10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

or

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to 

Commission file number 0-13092

SPECTRASCIENCE, Inc.

(Exact name of small business issuer

as specified in its charter)

Minnesota	41-1448837
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

11568 Sorrento Valley Rd., Suite 11

San Diego, California 92121    

(Address of principal executive offices)

(858) 847-0200  

(Issuer's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer       ¨	Accelerated filer                         ¨
Non-accelerated filer          ¨	Smaller reporting company       x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES þ NO ¨

The number of shares of the Registrant’s common stock, par value $0.01 per share, outstanding on November 16, 2009 was 70,107,615 with an additional 21,650,000 shares of Series B Convertible Preferred Stock, par value $0.01 per share, outstanding. As of this date the Registrant also had outstanding warrants to purchase 13,654,000 shares of common stock at a weighted average price of $0.34 per share.

SPECTRASCIENCE, INC.

FORM 10-Q

For the Quarterly Period Ending September 30, 2009

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION:	3
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
Item 4T.	Controls and Procedures	15
PART II	OTHER INFORMATION	16
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
SIGNATURES		17

2

PART I   FINANCIAL INFORMATION:    

Item 1. Financial Statements (Unaudited)

SpectraScience, Inc. and Subsidiary

Consolidated Balance Sheets

	September 30,  2009			December 31, 2008
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,315,232		$	1,618,181
Accounts Receivable (net)		24,952			23,877
Inventories (net of allowances)		374,581			465,881
Prepaid expenses and other current assets		254,351			85,344
Total current assets		1,969,116			2,193,283
Fixed assets, net		1,710,261			1,876,738
Patents, net		2,978,375			3,165,550
TOTAL ASSETS	$	6,657,752		$	7,235,571
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	271,363		$	345,762
Accrued liabilities		195,683			88,081
Total current liabilities		467,046			433,843
STOCKHOLDERS’ EQUITY
Series B Convertible Preferred Stock, $.01 par value:
Authorized – 15,000,000; shares issued and outstanding – 8,340,000 shares at September 30, 2009 (no shares at December 31, 2008) $1,668,000 liquidation value plus accumulated and unpaid dividends of $21,811 as of September 30, 2009		83,400			-
Common stock, $.01 par value:
Authorized—160,000,000 shares
Issued and outstanding 70,107,615 shares at September 30, 2009 (68,613,598 shares at December 31, 2008)		701,076			686,136
Additional paid-in capital		20,946,634			17,835,865
Accumulated (deficit)		(15,540,404	)		(11,720,273	)
TOTAL STOCKHOLDERS’ EQUITY		6,190,706			6,801,728
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,657,752		$	7,235,571

Note: The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information required by accounting principles generally accepted in the United States of America for complete financial statements.

See accompanying notes to unaudited condensed financial statements.

3

SpectraScience, Inc. and Subsidiary

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended  September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Revenue	$	1,875		$	52,010		$	122,266		$	60,560
Cost of revenue		638			22,079			81,418			27,130
Gross profit		1,237			29,931			40,848			33,430
Operating expenses:
Research and development		445,888			550,283			1,180,051			1,619,550
General and administrative		565,130			389,159			1,555,441			1,696,865
Sales and marketing		104,479			167,419			288,587			593,254
Total operating expenses		1,115,497			1,106,861			3,024,079			3,909,669
Operating (loss)		(1,114,260	)		(1,076,930	)		(2,983,231	)		(3,876,239	)
Other expense (income), net		(724	)		(24,021	)		21			(113,112	)
Net (Loss)		(1,113,537	)		(1,052,909	)		(2,983,252	)		(3,763,127	)
Deemed Dividend on Preferred Stock		(544,924	)		-			(836,879	)		-
Accrued but Unpaid Dividend on Preferred Stock		(21,811	)		-			(21,811	)		-
Net (loss) applicable to common stockholders	$	(1,680,272	)		(1,052,909	)	$	(3,841,942	)	$	(3,763,127	)
Basic and diluted net (loss) per share	$	(0.02	)	$	(0.02	)	$	(0.06	)	$	(0.06	)
Weighted average common shares outstanding		69,774,282			68,365,617			69,669,059			66,657,026

See accompanying notes to unaudited condensed financial statements.

4

SpectraScience, Inc. and Subsidiary

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the nine months ended September 30, 2009

(Unaudited)

	Preferred Stock				Common Stock				Additional  Paid-In		Accumulated (Deficit)			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital					Equity
Balance, December 31, 2008		-	$	-		68,613,598	$	686,136	$	17,835,865	$	(11,720,273	)	$	6,801,728
Stock based compensation - consultants		-		-		-		-		147,690		-			147,690
Stock based compensation - employees		-		-		-		-		456,397		-			456,397
Exercise of stock options		-		-		400,000		4,000		56,000		-			60,000
Issuance of Common Stock		-		-		1,094,017		10,940		262,563		-			273,503
Sale of Series B Preferred Stock and warrants		8,340,000		-		-		-		1,434,640		-			1,434,640
Deemed Dividend on Preferred Stock		-		83,400		-		-		753,479		(836,879	)		-
Net loss		-		-		-		-				(2,983,252	)		(2,983,252	)
Balance, September 30, 2009		8,340,000	$	83,400		70,107,615	$	701,076	$	20,946,634	$	(15,540,404	)	$	6,190,706

See accompanying notes to unaudited condensed financial statements.

5

SpectraScience, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2009			2008
OPERATING ACTIVITIES:
Net (loss)	$	(2,983,252	)	$	(3,763,127	)
Adjustments to reconcile net (loss) to net cash used in operating activities:
Depreciation and amortization		213,106			209,300
Luma equipment write-down		155,755
Stock-based compensation employees		456,397			731,953
Stock-based compensation consultants		147,690			41,532
Fair market value of stock issued for services		-			7,500
Changes in operating assets and liabilities:
Accounts receivable		(1,075	)		(52,498	)
Inventory		91,300			(283,182	)
Prepaid expenses and other current assets		104,497			(6,887	)
Accounts payable		(74,399	)		(37,005	)
Accrued liabilities		107,602			40,417
Net cash (used in) operating activities		(1,782,379	)		(3,111,997	)
INVESTING ACTIVITIES:
Purchase of certificate of deposit		-			(1,000,000	)
Redemption of certificate of deposit		-			900,000
Purchases of fixed assets		(15,210	)		(50,222	)
Net cash (used in) investing activities		(15,210	)		(150,222	)
FINANCING ACTIVITIES
Proceeds from issuance of common stock		-			445,351
Net proceeds from issuance of preferred stock		1,434,640			-
Proceeds from exercise of stock options		60,000			3,000
Net cash provided by financing activities		1,494,640			448,351
Net increase (decrease) in cash and cash equivalents		(302,949	)		(2,813,868	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,618,181			5,188,177
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,315,232		$	2,374,309
Supplemental disclosure of non-cash operating and financing activities:
Stock issued at fair value for prepaid stock issuance cost	$	273,504		$	-

See accompanying notes to unaudited condensed financial statements.

6

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements

September 30, 2009

1.   Nature of Business and Basis of Presentation

Description of Business

SpectraScience, Inc. was incorporated in the State of Minnesota on May 4, 1983 as GV Medical, Inc. In October 1992, GV Medical discontinued its prior business, refocused its development efforts and changed its name to SpectraScience, Inc. From 1996, the Company primarily focused on developing the WavSTAT ® Optical Biopsy System (“WavSTAT System”). The “Company” refers to SpectraScience, Inc. and its wholly owned subsidiary Luma Imaging Corporation.

The Company has developed and received FDA approval to market a proprietary, minimally invasive technology that optically illuminates tissue in real-time to distinguish between normal, pre-cancerous or cancerous cells without the need to physically remove tissue from the body to make such determination. The WavSTAT System operates by using cool, safe laser light to analyze tissue, enabling the physician to make an instant diagnosis during endoscopy and, if warranted, to begin immediate treatment during the same procedure. The WavSTAT is FDA approved for colon cancer detection.

On November 6, 2007, the Company acquired the assets of Luma Imaging Corporation (“LUMA ® ”) and operates LUMA as a wholly owned subsidiary of the Company. LUMA had acquired the assets from a predecessor company that had developed and received FDA approval for, a non-invasive diagnostic imaging system that can detect cervical cancer precursors and which utilizes an underlying technology that is similar to that of the WavSTAT System. The addition of the LUMA technology to the existing WavSTAT technology provides the Company with a broad suite of fluorescence-based intellectual property and know-how. LUMA received FDA approval as an adjunct to colposcopy in March 2006.

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q as they are prescribed for smaller reporting companies. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the nine-month period ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. These statements should be read in conjunction with the financial statements and related notes, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Liquidity and Going Concern

The Company has recently begun marketing its products. As of September 30, 2009, the Company had working capital of $1,502,070 and a cash balance of $1,315,232. In addition, for the nine-month period ending September 30, 2009, the Company used ($1,782,379) to fund operating activities.

From May through September 30, 2009, the Company sold 8,340,000 shares of Series B Convertible Preferred Stock to accredited investors at a price of $0.20 per share for an aggregate consideration of $1,668,000. The Company received net cash proceeds of $1,434,640 after the payment of finder’s fees and expenses of $233,360. The Series B Convertible Preferred Stock was sold as a component of a Unit offering described in more detail under the “Shareholders’ Equity” paragraph below.

On January 30, 2009, the Company entered into a Common Stock Purchase Agreement with Fusion Capital Fund II. Under the Purchase Agreement, Fusion Capital is obligated, under certain conditions, to purchase shares from us in an aggregate amount of $6.0 million from time to time over a twenty-four (24) month period.

SpectraScience expects to incur significant additional operating losses through at least 2010, as we complete clinical trials, begin outcome-based clinical studies and increase sales and marketing efforts to commercialize the WavSTAT systems. If we do not receive sufficient funding, the Company may be unable to continue as a going concern. We may incur unknown expenses or we may not be able to meet our revenue forecast, and one or more of these circumstances would require us to seek additional capital. We may not be able to obtain equity capital or debt funding on terms that are acceptable. Even if the Company receives additional funding, such proceeds may not be sufficient to allow the Company to sustain operations until it attains profitability and positive cash flows from operations.

7

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.   Summary of Significant Accounting Policies

Revenue recognition

We recognize revenue, net of discounts, from sales of our medical devices and sales of disposable supplies related to our medical devices when items have been shipped, when title transfers, when the selling price is fixed or determinable, and when collection of the resulting receivable is reasonably assured. Terms of sale are generally FOB origin, reflecting that title and risk of loss are assumed by the purchaser at the shipping point.

Consolidation

The accompanying consolidated financial statements include the accounts of SpectraScience, Inc. and its wholly-owned subsidiary Luma Imaging Corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Risks and Uncertainties

The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. The Company's operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks associated with a development stage company, including the potential risk of business failure.

Use of Estimates

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Significant estimates made by management include, among others, realization of long-lived assets, assumptions used to value stock options, and assumptions used to value the consideration issued, the assets acquired in the Luma acquisition and the realization of intangible assets. Actual results could differ from those estimates.

Stock-Based Compensation

All issuances of stock options or other equity instruments employees and to non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Any stock options issued to non-employees are recorded in expense and additional paid-in capital in stockholders’ equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each period.

For the nine-months ended September 30, 2009 and 2008, stock-based compensation was approximately $604,000 and $773,000, respectively. Stock-based compensation expense of approximately $195,000 and $361,000 was recognized in research and development expenses for the nine months ended September 30, 2009 and 2008, respectively. Stock-based compensation of approximately $439,000 and $370,000 was recognized in general and administrative expenses for the nine months ended September 30, 2009 and 2008, respectively. Stock-based compensation expense of approximately ($30,000) and $42,000 was recognized in sales and marketing expense for the nine months ended September 30, 2009 and 2008, respectively. The benefit recorded in sales and marketing stock option expense was the result of recapturing previously recognized expense as a result of option holder’s terminations. The Company previously adopted the fair value recognition provisions of future accounting standards prospectively for all employee and consultant awards granted, modified, or settled by the Company on August 2, 2004. Accordingly, changes in accounting standards as they relate to stock-based compensation have not had a material impact on the comparability of Company’s financial statements.

8

As of September 30, 2009, the Company had one stock-based employee compensation plan (the “Option Plan"). The Option Plan provides for the grant of incentive stock options (“ISOs") to full-time employees (who may also be directors) and nonqualified stock options ("NSOs") to non-employee directors, consultants, vendors or providers of services and expires on January 30, 2011. The exercise price of any ISO may not be less than the fair market value of the common stock on the date of grant and the term shall not exceed ten years. The amount reserved under the Option Plan equals 15% of the outstanding shares of the Company, totaling 10,516,142 reserved at September 30, 2009. At September 30, 2009 the Company had outstanding 7,350,000 options under the Option Plan representing approximately 10.48% of the outstanding shares (4,450,000 of which were exercisable), with 3,166,142 available for future issuance. Awards under the Company’s Option Plan generally vest over three years.

The fair value of options granted were estimated at the date of grant using a Black-Scholes option-pricing model which includes several variables including expected life, risk free interest rate, expected stock price volatility, stock option exercise patterns and expected dividend yield. The Company also must estimate forfeitures for employee stock options. These models and assumptions are emerging and may change future expenses by increasing or decreasing stock-based compensation expense. Management used the following weighted average assumptions to value all stock options for the nine months ending September 30, 2009 and 2008:  

	2009			2008
Expected life	5 years			5 years
Risk-free interest rate		2.02	%		3.64	%
Expected volatility		122	%		133	%
Expected dividend yield		0	%		0	%

In addition to the above, management estimated the forfeitures on employee options under the Option Plan would have negligible effects because such forfeitures would be a very small percentage. Recent forfeitures are due to layoffs which were not expected to occur at the grant date of these options. Management believes that options granted to remaining employees have been to a group of individuals that have a high desire to see the Company succeed and have aligned themselves to that end.

The expected life used in the calculations were selected by management based on past experience, forward looking profit forecasts and estimates of what the trading price of the Company’s stock might be at different future dates.

The risk-free interest rates are the 5-year U.S. Treasury rate as published at the time of making the calculations.

Volatility is a calculation based on the Company’s historical stock price over approximately, the past 5 years (expected life of stock options). Management computed and tested this volatility calculation for reasonableness and found it to be acceptable based on a number of factors including the Company’s current market capitalization, comparables to other companies in our area of interest, the current development stage of the Company and management’s estimate of the net present value of forward looking profits that has been compiled (for which there is no assurance).

	Options Available For Grant			Plan Options  Outstanding			Weighted Average  Exercise Price Share		Weighted-Average  Remaining  Contractual Term  (years)		Aggregate  Intrinsic Value
Outstanding December 31, 2008		2,142,040			8,150,000		$	0.58		8.38
Options granted		(600,000	)		600,000			0.29		10.00
Options exercised		400,000			(400,000	)		0.15		-
Additional options available		224,102
Forfeited or expired		1,000,000			(1,000,000	)		-		-
Outstanding at September 30, 2009		3,166,142			7,350,000		$	0.58		7.80	$	-
Exercisable at September 30, 2009					4,450,000		$	0.71		6.91	$	-

The total intrinsic value of options exercised during the nine months ended September 30, 2009 and 2008 was $160,000 and $13,000, respectively. At September 30, 2009, total unrecognized estimated employee and director compensation cost related to non-vested stock options granted prior to that date is approximately $560,000, which is expected to be recognized over the next two years.

9

Impairment or Disposal of Long-Lived Intangible Assets

Current accounting standards address financial accounting and reporting for the impairment or disposal of long-lived intangible assets (such as our patents). Accounting standards require that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset (excluding interest), an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. The Company adopted these accounting standards on August 2, 2004. Management believes no impairment exists at September 30, 2009.

Inventories

Inventories consisted of the following at September 30, 2009 and December 31, 2008:

	September 30, 2009		December 31, 2008
Raw materials	$	132,172	$	205,651
Finished goods		242,409		260,230
Totals	$	374,581	$	465,881

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted earnings (loss) per share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and only if the additional common shares would be dilutive. Basic and diluted loss per share are the same for the nine months ended September 30, 2009 and 2008, since any additional common stock equivalents would be antidilutive. Potentially dilutive shares of common stock that have been excluded from the calculation of the weighted average number of dilutive common shares for the three and nine months ended September 30, 2009 include outstanding stock options, convertible preferred stock and warrants. As of September 30, 2009, there were 8,340,000 shares of Series B Convertible Preferred Stock, warrants to purchase 5,721,966 shares of Common Stock and 7,350,000 stock options outstanding.

Recent Accounting Pronouncements

In April 2009, accounting standards related to “ Interim Disclosures about Fair Value of Financial Instruments ” require disclosures about fair value of financial instruments in interim and annual financial statements. These standards are effective for periods ending after June 15, 2009. The Company adopted these standards effective for the quarter ending September 30, 2009. The adoption did not have an impact on the Company’s financial position or results of operations.

In May 2009, more specific accounting standards related to “ Subsequent Events ” established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company adopted these standards for the quarter ending June 30, 2009.

In June 2009, a new accounting standard related to the renumbering of all accounting standards was issued. Under the standard, Accounting Standards Codification (Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. In the FASB’s view, the issuance of this Statement and the Codification will not change GAAP, except for certain nonpublic nongovernmental entities. The Company does not expect that the adoption of this Statement will have a material impact on the Company’s financial statements.

10

Fair Value of Financial Instruments

The carrying amount of the Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their estimated fair values due to the short-term maturities of those financial instruments.

3. Stockholders Equity

Common Stock

On January 30, 2009, we entered into a Common Stock Purchase Agreement with Fusion Capital Fund II, an Illinois limited liability company. Under the Purchase Agreement, Fusion Capital is obligated, under certain conditions, to purchase shares from us in an aggregate amount of $6.0 million from time to time over a twenty-four (24) month period.  Under the terms of the Purchase Agreement, on the date we entered into the agreement, we issued Fusion Capital a commitment fee consisting of 1,094,017 restricted shares of our common stock. 

Series B Convertible Preferred Stock and Warrants

On June 22, 2009, the Board of Directors designated 15,000,000 of the Company’s undesignated capital stock as Series B Convertible Preferred Stock (the “Preferred”) with par value of $0.01 per share. The Preferred is convertible into an equal number of shares of the Company’s Common Stock based upon an initial conversion price of $0.20 per share and carries a liquidation preference of like amount plus declared but unpaid cumulative dividends. The Preferred is entitled to receive cumulative dividends in preference to any dividend which may be declared on the Common Stock at the rate of 8% of the original issue price. In addition, the Preferred has rights which provide for (i) dividend payments senior to those with respect to common shares, (ii) voting rights equal to the number of common shares into which the Preferred is convertible and (iii) adjustments to the conversion price in the event of stock dividends, stock splits or other effective stock subdivisions. The Preferred is subject to automatic conversion in the event of (a) an underwritten public offering exceeding $10 million in gross proceeds to the Company or, (b) the approval of 67% of the Preferred holders or (c) in the event that the underlying conversion shares become freely tradable and the average daily trading volume of the underlying stock is not less than 50,000, nor the average closing price of the underlying stock is not less than the conversion price then in effect for 10 consecutive trading days.

From May through September 30, 2009, as a part of a Units offering, the Company sold 8,340,000 shares of its Preferred to accredited investors for an aggregate consideration of $1,668,000. The Company received net cash proceeds of $1,434,640 after the payment of finders’ fees and expenses of $233,360. In addition, the Company issued five-year warrants to purchase 4,170,000 additional shares of Common Stock at an initial exercise price of $0.30 per share and 764,000 agent warrants at an initial exercise price of $0.35 per share. The fair value of the agent warrants as determined using the Black-Scholes Model is approximately $249,000. The convertible feature of the Preferred and the terms of the warrants provide for a rate of conversion or exercise that was below market value at issuance. Such feature, as it specifically relates to the convertible feature of the Preferred, is characterized as a “Beneficial Conversion Feature” (“BCF”). Pursuant to existing accounting standards, the estimated relative fair values of the BCF and the warrants, in approximate amounts of $837,000 and $722,000, respectively, were calculated. The value of the BCF was determined utilizing an intrinsic value method with the fair value of the warrants determined using the Black-Scholes option-pricing model at the date of issuance. The warrant fair values were determined assuming a five-year term, stock volatility of between approximately 124% and 123% and risk-free interest rates of between 1.98% and 2.47%. The stand-alone fair value of the BCF was then determined to be higher than the remaining proceeds received and, accordingly, the value assigned to the BCF was limited to the gross proceeds received from the offering net of the fair value of the warrants. Per the guidance of accounting standards, the value of the BCF is treated as a deemed dividend to the Preferred stockholders and, due to the potential immediate convertibility of the Preferred stock at issuance, this value is recorded as an increase to both additional-paid-in-capital and accumulated deficit at the time of issuance.

4. Subsequent Events

Subsequent events have been evaluated through November 16, 2009, the date the financial statements are filed with the Securities and Exchange Commission. Through that date, there were no events requiring disclosure, except for the sale to accredited investors of an additional 13,310,000 shares of Series B Convertible Preferred Stock, including Common Stock purchase warrants to purchase 6,655,000 shares at $0.30 per share and 1,331,000 agent warrants to purchase Common Stock at $0.35 per share. The Company received $2,662,000 gross proceeds from the sale, and net proceeds of $2,359,000 after payment of $303,000 in finders’ fees.

11

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Report, or in our future filings with the SEC, in our press releases and in oral statements made with the approval of an authorized executive officer, the words or phrases “anticipates,” “estimates,” “expects,” “will likely result,” “projects,” “believes,” “intends,” or similar expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed in the forward-looking statements.

We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances after the date of such statements. Readers are urged to carefully review and consider the various disclosures made by us in this Report and other reports we file with the SEC that attempt to advise interested parties of the risks and factors that may affect our business. Such forward-looking statements are qualified in their entirety by the cautions and risk factors set forth in our Annual Report on Form 10-K covering the year ended December 31, 2008.

Business

SpectraScience, Inc. develops and manufactures innovative Laser Induced Fluorescence spectrophotometry systems capable of determining whether tissue is normal, pre-cancerous or cancerous without removing tissue from the body. The WavSTAT  Optical Biopsy System (“WavSTAT”) is SpectraScience's first fully developed product to incorporate its proprietary Laser Induced Fluorescence technology for worldwide clinical use. It is approved by the FDA for use during endoscopy of the colon when screening for colon cancer. The Company’s second application of this technology for detecting pre-esophageal cancer is undergoing a clinical trial at four institutions. Upon completion of the trial, the Company plans to file with the FDA seeking permission to begin marketing for that indication for use. SpectraScience believes its core technology is a hardware platform technology that can be developed for use in many areas of the human body such as early detection of pre-cancers in the lung.

Our principal executive offices are located at 11568 Sorrento Valley Rd., Suite 11, San Diego, CA 92121. We can be reached by telephone at (858) 847-0200; by fax at (858) 847-0880; or by email at info@spectrascience.com. We have a web-site at http://www.spectrascience.com. The information contained on our web site shall not be deemed to be a part of this Report.

Plan of Operation

The Company currently has FDA approval to market the WavSTAT System for detecting pre-cancerous and cancerous tissue in the colon and to market the LUMA System for use as an adjunct to colposcopy in the detection of early stage cancer and pre-cancer of the cervix. Our plan is to add another indication for use in detecting pre-cancer and cancer in the esophagus. Over the next twelve months, SpectraScience intends to:

· Continue selling the WavSTAT System in the US and international markets for the detection and treatment of pre-cancer and cancer of the colon.

· Complete WavSTAT System clinical trials related to the diagnosis of esophageal cancers.

· Continue marketing and selling the WavSTAT System in international markets for the detection of pre-cancer and cancer of the esophagus and in the US market after FDA approval.

· Continue selling or renting the LUMA System in the US as an adjunct to colposcopy to specialized OB/GYN clinics, managed care organizations (early detection and future cost avoidance), teaching hospitals and medical environments where nurse practitioners and/or medical clinicians can leverage our technology for effective early diagnosis.

· Enhance our San Diego facility and grow our organization to allow for a larger manufacturing base for both WavSTAT and LUMA Systems and also to continue the design and planning for the next generation of fluorescence-based systems.

Recent Accounting Pronouncements

In April 2009, accounting standards related to “ Interim Disclosures about Fair Value of Financial Instruments ” require disclosures about fair value of financial instruments in interim and annual financial statements. These standards are effective for periods ending after June 15, 2009. The Company adopted these standards effective for the quarter ending September 30, 2009. The adoption did not have an impact on the Company’s financial position or results of operations.

In May 2009, more specific accounting standards related to “ Subsequent Events ” established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company adopted these standards for the quarter ending September 30, 2009.

12

In June 2009, a new accounting standard related to the renumbering of all accounting standards was issued. Under the standard, Accounting Standards Codification (Codification) will become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. In the FASB’s view, the issuance of this Statement and the Codification will not change GAAP, except for certain nonpublic nongovernmental entities. The Company does not expect that the adoption of this Statement will have a material impact on the Company’s financial statements.

Results of Operations

In response to the global economic recession, SpectraScience eliminated all but the essential expenses required to focus on manufacturing, selling and marketing the WavSTAT System in international markets, primarily Europe. As a result, in all expense categories described below, expenses are materially lower in the current period as compared to the prior period one year ago.

For the Three Months ended September 30, 2009 and 2008

The Company recognized approximate revenue of $2,000 and $52,000 for the three months ended September 30, 2009 and 2008, respectively. The decrease is a result of the general downturn in the world economy, as compared to the quarter one year ago.

Overall research and development expenses for the three months ended September 30, 2009 and 2008 were approximately $446,000 and $550,000, respectively. The $104,000 decrease in research and development expenses related to approximate decreases in payroll expense of $179,000, clinical expense of $58,000, production supplies expense of $17,000, and all other expense of $14,000 offset by increases in inventory obsolescence of approximately $154,000 and consulting expense of approximately $10,000. The reduction in all expense categories is a result of a concerted effort to minimize expenses due to the global economic recession. The increase in inventory obsolescence expense is primarily the result of a shift to manufacturing diagnostic systems that utilize more current technologies.

General and administrative expenses for the three months ended September 30, 2009 and 2008 were approximately $565,000 and $389,000, respectively. The $176,000 increase for the three months ended September 30, 2009 compared to the three months ended September 30, 2008 was due to approximate increases of $62,000 in professional fees expense, $66,000 in stock compensation expense, $34,000 in amortization expense, $22,000 in bad debt expense and $10,000 in investor relations expense, offset by approximate decreases of $15,000 in payroll expense and $3,000 in all other expenses. The overall increases were a result of increased consultant utilization after an earlier reduction in payroll due to the poor overall economy and of increases in non-cash amortization and stock compensation expense.

Sales and marketing expenses for the three months ended September 30, 2009 and 2008 were $104,000 and $167,000, respectively. The overall expense decrease of approximately $63,000 was due to approximate decreases of $70,000 in payroll expense, $14,000 in trade show expense and $2,000 in stock compensation expense offset by approximate increases of $19,000 in travel expense and $4,000 in all other expenses. The overall decreases were a result of headcount expense reductions due to the Company’s response to the downturn in the overall economy.

Other income, net, for the three months ended September 30, 2009 and 2008 decreased by approximately $25,000. The reduction was primarily due to a decrease in interest income due to lower comparative interest bearing cash balances during the three months ended September 30, 2009 as compared to the same quarter one year ago.

The net losses for the three-month periods ended September 30, 2009 and 2008 were approximately ($1,114,000) and ($1,053,000), respectively. Of the net loss for the quarter ended September 30, 2009 approximately $232,000 was comprised of non-cash stock-option expense.

For the Nine Months ended September 30, 2009 and 2008

The Company recognized approximate revenue of $122,000 and $61,000 for the nine months ended September 30, 2009 and 2008, respectively. The increase is a result of the Company beginning to ramp up its sales primarily as a result of the completion of the WavSTAT System platform for sale and the introduction of the product in Europe, as compared to the comparable period one year ago.

Overall research and development expenses for the nine months ended September 30, 2009 and 2008 were approximately $1,180,000 and $1,619,000, respectively. The approximate $439,000 decrease was comprised of decreases of approximately $322,000 in payroll expense, $166,000 in stock compensation expense, $118,000 in engineering development expense, $37,000 in consulting expense, $22,000 in production supplies expense and $27,000 in all other expense offset by increases of approximately $253,000 in obsolete inventory expense. The reduction in overall expenses is a result of an effort to minimize expenses due to the global economic recession. The increase in inventory obsolescence expense is primarily the result of a shift to manufacturing diagnostic systems that utilize more current technologies.

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General and administrative expenses for the nine months ended September 30, 2009 and 2008 were approximately $1,555,000 and $1,696,000, respectively. The $141,000 reduction was comprised of decreases of approximately $130,000 in payroll expense, $60,000 in travel expense, $123,000 in professional expense and $19,000 in other expense offset by approximate increases of $91,000 in financing fee amortization, $68,000 in stock compensation expense and $32,000 in bad debt expense. The overall decrease was a result of headcount and discretionary expense reductions due to the Company’s response to the downturn in the global economy. Certain expense increases were generally a result of increased consultant utilization after an earlier reduction in headcount and increases in non-cash amortization.

Sales and marketing expenses for the nine months ending September 30, 2009 and 2008 were approximately $288,000 and $593,000, respectively. The $304,000 reduction was comprised of approximate decreases of $132,000 in payroll expense, $72,000 in stock compensation expense, $77,000 in advertising and trade shows and $3,000 in other expense offset by an $18,000 increase in travel expense. The reduction in stock compensation expense is primarily the result of employee headcount reductions and the associated re-capture of previously recognized stock compensation expense. The overall decrease was a result of a reduction in sales headcount and related sales expenses in response to the overall economic downturn.

Other income, net, for the nine months ended September 30, 2009 and 2008 decreased approximately $113,000. The reduction was primarily due to a decrease in interest income due to lower comparative interest bearing cash balances held during the nine months ended September 30, 2009 as compared to the same quarter one year ago.

As a result of the above, the approximate net loss for the nine months ended September 30, 2009 and 2008 was ($2,983,000) and ($3,763,000), respectively. The decreased net loss was due to decreases in overall operating expense as a result of planned expense reductions taken as a result of the overall recessionary market environment. Of the net loss for the nine months ended September 30, 2009 approximately $604,000 was comprised of non-cash stock-option expense.

Liquidity and Capital Resources

On September 30, 2009, the Company had a cash balance of $1,315,252 as compared with a cash balance of $1,618,181 at December 31, 2008, representing a decrease of ($302,929) in cash for the period. The cash balances decreased primarily due to working capital used in operations off set by sales of Series B Convertible Preferred Stock as described above. There have been minimal capital equipment expenditures and none are foreseen.

From May through September 30, 2009, as a part of a Units offering, the Company sold 8,340,000 shares of Series B Convertible Preferred Stock to accredited investors for an aggregate consideration of $1,668,000. The Company received net cash proceeds of $1,434,640 after the payment of finders’ fees and expenses of $233,360. From September 30, 2009 until November 16, 2009 the Company sold an additional 13,310,000 shares of Series B Convertible Preferred Stock, including Common Stock purchase warrants to purchase 6,655,000 shares at $0.30 per share and 1,331,000 agent warrants to purchase Common Stock at $0.35 per share. The Company received $2,662,000 gross proceeds from the sale, and net proceeds of $2,359,000 after payment of $303,000 in finders' fees.

On January 30, 2009, the Company entered into a Common Stock Purchase Agreement with Fusion Capital Fund II. Under the Purchase Agreement, Fusion Capital is obligated, under certain conditions, to purchase shares from us in an aggregate amount of $6.0 million from time to time over a twenty-four (24) month period. At September 30, 2009, the Company had not sold any shares to Fusion Capital.

SpectraScience expects to incur significant additional operating losses through at least 2010, as we complete clinical trials, begin outcome-based clinical studies and increase sales and marketing efforts to commercialize the WavSTAT systems. If we do not receive sufficient funding, the Company may be unable to continue as a going concern. We may incur unknown expenses or we may not be able to meet our revenue forecast, and one or more of these circumstances would require us to seek additional capital. We may not be able to obtain equity capital or debt funding on terms that are acceptable. Even if the Company receives additional funding, such proceeds may not be sufficient to allow the Company to sustain operations until it attains profitability and positive cash flows from operations.  

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required

Item 4. Controls and Procedures

Not Required

14

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2009 (the “Evaluation Date”). We reviewed in particular whether the information required to be disclosed is recorded, processed, summarized and reported  appropriately within the required time periods and was accumulated and communicated to management in a timely manner. We conducted our evaluation consistent with the COSO review framework. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures provide reasonable assurance that:

· Financial records are maintained in reasonable detail to accurately and fairly reflect the transactions and dispositions of the Company.

· Transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and receipts and expenditures are being made in accordance with authorizations of management and directors of the Company.

· Internal controls provide reasonable assurance to prevent or detect in a timely manner unauthorized acquisitions, use or dispositions of the Company that could have a material effect on the financial statements

Evaluation of Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Under supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework within the Internal Control-Integrated Framework, management concluded that our internal control over financial reporting was effective as of September 30, 2009.

Management’s assessment of the effectiveness of our internal control over financial reporting as of September 30, 2009 has not been attested to by McGladrey & Pullen, LLP, the Company’s independent registered public accounting firm.

Changes in Internal Financial Controls

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated any changes to our internal controls over financial reporting which may have occurred during the quarter ended September 30, 2009. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that there were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2009 which have materially affected, or are likely to materially affect our internal controls over financial reporting.

15

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings
	None
Item 1A.	Risk Factors
	No response required of smaller reporting companies
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	From May through September 2009, thze Company sold 8,340,000 shares of Series B Convertible Preferred Stock to accredited investors at a price of $0.20 per share for an aggregate consideration of $1,668,000. The Company received net cash proceeds of $1,531,600 after the payment of finder’s fees and expenses of $233,360.
	These transactions were exempt from registration pursuant to Regulation D promulgated under the Securities Act of 1933.
Item 3.	Defaults Upon Senior Securities
	None
Item 4.	Submission of Matters to a Vote of Security Holders

Our annual meeting of shareholders was held on September 21, 2009. At the annual meeting, Jim Hitchin, Mark McWilliams, Stanley Pappelbaum, M.D., Chester Sievert, Jr., the Honorable Tommy Thompson, and F. Duwaine Townsen were elected as directors for terms expiring at the annual meeting of our shareowners in 2010. The following table shows the vote totals with respect to the election of these directors:

	For		Withheld
Jim Hitchin		60,640,973		191,764
Mark McWilliams		60,649,706		183,031
Stanley Pappelbaum, MD		60,645,993		186,744
Chester E. Sievert		60,637,051		195,686
Hon. Tommy Thompson		60,640,971		191,766
F. Duwaine Townsen		60,645,723		187,014

At the annual meeting our shareholders also approved an amendment to our Articles of Incorporation to authorize an additional 50,000,000 shares of Common Stock ($0.01 par value) and 50,000,000 undesignated shares of capital stock. The following table shows the vote totals with respect to the Amendment to our Articles of Incorporation:

Votes For	Votes Against	Abstentions
58,956,471	1,648,119	228,147

Item 5.	Other Information
	None
Item 6.	Exhibits
Exhibit 3.3	Certificate of Amendment to the Articles of Incorporation and complete Amended and Restated Articles of Incorporation.
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

16

SpectraScience, Inc.

FORM 10-Q

September 30, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SpectraScience, Inc.
	(Registrant)
Date November 16, 2009	/s/ James Hitchin
	James Hitchin
	President, Chief Executive Officer
	(Principal executive officer)
Date November 16, 2009	/s/ James Dorst
	James Dorst
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

17

EX-3.3

EXHIBIT 3.3

CERTIFICATE OF AMENDMENT TO

ARTICLES OF INCORPORATION OF

SPECTRASCIENCE, INC.

The undersigned, being the Chief Executive Officer of SpectraScience, Inc., a Minnesota corporation (the “Corporation”), in accordance with the Minnesota Business Corporation Act, does hereby certify that the Board of Directors adopted the following resolutions effective as of September 21, 2009:

AMENDMENT OF ARTICLES OF INCORPORATION

RESOLVED, that Article I of the Articles of Incorporation of the Corporation be, and the same hereby is, amended at Section 1.02 to read as follows:

“1.02 Registered Office and Agent. The location and post office address of the registered office of this Corporation in the State of Minnesota is 1400 Fifth Street Towers, 100 South Fifth Street, Minneapolis, Minnesota 55402. The registered agent of the Corporation at that address is Janna R. Serverance.”

RESOLVED FURTHER, that Article II of the Articles of Incorporation of the Corporation be, and the same hereby is, amended at Section 2.01 to read as follows:

“2.01 Numbers and Classes of Shares. This Corporation shall have the authority to issue an aggregate of 225,000,000 shares of capital stock, consisting of 160,000,000 shares of common stock, $.01 par value per share (the “Common Stock”), 50,000,000 shares of undesignated shares of Series B Preferred Stock. The Undesignated Stock may be issued in one or more series as determined from time to time by the Board of Directors. Any series authorized for issuance by the Board of Directors may be senior to the Common Stock with respect to any distribution (as such term is defined in Section 302A.011, Subd. 10, Minnesota Statutes) if so designated by the Board of Directors upon issuance of the shares of that series. The Board of Directors is hereby granted the express authority to fix by resolution any other designations, powers, preferences, rights (including voting rights), qualifications, limitations or restrictions with respect to any particular series created from the Undesignated Stock prior to issuance thereof.”

IN WITNESS WHEREOF, the undersigned has hereunto affixed his signature.

/s/ JIM HITCHIN

Jim Hitchin, Chief Executive Officer

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

SPECTRASCIENCE, INC.

The Articles of Incorporation of SpectraScience, Inc., as amended, are hereby amended and restated in their entirety to read as follows:

ARTICLE I. NAME AND REGISTERED OFFICE

1.01           Name. The name of this Corporation is SpectraScience, Inc.

1.02           Registered Office. The location and post office address of the registered office of this Corporation in the State of Minnesota is 4800 WELLS FARGO CTR, MPLS 55402

ARTICLE II. SHARES AND SHAREHOLDERS

“2.01         Numbers and Classes of Shares. This Corporation shall have the authority to issue an aggregate of 225,000,000 shares of capital stock, consisting of 160,000,000 shares of common stock, $.01 par value per share (the “Common Stock”), 50,000,000 shares of undesignated shares of Series B Preferred Stock. The Undesignated Stock may be issued in one or more series as determined from time to time by the Board of Directors. Any series authorized for issuance by the Board of Directors may be senior to the Common Stock with respect to any distribution (as such term is defined in Section 302A.011, Subd. 10, Minnesota Statutes) if so designated by the Board of Directors upon issuance of the shares of that series. The Board of Directors is hereby granted the express authority to fix by resolution any other designations, powers, preferences, rights (including voting rights), qualifications, limitations or restrictions with respect to any particular series created from the Undesignated Stock prior to issuance thereof.”

2.02           Issuance of Shares. The Board of Directors Shall have the authority to issue shares of a class or series to holders of shares of another class or series to effectuate share dividends, splits, or conversion of its outstanding shares.

2.03           Preemptive Rights. No shareholder of the Corporation shall have any preemptive rights to subscribe for or purchase his, her or its proportionate share of any stock of the Corporation, now or hereafter authorized or issued.

2.04           Cumulative Voting. No shareholder shall have the right to cumulate his, her or its votes in the election of directors or for any other purpose whatsoever.

2.05           Shares Outstanding as of the Date of this Restatement. Effective with the filing of these Amended and Restated Articles of Incorporation, the par value of all outstanding Common Stock shall be reduced from $.25 to $.01 per share and all such shares shall be “Common Stock” as described in Section 2.01 above.

2

ARTICLE III. WRITTEN ACTION

Any action, other than an action requiring shareholder approval, required or permitted to be taken at a meeting of the Board of Directors of this Corporation may be taken by written action signed by the number of directors required to take the same action at a meeting of the Board of Directors at which all directors were present. Any action requiring shareholder approval required or permitted to be taken at a meeting of the Board of Directors of this Corporation may be taken by written action signed by all of the directors.

ARTICLE IV. LIMITATION ON DIRECTORS LIABILITY

A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for (i) liability based on a breach of the duty of loyalty to the Corporation or the shareholders; (ii) liability for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) liability based on the payment of an improper dividend or an improper repurchase of the Corporation's stock under Minnesota Statutes Section 302A.559 or on violations of Minnesota state securities laws (Minnesota Statutes, Section 80A.23); (iv) liability for any transaction from which the director derived an improper personal benefit; or (v) liability for any act or omission occurring prior to the date this Article IV becomes effective.  If the Minnesota Business Corporation Act is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Minnesota Business Corporation Act. Any repeal or modification of this Article by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. The provisions of this Article IV shall not be deemed to limit or preclude indemnification of a director by this Corporation for any liability or a director which has not been eliminated by the provisions of this Article IV.

The foregoing restated articles of Incorporation supersede the original Articles of Incorporation and all amendments to them.

3

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification

I, James Dorst, Chief Financial Officer and Principal Accounting Officer of SpectraScience, Inc. certify that:

1.   I have reviewed this report on Form 10-Q of SpectraScience, Inc.

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the SpectraScience, Inc. as of, and for, the periods presented in this report;

4.   SpectraScience’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for SpectraScience, Inc. and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to SpectraScience, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of SpectraScience’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in SpectraScience’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.   The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect SpectraScience’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

November 16, 2009
Signature:	/s/ James Dorst
Name:	James Dorst
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SpectraScience, Inc. (the “Company”) on Form 10-Q for the nine months ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Hitchin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James Hitchin

James Hitchin

Chief Executive Officer

November 16, 2009

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SpectraScience, Inc. (the “Company”) on Form 10-Q for the nine months ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Dorst, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James Dorst

James Dorst

Chief Financial Officer

November 16, 2009