Venture Debt Financing

On February 5, 2013, the Company signed a non-binding term sheet with a venture capital lender for a loan of up to $10 million. Of the $10 million, it is anticipated that $6 million will be funded in March 2013 and the Company will have the option to draw down the remaining $4 million through March 17, 2014, subject to the satisfaction of meeting certain sales and revenue targets. It is anticipated that the loan will mature 42 months from the initial closing and bear interest at the rate of 10.45% per year. As structured, the first 12 months of the loan will be interest only, and after that the company will make 30 equal payments of principal and interest until maturity. The loan would be secured by a general lien against all of the Company's assets, other than its intellectual property assets. In addition, the lender will have a security interest in the proceeds of the sale of any of our intellectual property assets. The lender will receive a warrant to purchase that number of shares of our common stock equal to 775,000 divided by the to-be-determined exercise price of the warrant. The loan is subject to satisfactory completion of the lender's due diligence and the execution of definitive loan documents and is conditioned upon the Company having raised $12.5 million in equity proceeds since January 1, 2013. There can be no assurance that the loan will be consummated or that the material terms of the loan will be as described.

"Upon closing of the offering and consummation of the initial funding of the debt financing in the coming weeks, together with the remaining $4 million available under the debt financing contingent on certain performance milestones, the cash committed to the Company's balance sheet will be roughly $30 million. We envision being able to execute the second phase of our launch strategy with confidence throughout 2013 and well into 2014," said Dr. Joseph V. Gulfo, President and CEO of MELA Sciences.

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