                
Basic and
diluted weighted
average number   43,086,595     30,332,217     41,170,911      30,323,061
of common shares
outstanding 

 
MELA SCIENCES, INC. 
CONDENSED STATEMENTS OF CASH FLOWS 
(unaudited) 
                                                                
                                               Six Months Ended June 30,
                                               2013            2012
                                                                
Cash flows from operating activities:                           
Net loss                                        $ (13,933,371)  $ (11,237,212)
Adjustments to reconcile net loss to net cash                   
used in operating activities: 
Depreciation and amortization                  1,107,009       330,395
Allowance for uncollectible accounts           40,290          —  
Inventory reserve                              325,000         —  
Non-cash interest expense                      98,706          —  
Change in fair value of warrant liability      89,859          —  
Write-off of unamortized financing costs       41,166          62,391
Non-cash equity compensation                   1,097,106       774,493
Changes in operating assets and liabilities:                    
Increase in accounts receivable                (68,593)        (68,360)
Decrease (increase) in inventory               74,100          (383,181)
Decrease in prepaid expenses and other current 218,204         306,814
assets 
Increase in other assets                       (3,500)         (6,751)
Increase in accounts payable and accrued       224,958         888,813
expenses 
(Decrease) increase in deferred rent           (11,826)        2,778
Increase in deferred revenue                   130,653         87,974
Increase in long-term interest payable         51,922          —  
Increase in other current liabilities          12,981          12,277
                                                                
Net cash used in operating activities          (10,505,336)    (9,229,569)
                                                                
Cash flows from investing activities:                           
Purchases of property and equipment            (3,766,264)     (1,390,572)
                                                                
Net cash used in investing activities          (3,766,264)     (1,390,572)
                                                                
Cash flows from financing activities:                           
Proceeds from borrowings and issuance of       6,000,000       —  
warrant 
Expenses related to borrowings and issuance of (245,358)       —  
warrant 
Expenses related to public offering            0               (198,942)
Proceeds from exercise of stock options        18,059          33,310
Net proceeds from public offerings             15,789,873      —  
                                                                
Net cash provided by (used in) financing       21,562,574      (165,632)
activities
                                                                
Net increase (decrease) in cash and cash       7,290,974       (10,785,773)
equivalents 
Cash and cash equivalents at beginning of      7,861,524       27,996,871
period 
                                                                
Cash and cash equivalents at end of period      $ 15,152,498    $ 17,211,098
                                                                
Supplemental disclosure of cash flow                            
information:
Non-cash investing and financing activity:                      
Reclassification of warrant liability to        $ 652,442      $ —  
stockholders' equity 
Reclassification of MelaFind^® components from  $ —             $ 522,014
other assets to property and equipment 

CONTACT: For further information contact:
        
         For Investors
         Lynn Pieper
         Westwicke Partners
         415-202-5678
        
         For Media
         Diana Garcia Redruello
         PR@melasciences.com
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