MELA Sciences Reports 2014 Financial Results and Provides a Business Update

Irvington, NY, March 30, 2015 — 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 reported financial results and provided a business update.

Fourth Quarter 2014 and Subsequent Weeks Operational Highlights:

  • Named Michael R. Stewart as the Company’s President and Chief Executive Officer. Mr. Stewart has been a member of the MELA Sciences Board of Directors since August 2014 and was most recently a senior executive at NASDAQ-traded PhotoMedex, Inc.  Mr. Stewart was previously CEO of publicly traded Surgical Laser Technologies, Inc. prior to its sale to PhotoMedex.
  • Announced that the CPT Editorial Panel accepted the addition of Category III codes 039XX1T and 039XX2T to report multi-spectral digital skin lesion analysis of atypical cutaneous lesions, which applies to the MelaFind System.  The Company expects that these codes will become effective on January 1, 2016 and will provide the basis to begin pursuing insurance coverage and reimbursement for MelaFind.
  • Reported that highly favorable results were obtained in a clinical and healthcare management study using MelaFind to help identify lesions most at risk for atypia and malignancy in patients at a high risk for melanoma, potentially allowing some patients to avoid an unnecessary surgical procedure.  The results were included in the 2013 Outcomes for Cleveland Clinic’s Dermatology & Plastic Surgery Institute.
  • Conducted a fourth U.S. “reader” study in October at the Fall Clinical Dermatology Conference in Las Vegas, Nevada.  These studies measure the impact of MelaFind on physician biopsy management.

Michael R. Stewart, President and CEO of Mela Sciences, stated, “We are pleased to have learned that, barring any further action by the American Medical Association, Category III CPT Codes for the use of MelaFind will become effective on January 1, 2016.  Obtaining insurance reimbursement for physicians’ use of the MelaFind system in the U.S. is a critical step toward MelaFind becoming broadly adopted by the dermatology community, and this is the first tangible success of our decision to pursue that strategy.  More broadly, we are seeking to expand MelaFind’s use both domestically and internationally, particularly by placing MelaFind in key institutions with a particular focus on dermatologists who treat high risk patients; increasing our visibility through abstracts, posters and clinical presentations at dermatology conferences; as well as continuously improving the MelaFind device.  I believe we are making progress on all of these fronts.”

2014 Financial Results (All comparisons are to results for the year ended December 31, 2013):

  • Revenue increased to $0.9 million, from $0.5 million, and was the result of MelaFind system revenue under the Company’s capital sale model, partially offset by a decline in deferred placement revenue.  The Company’s first commercial sale occurred in the second quarter of 2014.
  • Cost of revenue was $4.9 million, up 14% from $4.3 million in 2013.  This increase was the result of several factors, including a reserve for obsolete inventory, deferred repairs of certain of our MelaFind system units, and direct costs of MelaFind systems sold under our capital sale model, partially offset by lower depreciation and other expenses. Research and development (R&D) expenses declined 58% to approximately $1.6 million in 2014, compared with $3.8 million for 2013.  The decrease was the result of the cost reduction plan initiated in August 2013.  Ongoing R&D efforts are focused on product enhancements.
  • Selling, general and administrative (SG&A) expenses declined 29% to approximately $11.0 million, compared with $15.5 million for 2013.  The decrease is the result of salary and headcount reductions, lower stock compensation expense, lower consulting and temporary help expenses, and other cost reduction initiatives.
  • Interest expense was $2.4 million, compared with $0.6 million in 2013.  In 2014, interest expense was related to the issuance of 4% Convertible Debentures and to the subsequent conversion of approximately $1.6 million in the debentures during the year, and included $1.9 million in amortization of debt discount, $0.3 million in interest payments, and $0.2 million in amortization of deferred financing costs. The conversion of the debentures resulted in approximately $1.2 million of accelerated interest expense.  In 2013, interest expense was incurred as a result of a $6 million senior debt financing in March 2013, which was prepaid in September 2013.
  • The change in fair value of the Company’s warrant liability, which is marked to market, resulted in a benefit of $8.1 million for 2014, compared with a charge of $0.3 million for 2013 and was primarily related to a lower stock price for the period.

The Company had cash and cash equivalents totaling $11.4 million at December 31, 2014, compared with $3.8 million at December 31, 2013.

As reported in the Company’s Form 10-K for the year ended December 31, 2014, management concluded that the Company’s  internal controls specifically related to proper review and monitoring were not operating effectively at December 31, 2014. Since December 31, 2014, all accounts have been reconciled appropriately. Management has updated the Company’s quarterly closing procedures and implemented a timeline by which to actively monitor the Company’s progress with respect to the quarterly close, specifically to permit adequate review. Upon completion of the closing process following the end of the first quarter of 2015, management will determine whether the material weakness cited at December 31, 2014 has been remediated.

About MELA Sciences, Inc.  (
MELA Sciences is a medical technology company dedicated to designing and developing innovative software-driven technology for physician clinical use for the early 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 their 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 “will,” “may,” “seeks,” and “expects,” that suggest future events or trends. These statements, including the effective date of the CPT codes for physicians’ use of the MelaFind system, the Company’s ability to gain Medicare Part B reimbursement from CMS and reimbursement from private insurance companies, study results, acceptance of MelaFind by practitioners and key opinion leaders and institutions, the Company’s ability to expand MelaFind’s use domestically and internationally and increase its visibility, the Company’s ability to develop, launch and improve its products, and the Company’s effectiveness in mitigating or preventing significant deficiencies or material weaknesses in its internal control over financial reporting in the future, 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 and


Andrew McDonald
LifeSci Advisors, LLC

Diana Garcia Redruello
MELA Sciences, Inc.




(in thousands, except for share data)

December 31,

December 31,




Current Assets:
Cash and cash equivalents



Accounts receivable (net of allowance of $95 and $46 as of December 31, 2014 and 2013, respectively)



Inventory (net of reserve $1,409 and $325 as of December 31, 2014 and 2013, respectively)



Prepaid expenses and other current assets



Total Current Assets



Property and equipment, net



Patents and trademarks, net



Deferred financing costs




Other assets



Total Assets





Current Liabilities:



Accounts payable (includes related parties of $74 and $33 as of December 31, 2014 and 2013, respectively)



Accrued expenses (includes related parties of $0 and $48 as of December 31, 2014 and 2013, respectively)



Deferred revenue



Warrant liability



Other current liabilities



Total Current Liabilities



Long-Term Liabilities:
Deferred revenue



Deferred rent



Senior secured convertible debentures (net of discount of $8,410 at December 31, 2014)



Total Long-Term Liabilities



Total Liabilities






Stockholders’ Equity:



Series B convertible preferred stock – $0.10 par value; authorized 10,000,000 shares: issued and outstanding: 11,787 and 0 at December 31, 2014 and 2013, respectively



Common stock – $0.001 par value; authorized 50,000,000 shares:
Issued and outstanding 6,037,232 and 4,750,160 shares at December 31, 2014 and 2013, respectively.



Additional paid-in capital



Accumulated deficit



Total Stockholders’ Equity



Total Liabilities and Stockholders’ Equity






(in thousands, except for share and per share data)



December 31,

December 31,



Net revenues



Cost of revenue



Gross profit  




Operating expenses:
Research and development



Selling, general and administrative



Impairment of long-lived assets



Total operating expenses



Operating loss  




Other income (expenses):
Interest income



Interest expense



Change in fair value of warrant liability



Write-off of unamortized loan costs



Gain on sale of fixed assets



Registration rights liquidated damages



Other income, net





Net loss  




Deemed dividend related to beneficial conversion feature on convertible preferred stock



Net loss attributable to common stockholders



Basic and diluted net loss per common share



Basic and diluted weighted average number of common shares outstanding








(in thousands)

December 31,

December 31,



Cash flows from operating activities:
Net loss



Adjustments to reconcile net loss:
Write-off of unamortized loan costs



Depreciation and amortization



Impairment of long-lived assets



Bad debt expense



Write-off of unamortized financing costs



Share-based compensation expense



Amortization of deferred financing costs



Amortization of debt discount



Change in fair value of warrant liability



Inventory reserve



Gain on sale of fixed assets



Changes in operating assets and liabilities:
     Accounts receivable






     Prepaid expenses and other current assets



     Other assets



     Accounts payable and accrued expenses



     Other current liabilities



     Deferred rent



     Deferred revenue



          Net cash used in operating activities




Cash flows from investing activities:
Purchases of property and equipment



Proceeds from the sale of fixed assets



    Net cash provided by (used in) investing activities




Cash flows from financing activities:
Net proceeds from private placements/public offerings



Proceeds from long-term debt



Expenses related to long-term debt



Expenses related to issuance of Series B convertible preferred stock


Repayment of long-term debt



Proceeds from exercise of stock options



    Net cash provided by financing activities




Net increase (decrease) in cash and cash equivalents



Cash and cash equivalents at beginning of period




Cash and cash equivalents at end of period




Supplemental Disclosure of Cash Flow Information:      
Cash paid for interest


 $         -

Supplemental Disclosure of Non-cash Investing and Financing Activities:
Conversion of convertible preferred stock into common stock


 $         -

Conversion of senior secured convertible debentures into common stock


 $         -

Recognition of debt discount on senior secured convertible debentures


 $         -

Recognition of beneficial conversion feature on senior secured convertible debentures


 $         -

Exchange of series A convertible preferred stock for series B convertible preferred stock


 $         -

Reclassification of warrant liability to stockholders equity

 $          -

 $    652

Reclassification of MelaFind components from property and equipment to inventory

 $          -



MELA Sciences RSS

Subscribe to MELA Science’s RSS (Really Simple Syndication) feeds to get information delivered directly to your desktop!

Clicking on an RSS link below will provide you with raw XML data of our content. If you do not have a compatible reader installed, you will see XML code in your browser - to view our content, paste the feed address into an RSS reader, or use a browser which supports RSS feeds. See below for additional information on RSS.

MELA Sciences RSS Feeds

Additional Information About RSS
Really Simple Syndication (RSS) is an XML-based format for distributing and aggregating Web content (such as news headlines). Using RSS, web content providers can easily create and disseminate news headlines and URLs. To find more information about common RSS Readers, enter the term “RSS Reader” into an internet search engine.