Organization and Basis Of Presentation

9 Months Ended

Sep. 30, 2011

Organization and Basis of Presentation [Abstract]

ORGANIZATION AND BASIS OF PRESENTATION

1. ORGANIZATION AND BASIS OF PRESENTATION

MELA Sciences, Inc., a Delaware corporation (the “Company”), is a medical device company focused on the design, development and commercialization of a non-invasive, point-of-care (in the doctor’s office) instrument to aid in the detection of early melanoma. The Company’s flagship product, MelaFind^®, features a hand-held imaging device that emits light of multiple wavelengths to capture images of suspicious pigmented skin lesions and extract data. The data are then analyzed utilizing image processing classification algorithms, ‘trained’ on our proprietary database of melanomas and benign lesions, to provide information to assist in the management of the patient’s disease, including information useful in the decision of whether to biopsy the lesion.

The components of the MelaFind^® system include:

• a hand-held imaging device, which employs high precision optics and multi-spectral illumination (multiple colors of light including near infra-red);

• a proprietary database of pigmented skin lesions, which we believe to be the largest in the U.S.; and

• lesion classifiers, which are sophisticated mathematical algorithms that extract lesion feature information and classify lesions.

On November 1, 2011, the Company received written approval from the U.S. Food and Drug Administration (“FDA”) of the Company’s MelaFind^® Pre-Market Approval (“PMA”) application.

The MelaFind^® PMA was submitted to the FDA in June 2009, and had been granted expedited review by the FDA. A pivotal trial conducted to establish the safety and effectiveness of MelaFind^® was performed under the auspices of a binding Protocol Agreement; all study end points were met. The results of the pivotal study were published in the Archives of Dermatology in October 2010 (on-line) and February 2011 (print). The PMA application for MelaFind^® was reviewed by the FDA’s General and Plastic Surgery Devices Panel (“Panel”) in November of 2010. The Panel voted favorably on all three questions posed by the FDA.

In February 2011, the Company submitted a PMA amendment containing a revised ‘indications for use’ statement limiting MelaFind^® to use by dermatologists, based on discussions that ensued during the Panel meeting. In May 2011, the Company filed a second PMA amendment containing a training program for clinicians, an outline of which was presented at the Panel meeting. Also in May 2011, the Company submitted a Citizen’s Petition to the FDA requesting that the Commissioner of the FDA enforce the binding Protocol Agreement, as well as FDA laws and regulations, in completing the review of the MelaFind^® PMA.

The Company received an Approvable Letter from the FDA for the MelaFind^® PMA application on September 22, 2011. Subsequent to September 30, 2011, the Company received an Approval Letter from the FDA on November 1, 2011 approving the MelaFind^® PMA application. Based upon receipt of FDA approval of the MelaFind^® PMA application, the Company withdrew its Citizen’s Petition filed with the FDA in May 2011.

With FDA approval received, the Company plans to launch MelaFind^® commercially in the United States during the first quarter of 2012.

In August of 2011, the Company received the International Organization for Standardization (“ISO”) 13485 certification of the Company’s comprehensive management system for the design and manufacture of medical devices. On September 6, 2011, the Company received Conformite Europeenne (“CE”) Mark approval for MelaFind^®. With CE Mark approval, the Company has the ability to market MelaFind^® to dermatologists across the European Union and in certain other countries.

The Company plans to launch MelaFind^® commercially in Germany during the first quarter of 2012.

To date the Company has not generated any revenues from MelaFind^®. The Company anticipates that it will continue to incur net losses for the foreseeable future in the development and commercialization of the MelaFind^® device. From inception, the Company financed operations primarily through the sale of convertible preferred stock and subsequently sold common stock as part of an initial public offering in October 2005, two private placements (in November 2006 and August 2007), two registered direct offerings (in August 2008 and July 2009), and pursuant to a Committed Equity Financing Facility (“CEFF”) with Kingsbridge Capital Limited in the second half of 2009 and first quarter of 2010. In addition, the Company received net proceeds of approximately $15.2 million through the sale of common stock pursuant to a public offering which closed July 6, 2010.

The Company faces certain risks and uncertainties which are present in many emerging medical device companies regarding future profitability, ability to obtain future capital, protection of patents and intellectual property rights, competition, rapid technological change, government regulations, changing health care marketplace, recruiting and retaining key personnel, and reliance on third party manufacturing organizations.

As of September 30, 2011, the Company’s total of cash and cash equivalents was approximately $17.0 million. Management believes that with FDA and CE Mark approval this cash balance will be sufficient to fund the Company’s controlled launches in the northeast U.S. and Germany and the anticipated level of operations for at least the next twelve months. However, the Company will require additional funds to achieve significant commercialization of MelaFind^®. There can be no assurances that the Company will be able to raise additional financing in the future. Additional funds may not become available on acceptable terms, and there can be no assurance that any additional funding that the Company does obtain will be sufficient to meet the Company’s needs in the long term. In the event that the Company is unable to raise additional funds, the Company has the ability and intent to reduce certain discretionary expenditures.

The unaudited condensed financial statements included herein have been prepared from the books and records of the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. The information and note disclosures normally included in complete financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

The Company’s management is responsible for the financial statements included in this document. The Company’s interim financial statements are unaudited. Interim results may not be indicative of the results that may be expected for the year. However, the Company believes all adjustments considered necessary for a fair presentation of these interim financial statements have been included and are of a normal and recurring nature.