10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

Commission file number 0-13092

SPECTRASCIENCE, INC.

(Exact name of registrant

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, including zip code)

(858) 847-0200

(Registrant's telephone number, including area code)

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 o

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 registration 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer        o	Accelerated filer                  o
Non-accelerated filer           o	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 x

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding on August 10, 2012 was 119,609,409.

SPECTRASCIENCE, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2012

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION:
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	17
Item 4.	Mine Safety Disclosures	17
Item 5.	Other Information	17
Item 6.	Exhibits	17
SIGNATURES		19

2

PART I     FINANCIAL INFORMATION:

Item 1. Financial Statements (Unaudited)

SpectraScience, Inc. and Subsidiary

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	185,292		$	250,723
Accounts receivable, net		312,822			26,735
Inventories		342,380			367,838
Deferred debt issuance costs		287,321			-
Prepaid expenses and other current assets		11,579			24,493
Total current assets		1,139,394			669,789
Fixed assets, net		167,570			244,275
Patents, net		2,323,743			2,432,732
TOTAL ASSETS	$	3,630,707		$	3,346,796
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	717,137		$	695,809
Convertible debt		2,350,526			-
Discount		(807,600	)		-
Convertible debt, net		1,542,926
Derivative liability		3,829,325			-
Accrued expenses		231,306			145,356
Total current liabilities		6,320,694			841,165
Warrant liability		3,291,354			-
TOTAL LIABILITIES		9,612,048			841,165
COMMITMENTS
SHAREHOLDERS’ EQUITY (DEFICIT)
Series B Convertible Preferred Stock, $.01 par value:
Authorized – 2,585,000 shares; shares issued and outstanding – 2,585,000 shares at June 30, 2012 and December 31, 2011, liquidation value of $517,000 plus accumulated and unpaid dividends of $106,931 as of June 30, 2012 and December 31, 2011		25,850			25,850
Series C Convertible Preferred Stock, $.01 par value:
Authorized – 1,000,000 shares; shares issued and outstanding -1,000,000 shares at June 30, 2012 and December 31, 2011, $200,000 liquidation value		10,000			10,000
Common stock, $.01 par value:
Authorized — 175,000,000 shares; shares issued and outstanding—108,041,084 shares at June 30, 2012 and December 31, 2011		1,080,411			1,080,411
Additional paid-in capital		31,115,867			30,922,930
Accumulated deficit		(38,213,469	)		(29,533,560	)
TOTAL SHAREHOLDERS’ EQUITY (DEFICIT)		(5,981,341	)		2,505,631
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)	$	3,630,707		$	3,346,796

Note: The balance sheet at December 31, 2011 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 financial statements.

3

SpectraScience, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended  June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenue	$	310,125		$	-		$	310,125		$	-
Cost of revenue		200,294			-			200,294			-
Gross profit		109,831			-			109,831			-
Operating expenses:
Research and development		289,413			288,601			669,699			500,280
General and administrative		652,754			514,387			1,200,400			1,061,498
Sales and marketing		132,056			158,556			240,751			254,455
Total operating expenses		1,074,223			961,544			2,110,850			1,816,233
Loss from operations		(964,392	)		(961,544	)		(2,001,018	)		(1,816,233	)
Other expense (income)
Interest expense		116,309			-			154,336			-
Change in fair value of derivative and warrant liabilities		2,889,557			-			4,471,963			-
Amortization of derivative and warrant liability discount		1,094,437			-			1,445,862			-
Amortization of deferred debt issuance costs and original issue discount		461,289			-			604,861			-
Other expense, net		1,924			(2,479	)		1,868			2,311
		4,563,516			(2,479	)		6,678,890			2,311
Net (Loss)		(5,527,908	)		(959,065	)		(8,679,909	)		(1,813,922	)
Basic and diluted net (loss) per share	$	(0.05	)	$	(0.01	)	$	(0.08	)	$	(0.02	)
Weighted average common shares outstanding		108,041,084			108,041,084			108,041,084			108,030,167

See accompanying notes to unaudited financial statements.

4

SpectraScience, Inc. and Subsidiary

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)

For the six months ended June 30, 2012

(Unaudited)

	Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance, December 31, 2011		3,585,000	$	35,850		108,041,084	$	1,080,411	$	30,922,930	$	(29,533,560	)	$	2,505,631
Stock based compensation – consultants										18,543					18,543
Stock based compensation – employees										174,394					174,394
Net loss												(8,679,909	)		(8,679,909	)
Balance, June 30, 2012		3,585,000	$	35,850		108,041,084	$	1,080,411	$	31,115,867	$	(38,213,469	)	$	(5,981,341	)

See accompanying notes to unaudited financial statements.

5

SpectraScience, Inc. and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended  June 30,
	2012			2011
OPERATING ACTIVITIES:
Net loss	$	(8,679,909	)	$	(1,813,911	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		189,864			153,754
Amortization of derivative and warrant liabilities discount		1,445,862			-
Amortization of deferred debt issuance costs and original issue discount		604,861			-
Change in fair value of derivative and warrant liabilities		4,471,963			-
Stock-based compensation employees		174,394			257,141
Stock-based compensation consultants		18,543			9,233
Amortization of prepaid financing costs		-			12,363
Fair market value of common stock and warrants issued for services		-			8,000
Changes in operating assets and liabilities:
Accounts receivable		(286,087	)		-
Inventory		25,458			5,641
Prepaid expenses and other assets		12,914			39,988
Accounts payable		21,328			16,221
Accrued expenses		85,950			126,566
Net cash (used in) operating activities		(1,914,859	)		(1,185,004	)
INVESTING ACTIVITIES:
Redemption of certificates of deposit		-			1,998,974
Purchases of fixed assets		(4,170	)		-
Net cash from (used in) investing activities		(4,170	)		1,998,974
FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes payable		2,233,000			-
Debt issuance costs		(379,402	)		-
Net cash provided by financing activities		1,853,598			-
Net increase (decrease) in cash and cash equivalents		(65,431	)		813,970
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		250,723			1,764,803
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	185,292		$	2,578,773

See accompanying notes to unaudited financial statements.

6

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements

June 30, 2012

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. The “Company,” hereinafter, refers to SpectraScience, Inc. and its wholly-owned subsidiary Luma Imaging Corp. (“LUMA”). Since 1996, the Company primarily focused on developing the WavSTAT Optical Biopsy System (the “WavSTAT System”).

The Company has developed and received CE mark 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 remove the subject cell tissue from the body to make such determinations. The WavSTAT4 Optical Biopsy System operates by using cool, safe UV laser light to optically illuminate and analyze tissue, enabling the physician to make an instant diagnosis during endoscopy when screening for cancer, and if warranted, to begin immediate treatment during the same procedure. Beginning in December 2011, the WavSTAT 4 began to be sold in the European Union for colon cancer detection. In June 2012 the Company entered into a distribution agreement with PENTAX Europe, GmbH, for the sale of its systems internationally.

On November 6, 2007, the Company acquired the assets of LUMA in an equity transaction accounted for as an acquisition of assets and now 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 Company’s existing WavSTAT System technology provides the Company with a broad suite of fluorescence-based intellectual property and know-how. During the fiscal year ended December 31, 2010, the Company wrote off the remaining fair value of the LUMA inventory in order to focus on the continued development and marketing of the WavSTAT System. The Company retained the intellectual property of LUMA for use in the development of future generations of the WavSTAT System.

The transaction was accounted for as an acquisition of assets that included intellectual property, inventory and equipment. The intellectual property consisted of a total of 34 issued U.S. Patents and 28 additional patent applications.

Basis of Presentation

The accompanying unaudited 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 six-month period ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. 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, 2011.

Liquidity and Capital Resources

Historically, the Company’s sources of cash have come from the issuance and sales of equity securities and interest income. The Company’s historical cash outflows have been primarily used for operating activities including research, development, administrative and sales activities. Fluctuations in the Company’s working capital due to timing differences of its cash receipts and cash disbursements also impact its cash flow. The Company expects to incur significant additional operating losses through at least 2012, as it completes proof-of-concept trials, begins outcome-based clinical studies and increases sales and marketing efforts to commercialize the WavSTAT4 Systems in Europe. If the Company does not receive sufficient funding, the Company may be unable to continue as a going concern. The Company may incur unknown expenses or may not be able to meet its revenue forecast, and one or more of these circumstances would require the Company to seek additional capital. The Company 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 becomes profitable and begins to generate positive cash flows from operations.

7

As of June 30, 2012, the Company had negative working capital of approximately $5.2 million and cash and cash equivalents of approximately $185,000. In December 2011, the Company entered into an Engagement Agreement with Laidlaw & Company (UK) Ltd. (“Laidlaw”). Under the Engagement Agreement, Laidlaw will assist the Company in raising up to $20.0 million in capital over a two-year period from the date of the Engagement Agreement. During the six-month period ended June 30, 2012, the Company raised approximately $1.85 million under this agreement. However, if the Company does not receive additional funds in a timely manner, the Company could be in jeopardy as a going concern. The Company may not be able to find alternative capital or raise capital or debt on terms that are acceptable. Management believes that if the events defined in the Engagement Agreement occur as expected, such proceeds will be sufficient to allow the Company to sustain operations until it attains profitability and positive cash flows from operations. However, the Company may incur unknown expenses or may not be able to meet its revenue expectations which requiring it to seek additional capital. In such event, the Company may not be able to find capital or raise capital or debt on terms that are acceptable.

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

The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue from the sale of the Company’s products is generally recognized when title and risk of loss transfers to the customer, the terms of which are generally free on board shipping point. The Company uses customer purchase orders to determine the existence of an arrangement. The Company uses shipping documents and third-party proof of delivery to verify that title has transferred. The Company assesses whether the fee is fixed or determinable based upon the terms of the agreement associated with the transaction. To determine whether collection is probable, the Company assesses a number of factors, including past transaction history with the customer and the creditworthiness of the customer.

Consolidation

The accompanying consolidated financial statements include the accounts of SpectraScience, Inc. and its wholly-owned subsidiary LUMA. 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 short history of product sales, 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 requires 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 warrants, assumptions used to value the common stock issued and the assets acquired in the LUMA acquisition and the realization of intangible assets. Actual results could differ from those estimates.

Inventory Valuation

The Company states its inventories at the lower of cost or market value, determined on a specific cost basis. The Company provides inventory allowances when conditions indicate that the selling price could be less than cost due to obsolescence and reductions in estimated future demand. The Company balances the need to maintain strategic inventory levels with the risk of obsolescence due to changing technology and customer demand levels. Unfavorable changes in market conditions may result in a need for additional inventory reserves that could adversely impact the Company’s gross margins. Conversely, favorable changes in demand could result in higher gross margins when the Company sells products.

8

Valuation of Long-lived Assets

The Company’s long-lived assets consist of property and equipment and intangible assets. Equipment is carried at cost and is depreciated over the estimated useful lives of the assets, which are generally two to three years, and leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. The straight-line method is used for depreciation and amortization. Intangible assets consist of patents, which are amortized using the straight-line method over the estimated useful lives of the patents. The Company does not capitalize external legal costs and filing fees associated with obtaining patents on its new discoveries. Acquired intellectual property is recorded at cost and is amortized over its estimated useful life. The Company believes the useful lives assigned to these assets are reasonable. The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These computations utilize judgments and assumptions inherent in management’s estimate of future cash flows to determine recoverability of these assets. If management’s assumptions about these assets were to change as a result of events or circumstances, the Company may be required to record an impairment loss.

Stock-Based Compensation

The Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, Compensation—Stock Compensation   (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company adopted ASC 718 on January 1, 2006. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes-Merton option-pricing model (the “Black-Scholes Model”). The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. The Company estimates forfeitures at the time of grant and revises its estimate in subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees    (“ASC 505-50”). Under ASC 505-50, the Company determines the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

All issuances of stock options or other equity instruments to employees and 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 shareholders’ 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.

As of June 30, 2012, the Company had one stock-based employee compensation plan under which it makes grants, the 2011 Equity Incentive Plan (the “EIP”). The EIP provides for the grant of incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”) and restricted stock awards to full-time employees (who may also be directors) and NQSOs and restricted stock awards to non-employee directors, consultants, customers, vendors or providers of services. 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 2011 EIP is 5,000,000 shares of common stock.  At June 30, 2012, the Company had outstanding 16,295,000 options under the EIP and the Company’s prior Amended 2001 Stock Plan representing approximately 15% of the Company’s outstanding shares (7,973,124 of which were exercisable), with 1,200,000 available for future issuance under the 2011 EIP. Awards under the Company’s EIP generally vest over four years.

The fair value of options granted were estimated at the date of grant using a Black-Scholes 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 stock options granted during the six months ended June 30, 2012 and 2011:

	2012		2011
Expected life	5 Years		-
Risk-free interest rate		.85%		-
Expected volatility		114%		-
Expected dividend yield		0%		-

9

In addition to the above, management estimated the forfeitures on employee options under the EIP would have negligible effects because such forfeitures would be a very small percentage. Management believes that options granted 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 five-year U.S. Treasury rates as published at the time of making the calculations.

Volatility is a calculation based on fluctuations in the Company’s stock price over a historical time period consistent with the estimated life of the option. 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, comparison to other similar companies in its area of interest, the current early revenue 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).

Information with respect to stock option activity is as follows:

				Outstanding Options
	Options Available For Grant			Plan Options Outstanding		Weighted Average Exercise Price Per Share		Weighted-Average Remaining Contractual  Term (years)		Aggregate Intrinsic Value
December 31, 2011		1,700,000			15,795,000	$	0.20		8.01		-
Options granted		(500,000	)		500,000	$	0.09		9.63		-
Options exercised		-			-		-		-		-
Options forfeited		-			-		-		-		-
Options expired under 2001 EIP		-			-		-		-		-
Additional options authorized		-			-		-		-		-
Outstanding at June 30, 2012		1,200,000			16,295,000	$	0.20		7.76		-
Exercisable at June 30, 2012		-			7,973,124	$	0.26		6.88		-

There were no options exercised during the six months ended June 30, 2012 and 2011. At June 30, 2012, total unrecognized estimated employee compensation cost related to non-vested stock options granted prior to that date is approximately $673,000, which we expect to be recognized over the next three years.

Inventories

Inventories consisted of the following at June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
Raw materials	$	271,326	$	225,729
Finished goods		71,054		142,109
Totals	$	342,380	$	367,838

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders 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 six month periods ended June 30, 2012 and 2011, 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 six months ended June 30, 2012 include stock options to purchase 16,295,000 shares of common stock, warrants to purchase 53,396,441 shares of common stock, convertible debt convertible into 41,021,402 shares of common stock and preferred stock convertible into 3,585,000 shares of common stock.

10

3. Liabilities

Convertible Debentures

For the six-month period ended June 30, 2012, the Company issued Convertible Debentures (“Debentures”) at a face amount of $2,350,526. At June 30, 2012, the unamortized discount of $807,600 consisted of a discount on the derivative liability of $402,222, discount on the warrant liability of $364,844 and original issue discount of $40,534. The discount will be amortized over the remaining term of the Debentures. The Debentures have an original term of 6 months, accrue interest at a rate of 20% per year, carry an original issue discount of 5% and will convert into common stock at an initial conversion price of $0.0573 per share at maturity. The Debentures were issued with detachable five-year cashless warrants (“Holders Warrants”) that allow the holders to purchase one share of stock for each two shares available under the converted Debentures at an exercise price of $0.0745 per share. In addition, the Company issued five-year cashless Agent Warrants equal to 10% of the total number of shares issuable under the Debentures and Holders Warrants at an exercise price of $0.0745 per share. At June 30, 2012, there were Debentures, Holders Warrants and Agent Warrants convertible or exercisable into 41,021,402, 20,510,701 and 6,153,210 shares of common stock, respectively. The conversion price of the Debentures and the exercise price of the warrants are subject to an adjustment feature in the event that the Company issues securities for less than the conversion price of the Debentures or the exercise price of the Holders Warrants and Agent Warrants. The accounting for the adjustment features of the conversion price and the warrant exercise price is described separately below under, “Warrant Liability” and “Derivative Liability”. Upon issuance of the Debentures the Company received net cash proceeds of $1,851,098, net of $379,402 in transaction costs and $117,526 of original issue discount. On June 30, 2012, if converted, the value of the Debentures would exceed their face value by approximately $3,803,000.

Warrant Liability

The Company issued Debentures with Holders Warrants and Agent Warrants that include a possible exercise adjustment feature in the event that the Company issues securities for consideration less than that offered with the warrants (referred to as “Derivative Warrants”) and in certain change of control transactions. Effective January 1, 2009, the accounting guidance regarding derivative warrants changed and required that certain of the Company’s warrants be recorded as a liability and measured at fair value recorded in earnings. The Company records the fair value of these warrants in its statement of operations in the line “Change in fair value of derivative and warrant liabilities.” The Company measures these warrants using a modified Black-Scholes option valuation model using similar assumptions to those described herein under, “Stock-Based Compensation.” For the six month period ended June 30, 2012, the Company recorded non-cash expense related to these warrants of approximately $2,769,000. At June 30, 2012, there were exercisable warrants to purchase 26,663,911 shares of common stock subject to this price adjustment feature. The time period over which the Company will be required to evaluate the fair value of these warrants is approximately four years and six months. Upon issuance of the Debentures, the Company recorded a Warrant Liability of $1,888,415 and an initial fair value non-cash expense of $380,334. For the six-month period ended June 30, 2012, the Company recorded non-cash expense of $1,402,939 which represents the change in the fair value of the Warrant Liability from inception to June 30, 2012, resulting in a Warrant Liability amount of $3,291,354.

The Company computes the fair value of the warrant liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the warrant liability is the Company’s stock price, which is subject to significant fluctuation and is not under the Company’s control. The resulting effect on the Company’s net loss is therefore subject to significant fluctuation and will continue to be so until the Derivative Warrants expire (approximately five years from the date of issuance). Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases.

The assumptions used in determining fair value represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change, including changes in the market value of the Company’s common stock, the Company’s fair value estimates could be materially different in the future.

Derivative Liability

During the six-month period ended June 30, 2012, the Company issued convertible Debentures with a conversion price that includes a possible exercise adjustment feature in the event that it issues securities for consideration less than that offered with the convertible Debentures (referred to as “Derivative Liabilities”). The Company records the fair value of the conversion feature in its statement of operations in the line “Change in fair value of derivative and warrant liabilities.” The Company measures the conversion feature using a modified Black-Scholes option valuation model using similar assumptions to those described herein entitled, “Stock-Based Compensation.” For the six month period ended June 30, 2012, the Company recorded non-cash expense related to this conversion feature of approximately $3,427,000. At June 30, 2012, there were convertible shares to purchase 41,021,402 shares of common stock subject to this price adjustment feature. The time period over which the Company will be required to evaluate the fair value of this conversion feature is approximately six months. Upon issuance of the Debentures, the Company recorded a derivative liability of $1,573,320 and an initial fair value non-cash expense of $432,685. For the six-month period ended June 30, 2012, the Company recorded non-cash expense of $2,256,005 which represents the change in the fair value of the Derivative Liability from inception to June 30, 2012, resulting in a Derivative Liability amount of $3,829,325 at June 30, 2012.

The Company computes the fair value of the derivative liability at each reporting period and the change in the fair value is recorded as non-cash expense or non-cash income. The key component in the value of the derivative liability is the Company’s stock price, which is subject to significant fluctuation and is not under its control. The resulting effect on net loss is therefore subject to significant fluctuation and will continue to be so until the Company’s Debentures, which the convertible feature is associated with, matures (approximately six months from the date of issuance). Assuming all other fair value inputs remain constant, the Company will record non-cash expense when its stock price increases and non-cash income when its stock price decreases.

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The assumptions used in determining fair value represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change, including changes in the market value of the Company’s common stock, the Company’s fair value estimates could be materially different in the future.

4. Shareholders’ Equity

Stock Options

In February 2012, the Company granted a stock option to purchase 500,000 shares of common stock at an exercise price of $0.09 per share to our European Director of Business Development. The option vests 25% at grant and 1/36 of the remaining grant amount monthly for three years.

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5. Fair Value Measurements

Accounting guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring the fair value of assets and liabilities using a hierarchy system, and defines required disclosures. It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts business.

The Company's balance sheet contains derivative and warrant liabilities that are recorded at fair value on a recurring basis. The three-level valuation hierarchy for disclosure of fair value is as follows:

Level 1: uses quoted market prices in active markets for identical assets or liabilities.

Level 2: uses observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: uses unobservable inputs that are not corroborated by market data.

The fair value of the Company’s recorded derivative and warrant liabilities is determined based on unobservable inputs that are not corroborated by market data, which require a Level 3 classification. A modified Black Scholes option valuation model was used to determine the fair value with similar assumptions to those described herein entitled, “Stock-Based Compensation”. The Company records derivative and warrant liabilities on the balance sheets at fair value with changes in fair value recorded in the consolidated statements of operations.

The following table presents the balances of liabilities measured at fair value on a recurring basis by level as of June 30, 2012:

	Fair Value Measurements Using
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
As of June 30, 2012
Derivative liability	$	-	$	-	$	3,829,325	$	3,829,325
Warrant liability		-		-		3,291,354		3,291,354
Total	$	-	$	-	$	7,120,679	$	7,120,679

The following table presents changes in the liabilities with significant unobservable inputs (Level 3) for the six months ended June 30, 2012:

	Warrant		Derivative		Total
	Liability		Liability		Liability
Beginning balance, December 31, 2011	$	-	$	-	$	-
Issuance of convertible debt and warrants
Resulting in derivative and warrant liabilities		1,888,415		1,573,319		3,461,734
Change in estimated fair value		317,148		452,240		769,388
Balance, March 31, 2012		2,205,563		2,025,559		4,231,122
Change in the estimated fair value		1,085,791		1,803,766		2,889,557
Ending balance, June 30, 2012	$	3,291,354	$	3,829,325	$	7,120,679

6. Contingencies

None

7. Subsequent Events

In July 2012, the Company issued 30,000 restricted common shares to a vendor for services. The fair value of the shares was determined to be $8,000, based upon the market value of the stock on the date of issuance.

On July 13, 2012, the shareholders of the Company approved an amendment to the Company’s Amended and Restated Articles of Incorporation increasing the number of authorized shares of capital stock from 225,000,000 to 325,000,000, consisting of an increase in authorized shares of common stock from 175,000,000 to 275,000,000.

In August 2012, Holders of Convertible Debentures with a face value of $600,000 converted their Debentures into 10,471,204 shares of common stock. In addition, associated with these Debentures, the Company paid $60,000 in accrued interest by issuing 1,047,120 shares of common stock.

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

Forward-Looking Statements

This quarterly report on Form 10-Q (the “Report”) contains forward-looking statements that are not related to historical results, including, without limitation, statements regarding our business strategy and objectives, near term operating goals, expectations regarding the market for our products and beliefs with respect to opportunities and industry conditions in those markets, beliefs about our products and expectations with respect to their performance and acceptance, beliefs about the strengths of our intellectual property portfolio, regulatory goals and developments, our agreement with Laidlaw, future financial position, expectations with respect to stock option expense recognition, future cash needs, the sufficiency of our working capital and operating losses for the remainder of the current fiscal year, and involve risks and uncertainties. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, there can be no assurance that such assumptions will prove to be accurate and actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, changes in law or regulatory policies, unanticipated competition from other similar businesses, adverse outcomes from litigation, unexpected employee departures or disruptions, adverse market and general economic factors and other factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. 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 for the fiscal year ended December 31, 2011.

Business

SpectraScience, Inc. (the “Company,” “SpectraScience,” “we,” “our,” or “us”) 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 (the “WavSTAT System”) is SpectraScience's first product to incorporate its proprietary Laser Induced Fluorescence technology for worldwide clinical use. The WavSTAT System carries the CE mark designation which allows for its sale and marketing in the European Union for the diagnosis of cancer. The Company’s second planned application of this technology for detecting early stage esophageal cancer is presently undergoing a clinical trial to determine its marketability. Upon successful completion of the trial, the Company plans to self-certify for CE mark approval for sale in the European Union and then file an application with the FDA seeking permission to begin marketing for that indication for use in the United States. The Company believes it has a strong intellectual property portfolio that will allow it to continue to expand its WavSTAT cancer diagnosis platform to address the diagnosis of multiple cancers, utilize additional proprietary bio-photonic techniques to improve the WavSTAT’s overall diagnostic performance and ultimately allow for the detection of cancer and pre-cancer over a relatively large area of examined tissue.

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

During the past 12 months, SpectraScience spent a majority of its time and significant resources redesigning and manufacturing its improved WavSTAT4 Optical Biopsy System. Improvements included a redesign of the system to make it easier to use and the development of a new diagnostic algorithm that the Company believes is more accurate and reliable. The WavSTAT4 completed production and qualified for sale in the European Union under the CE Mark in December 2011.

Over the next 12 months, SpectraScience intends to:

· Market and sell the WavSTAT4 Optical Biopsy System colon cancer diagnostic application in the European Union;

· Continue WavSTAT4 System clinical trials related to the diagnosis of esophageal cancer with a goal to introduce an esophageal application in the European Union in early 2013;

· Pursue the introduction of the WavSTAT4 colon cancer application in other international markets, in particular Russia and India;

· Begin WavSTAT4 clinical trials for diagnosis of colon cancer, the goal of which is the preparation of a Supplemental PMA filing with the FDA for approval for sale in the United States;

· Begin the design and planning for the next generation of multi-modal fluorescence and broadband spectroscopy systems at our facility in San Diego, California; and

· Continue to expand and refine our intellectual property portfolio.

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Results of Operations

Three Months Ended June 30, 2012 and 2011

The Company recognized approximately $310,000 and $0 in revenue for the three months ended June 30, 2012 and 2011, respectively. The revenue in the fiscal 2012 three-month period resulted from the Company’s distribution agreement with PENTAX Europe, GmbH, signed in June 2012. As a result the Company recognized gross profit of approximately $110,000 for the quarter ended June 30, 2012.

Total operating expenses increased from approximately $962,000 to $1,074,000, an increase of approximately $112,000 for the three-month period ended June 30, 2012 as compared to the three-month period ended June 30, 2011. This overall increase was comprised of approximate increases in general and administration expense of $139,000 offset by an approximate reduction of $27,000 in sales and marketing expense.

Research and development expenses remained unchanged for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. Overall research and development expenses for the comparative periods were approximately $289,000 for each period. Despite the similar expense amounts between the periods there were changes within expense categories. The Company incurred approximate increases in engineering development expense of $32,000 offset by approximate decreases in travel expense of $19,000 and all other expense of $13,000. The increase in engineering development expense reflected continued software refinement of the WavSTAT4 System while the offsetting decrease was a result of decreased travel expense in the three-month period ended June 30, 2012 as compared to the same period one year ago.

General and administrative expenses for the three months ended June 30, 2012 and 2011 were approximately $653,000 and $514,000, respectively. The approximate $139,000 increase for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 was due to approximate increases in consulting expense of $58,000, investor relations expense of $42,000, depreciation expense of $30,000, bad debt expense of $27,000 and all other expense of $4,000 offset by approximate decreases in accounting expense of $11,000 and travel expense of $11,000. These expense increases were a result of increased overall business activity and investor relations programs.

Sales and marketing expenses for the three months ended June 30, 2012 and 2011 were approximately $132,000 and $159,000, respectively. The decrease of approximately $27,000 was due to approximate decreases of $49,000 in recruiting expense, $19,000 in travel expense and $5,000 in delivery expense offset by approximate increases of $43,000 in payroll expense and $3,000 in trade show expense. The decreases are generally a result of the long recruitment time required to hire a European-based business development executive to service international markets and the lower associated travel expenses. The increase is primarily the result of the increased payroll cost of this executive.

As a result of the above, the approximate net operating loss for the three months ended June 30, 2012 and 2011 was $964,000 and $962,000, respectively.  Of the net operating loss for the quarter ended June 30, 2012, approximately $93,000 was comprised of non-cash stock option expense.

Non-operating expense increased approximately $4,566,000 as a result of non-cash expenses related to our convertible debt issuance comprised of approximate increases in warrant and derivative liability expense of $2,890,000, increased amortization of debt discount of approximately $1,094,000, increased amortization of debt issuance costs and original issue discount of approximately $461,000, increased interest expense of approximately $117,000 and increases in other non-operating expense of approximately $4,000.

As a result of the above, the approximate net loss increased by $4,569,000 for the three months ended June 30, 2012 and 2011 from approximately $959,000 to $5,528,000.  Of the net loss for the quarter ended June 30, 2012, approximately $4,655,000 was comprised of non-cash expense.

Six Months Ended June 30, 2012 and 2011

The Company recognized approximately $310,000 and $0 revenue for the six months ended June 30, 2012 and 2011, respectively. The revenue in the current six-month period is a result of the Company’s distribution agreement with PENTAX Europe, GmbH, signed in June of 2012. As a result the Company recognized gross profit of approximately $110,000 for the six-month period ended June 30, 2012.

Total operating expenses increased from approximately $1,816,000 to $2,111,000, an increase of approximately $295,000 for the six-month period ended June 30, 2012 as compared to the six-month period ended June 30, 2011. This overall increase was comprised of approximate increases in research and development expense of $169,000, general and administration expense of $139,000 offset by an approximate reduction of $13,000 in sales and marketing expense.

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Research and development expenses increased approximately $169,000 for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. Overall research and development expenses for the comparative periods were approximately $670,000 and $500,000, respectively. The increase was comprised of approximate increases in engineering development expense of $148,000, Payroll expense of $51,000 offset by approximate decreases in travel expense of $13,000 and all stock option expense of $17,000. The increase in engineering development expense reflected the continued refinement of the WavSTAT4 System. Payroll expense increased due to increased regulatory salary expense while the decrease in travel expense in the six-month period ended June 30, 2012 as compared to the same period one year ago was a result of less international travel in the current comparative period.

General and administrative expenses for the six months ended June 30, 2012 and 2011 were approximately $1,200,000 and $1,061,000, respectively. The approximate $139,000 increase for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 was due to approximate increases in investor relations expense of $76,000, depreciation expense of $47,000, payroll expense of $38,000, consulting expense of $30,000, bad debt expense of $27,000, insurance expense of $17,000 and rent expense of $14,000 offset by approximate decreases in stock compensation expense of $67,000, financial amortization expense of $23,000, legal expense of $16,000 and other expense of $4,000. Investor relations expense increased because the Company retained a new investor relations firm. Depreciation expense increased due to the classification of certain WavSTAT4 machines as demonstration units. Payroll expense increased due to the payment of senior management bonuses. Consulting expense increased as a result of the Company retaining additional technical marketing assessment services. Bad debt expense increased due to the Company’s shift from small country-specific distributors to PENTAX Europe GmbH. and stock compensation expense decreased due to a comparative reduction in stock option grants between the two comparative periods.

Sales and marketing expenses for the six months ended June 30, 2012 and 2011 were approximately $241,000 and $254,000, respectively. The decrease of approximately $13,000 was due to approximate decreases of $58,000 in recruiting expense and $4,000 in other expense offset by approximate increases of $39,000 in payroll expense and $10,000 in stock compensation expense. The decreases are generally a result of the long recruitment time required to hire a European-based business development executive to service international markets and an offset with the increased payroll cost of this executive.

As a result of the above, the approximate net operating loss for the six months ended June 30, 2012 and 2011 was $2,001,000 and $1,816,000, respectively.  Of the net operating loss for the six months ended June 30, 2012, approximately $193,000 was comprised of non-cash stock option expense.

Non-operating expense increased approximately $6,677,000 as a result of non-cash expenses related to our convertible debt issuance comprised of approximate increases in warrant and derivative liability expense of $4,472,000, increased amortization of debt discount of approximately $1,446,000, increased amortization of debt issuance costs and original issue discount of approximately $605,000 and increased interest expense of approximately $154,000.

As a result of the above, our net loss increased by approximately $6,866,000 for the six months ended June 31, 2012 and 2011 from approximately $1,814,000 to $8,680,000.  Of the net loss for the six months ended June 30, 2012, approximately $6,870,000 was comprised of non-cash expense.

Liquidity and Capital Resources

As of June 30, 2012, the Company had negative working capital of approximately $5.2 million and cash and cash equivalents of approximately $185,000, compared to positive working capital of approximately $171,000 and cash and cash equivalents of approximately $251,000 as of December 31, 2011. In December 2011, the Company entered into an Engagement Agreement with Laidlaw & Company (UK) Ltd. Under the Engagement Agreement, Laidlaw will assist the Company in raising up to $20.0 million in capital over the next two years. During the six-month period ended June 30, 2012, the Company raised approximately $1.85 million, net of transaction costs, under this agreement. However, if the Company does not receive additional funds in a timely manner, the Company could be in jeopardy as a going concern. The Company may not be able to find alternative capital or raise capital or debt on terms that are acceptable. Management believes that if the events defined in the Engagement Agreement occur as expected, such proceeds will be sufficient to allow the Company to sustain operations until it attains profitability and positive cash flows from operations. However, the Company may incur unknown expenses or may not be able to meet its revenue expectations which requiring it to seek additional capital. In such event, the Company may not be able to find capital or raise capital or debt on terms that are acceptable.

The financial statements included elsewhere in this quarterly report 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.

16

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required

Item 4. 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 defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Changes in Internal Financial Controls

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

3.1	Amendment to Amended and Restated Articles of Incorporation
3.2	Amended and Restated Articles of Incorporation (incorporated by reference to exhibit 3.1 to the Company’s current report on Form 8-K filed August 6, 2004)
3.3	Amendment to Amended and Restated Articles of Incorporation (incorporated by reference to exhibit 3.3 to the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2009, filed on November 16, 2009)
10.1	Exclusive Distribution Agreement dated effective June 15, 2012 by and between the Company and PENTAX Europe GmbH.

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31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Financial statements from the quarterly report on Form 10-Q of the Company for the quarter ended June 30, 2012, formatted in XBRL; (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statement of Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to the Consolidated Financial Statements.

*Pursuant to Rule 405(a)(2) of Regulation S-T, the Company will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this Form 10-Q within the permitted 30-day grace period for the first quarterly period in which detailed footnote tagging is required after the filing date of this Form 10-Q.

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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: August 14, 2012		/s/ Michael P. Oliver
		Michael P. Oliver
		President and Chief Executive Officer
		(Principal executive officer)
Date: August 14, 2012		/s/ James Dorst
		James Dorst
		Chief Financial Officer and Chief Operating Officer
		(Principal financial officer and principal accounting officer)

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EX-3.1

Exhibit 3.1

AMENDMENT TO

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

SPECTRASCIENCE, INC.

SpectraScience, Inc., a corporation organized and existing under the laws of the State of Minnesota (the “Company”), hereby certifies as follows:

The members of the Board of Directors have adopted a resolution amending Section 2.01 of the Amended and Restated Articles of Incorporation of the Company, and the Shareholders of the Company have voted to approve such amendment, such that Section 2.01 of the Amended and Restated Articles of Incorporation now reads in its entirety as follows:

“2.01) Numbers and Classes of Shares. This Corporation shall have the authority to issue an aggregate of 325,000,000 shares of capital stock, consisting of 275,000,000 shares of common stock, $.01 par value per share (the “Common Stock”), and 50,000,000 undesignated shares of capital stock, undesignated par value per share (the “Undesignated 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.”

This amendment has been approved pursuant to Minnesota Statutes, Chapter 302A. I certify that I am authorized to execute this amendment and I further certify that I understand that by signing this amendment, I am subject to the penalties of perjury as set forth in Section 609.48 as if I had signed this amendment under oath.

Dated: July 13, 2012

SPECTRASCIENCE, INC.

 /s/ Michael P. Oliver

Michael P. Oliver, President and Chief Executive Officer

EX-10.1

EXHIBIT 10.1

PENTAX EUROPE DISTRIBUTOR AGREEMENT

THIS PENTAX EUROPE DISTRIBUTOR AGREEMENT (this “Agreement”), effective this 15th day of June 2012 (the “Effective Date”), by and between

SpectraScience, Inc., a Minnesota corporation with offices at 11568-11 Sorrento Valley Road, San Diego, California USA 92121 (“SpectraScience”),

and

PENTAX Europe GmbH organized under the laws of Germany, with offices at 104 Julius-Vosseler Strasse, Hamburg, Germany 22527 (“DISTRIBUTOR”).

RECITALS:

WHEREAS, SpectraScience designs, develops and manufactures proprietary optical biopsy systems capable of determining whether tissue is normal, pre-cancerous or cancerous without physically removing the tissue from the body;

WHEREAS, DISTRIBUTOR desires to act as SpectraScience’s distributor in a specific territory for certain of SpectraScience’s products; and

WHEREAS, SpectraScience is willing to grant certain rights to DISTRIBUTOR for the marketing and distribution of such products in such territory, on the terms and conditions set forth herein.

Therefore, in consideration of entry into this Agreement and the mutual covenants contained herein, and other good and valuable consideration, the parties agree as follows:

SECTION 1. DEFINITIONS

1.1 Product(s). “Product(s)” means and includes the products set forth in Exhibit A attached hereto and amended from time to time, including without limitation replacement parts for such products and the printed materials that may accompany such products.

1.2 Territory. “Territory” shall mean those nations described in Schedule 1. Noncontiguous states, provinces, colonies, territories, and other dependencies of a nation are not included in the Territory unless specifically set forth in Schedule 1 hereof.

SECTION 2. GRANT OF RIGHTS

2.1 License. SpectraScience designates DISTRIBUTOR as its exclusive distributor, and grants DISTRIBUTOR the right to market and distribute the Products in the Territory, subject to the limitations set forth herein. SpectraScience retains all other rights not expressly granted herein with regard to the Products.

2.2 No Other Distributor. Except as otherwise specifically provided below SpectraScience shall not appoint any other distributor for the Products in the countries listed under “Territory” during the term of this Agreement, provided DISTRIBUTOR meets or exceeds its performance quotas annually, as described in Exhibit B on per country basis. In case of failure to meet quota in certain country compensation in other countries accumulated quotas will be accepted or a recovery plan will have to be agreed. In case the recovery plan fails SpectraScience can review the distribution rights.

SECTION 3. DISTRIBUTOR’S OBLIGATIONS

3.1 Best Efforts. DISTRIBUTOR shall use its best efforts to promote, market, and sell the Products in the Territory. DISTRIBUTOR shall conduct its business in a professional manner that will reflect positively upon SpectraScience and the Products.

3.2 Product Promotion.

3.2.1 DISTRIBUTOR shall exhibit and demonstrate the Products at such trade shows in the Territory as DISTRIBUTOR determines in good faith are necessary or useful in marketing and promoting the Products. DISTRIBUTOR shall give SpectraScience reasonable prior notice of all such trade shows such that SpectraScience can attend if it so desires. DISTRIBUTOR shall otherwise meet all reasonable business standards for displaying, demonstrating, and explaining the operation and use of the Products to customers and potential customers.

3.3 Packaging & labeling. Unless DISTRIBUTOR requests otherwise and agreed to by SpectraScience, all Products ordered by DISTRIBUTOR shall be packaged for shipment and storage in accordance with SpectraScience’s standard commercial practices.

DISTRIBUTOR shall initiate and complete translating of all advertising and marketing information provided by SpectraScience when required. Translations of all information shall be done in accordance with SpectraScience’s Translation Standard Operating Procedure. Translation of all such materials shall be approved by SPECTRASCIENCE prior to use. Any translations in SpectraScience’s possession as of the Effective Date shall be offered to DISTRIBUTOR free of charge. Any further translations required to distribute the Products in the Territory shall be obtained at DISTRIBUTOR’S expense. DISTRIBUTOR shall own all such translations but SPECTRASCIENCE shall have a non-exclusive right to use such translations.

3.4 License. DISTRIBUTOR is required to maintain in good standing its license to sell Medical Devices in its territory and to inform SPECTRASCIENCE in case of change in status of such license(s).

3.5 Performance Quotas.

3.5.1 DISTRIBUTOR acknowledges that, in the event that product purchase minimums as described in Schedule I are not achieved, this Distribution Agreement will be subject to termination as specified in Section 13 below.

3.5.2 DISTRIBUTOR shall not sell any Products beyond their stated expiration date. DISTRIBUTOR may, at its expense, and with the approval of SpectraScience, return expired Products in exchange for like Products with a later expiration, but shall not be entitled to a refund for any expired Product. It is the DISTRIBUTOR’S responsibility to control his purchasing and stock policy in order to avoid return of expired product(s).

3.6 Customer Support.

3.6.1 DISTRIBUTOR shall respond to and handle all customer inquiries and complaints relating to the Products. DISTRIBUTOR’s responsibilities shall include, all support, training, and maintenance issues relating to the Products. DISTRIBUTOR shall perform such responsibilities at its own expense, provided, however, that SpectraScience shall use its commercially reasonable efforts to repair or replace any defective Product to the extent of its warranty obligations hereunder. DISTRIBUTOR shall promptly report to SpectraScience all suspected Product defects, errors, technical difficulties, or other problems, including potential Vigilance reports, relating to the use or operation of the Products (collectively, “Problems”) and shall keep SpectraScience informed of customer complaints concerning same. Without limiting the foregoing, upon becoming aware of any Problem, DISTRIBUTOR shall report the Problem to SpectraScience in writing in accordance with the following: (i) if the Problem involves patient injuries, within twenty-four (24) hours after becoming aware of; and (ii) for any other Problem, within forty-eight (48) hours. SpectraScience shall provide DISTRIBUTOR required assistance in this respect, in particular with product liability issues.

3.7 Restricting Activity to the Territory.

DISTRIBUTOR shall not make active sales with regard to the Products into the exclusive territories or to the exclusive customer groups reserved to SpectraScience or its connected undertakings or allocated by it to another sales organization; sales on part of DISTRIBUTOR’s customers are not restricted thereby. The prohibition in sentence 1 shall only apply if and to the extent SPECTRASCIENCE has informed DISTRIBUTOR with regard to the European Union and the European Economic Area about the respective territories and customer groups. At present the territories and customer groups with regard to the European Union and the European Economic Area listed in Schedule 2 are allocated exclusively to other sales organizations; the territories and customer groups with regard to the European Union and the European Economic Area listed in Schedule 3 are reserved exclusively to SPECTRASCIENCE itself or to any of its Affiliates. SPECTRASCIENCE shall immediately inform DISTRIBUTOR of any changes regarding the Schedule 2 and Schedule 3, i.e. about the new allocation of exclusive territories and customer groups or if such allocation is revoked. In the event of sales to customers outside of the European Union and the European Economic Area DISTRIBUTOR must inquire with SpectraScience whether the respective country or the respective customer group is exclusively allocated or reserved as defined in sentence 1.

3.8 Indemnification.

3.8.1 DISTRIBUTOR shall defend, indemnify, and hold SpectraScience harmless from and against any and all costs, losses, claims, liabilities, fines, penalties, damages and expenses, court costs, and reasonable fees and disbursements of counsel, consultants, and expert witnesses (collectively, “Damages”) based upon, arising out of, or relating to (i) DISTRIBUTOR’S breach of this Agreement, negligence, willful misconduct, or violation of any applicable law, rule, regulation, or order, (ii) any act or omission by DISTRIBUTOR, or (iii) any unfair business practice of DISTRIBUTOR.

3.8.2 Notwithstanding anything to the contrary in this Agreement, SpectraScience shall assume product liability with respect to the Products supplied hereunder, in accordance with the applicable laws and regulations in the Territory. SpectraScience shall defend, indemnify and hold DISTRIBUTOR harmless from and against any and all losses, liabilities, claims, actions, damages, costs and expenses (including reasonable legal fees), arising out of any third party claims caused by any latent or inherent defect in the Product and/or failure of the Product to conform to the Product’s specifications or any other kind of damage associated with the gross negligence of SpectraScience or its agents.

3.9 Clinical Trials and Evaluations.

Products provided to customers for evaluation or trial within the territory will be at the discretion and expense of the DISTRIBUTOR. Locations, number of trial sites and scope will be discussed and agreed mutually as beneficial to SpectraScience and DISTRIBUTOR.

SECTION 4. REPORTING, PRODUCT ANALYSIS, VIGILANCE, REMEDIAL ACTIONS

4.1. Customer Complaints; Inquiries.

DISTRIBUTOR will transmit to SpectraScience all oral or written complaints referring to the Product at the time the complaints are entered into DISTRIBUTOR’s system.

Customer Complaints; Inquiries. DISTRIBUTOR hereby covenants that it shall be responsible as the first point of contact for technical support with the customer and/or end-users. DISTRIBUTOR will provide a line of communications to SpectraScience directly in matters of vigilance and post-market surveillance (early warning) in accordance with the European Commission Guidelines On A Medical Devices Vigilance System:

http://ec.europa.eu/enterprise/medical_devices/meddev/2_12_1-rev_ 5-2007-fin2.pdf

DISTRIBUTOR will further provide this technical support on the usage of products to the customers based on information supplied by SpectraScience. Customer feedback, the occurrence of incidents and near-incidents will be reported by the DISTRIBUTOR within three (3) business days directly to SpectraScience and SpectraScience’s Authorized European Representative (see below for contact details). DISTRIBUTOR reporting should follow the European Commission Guidelines On A Medical Devices Vigilance System.

Contact Details:

Authorized Representative in Europe

(Regulatory affairs only)

Emergo Europe

Molenstraat 15

2513 BH The Hague

The Netherlands

Tel: (31) (0) 70 345-8570

Fax: (31) (0) 70 346-7299

4.2 Safety Notification

In case a Product is potentially deviating from the Product Specification, or under any other circumstance where such Product might cause, or already has caused, harm to a patient, user or other person, each Party shall notify the other Party in writing (“Safety Notification”), irrespective of the time or location of detection of the potentially faulty Product, as soon as the respective Party gains knowledge of such.

It is SpectraScience’s sole responsibility to file Medical Device Reports or Vigilance Reports to any legal authority for the Products in order to comply with the applicable laws and regulations in the Territory. Should DISTRIBUTOR by any applicable law or regulation be obliged to report medical device incidents, this Agreement shall not prevent DISTRIBUTOR from doing so.

Safety Notifications and any other complaints on the Products are to be sent to the following address:

SpectraScience, Inc.

11568 Sorrento Valley Rd.

Suite 11

San Diego, CA 92121 - USA

Phone: +1 858-847-0200

Fax: +1 858-847-0880

4.3 Product Analysis

SpectraScience is obliged to analyze free of charge any Product returned from the field or found otherwise which

¨ is potentially non-conforming with the Product Specifications,

¨ is malfunctioning or defective, or

¨ might cause or already has caused harm to a patient, a user or another person

and to report to DISTRIBUTOR

¨ findings,

¨ failures, as well as

¨ actual or probable root causes

immediately when it becomes known to SpectraScience.

4.4 No statement

In the event of a (alleged) malfunction or defect of a Product, DISTRIBUTOR or its representatives or agents will not make any statement as to the cause, without having been informed by SpectraScience and having received SpectraScience’s written analysis of the malfunction or defect.

4.5 Sales and Service records

DISTRIBUTOR will maintain complete and accurate lists and records reflecting all Product sales, Service and related transactions as may be required by law and to comply with the EU regulations, regulations of the EC-Council Directive concerning medical devices or other legal requirements applicable for a country of the Territory to secure traceability of each Product

4.6 Product Recall

If either Party believes that a recall of any Products in the Territory is desirable or required by law in the Territory or elsewhere, it shall immediately notify the other Party. The Parties shall then discuss reasonably and in good faith whether such recall is appropriate or required and the manner in which any mutually agreed recall should be handled.

4.7 Remedial Actions

It is SpectraScience’s exclusive right and obligation to issue recalls, safety alerts, advisory notices or similar remedial actions on the Products. In such case DISTRIBUTOR will support and fully co-operate with SpectraScience to comply with the applicable laws and regulations. Furthermore, in such case DISTRIBUTOR will notify its customers and, upon SpectraScience’s request retrieve identified Products. SpectraScience shall bear all direct costs and expenses of any recall, including, without limitation, expenses or obligations to third parties, the costs of notifying customers and costs associated with the shipment of recalled Product from customer to DISTRIBUTOR or SpectraScience, and replacement of such Products, except to the extent attributable to DISTRIBUTOR’s failure to handle, ship, or store Products properly or DISTRIBUTOR’s breach of this Agreement, or its negligence or willful misconduct. Should DISTRIBUTOR by any applicable law or regulation be obliged to issue remedial actions in the sense of sentence 1, this Agreement shall not prevent DISTRIBUTOR from doing so.

4.8 Survival

The provisions of this Article 4 (Reporting, Product Analysis, Vigilance, and Remedial Action) shall survive the termination of the Agreement.

SECTION 5. SPECTRASCIENCE’S OBLIGATIONS

5.1 Products.

SpectraScience shall use its commercially reasonable efforts to ship the quantity of Products in accordance by the requested date in each purchase order submitted by DISTRIBUTOR. SpectraScience shall notify DISTRIBUTOR of any delay or failure to ship the Products promptly upon learning of any such delay or failure. The Products shall be shipped to DISTRIBUTOR by SpectraScience or on SpectraScience’s behalf, freight costs to be included in the invoice with risk of loss to pass to DISTRIBUTOR upon delivery of the Products by SpectraScience to a common carrier.

SECTION 6. EXPENSES

Except as otherwise expressly provided in this Agreement, SpectraScience and DISTRIBUTOR shall each bear their respective costs and expenses as incurred by each party in its performance hereunder, including without limitation all rents, salaries, commissions, and advertising, demonstration, promotional, travel, and accommodation expenses. SpectraScience will provide product manuals (IFU) as required for the territories or bear the related expenses.

SECTION 7. PRICES AND PAYMENTS

7.1 Prices and Payments.

7.1.1 DISTRIBUTOR shall pay SpectraScience the amount(s) set forth in SpectraScience’s then current price list at time of order for each Product shipped to DISTRIBUTOR. The price list in effective as of the date of this Agreement is set forth in Exhibit A. All prices are set forth in United States dollars.

7.1.2 All payments to be made by DISTRIBUTOR to SpectraScience pursuant to this Agreement represent net amounts SpectraScience is entitled to receive and shall not be subject to any deductions for any reason whatsoever, including without limitation, local duties, assessments, taxes, or bank charges.

7.1.3 Payment terms are net 30 days.

SECTION 8. LIMITATIONS OF WARRANTY AND DAMAGES

8.1 Limited Warranty. SpectraScience warrants, solely for the benefit of DISTRIBUTOR, that for a period of one year after shipment by the DISTRIBUTOR or a maximum of 18 months from shipment by SpectraScience, whichever comes first, that each Product (Except Disposable products which bear a shelf-life) shall substantially conform to the specifications set forth in the materials accompanying the Product and shall be free from defects in materials and workmanship; provided, however, that the foregoing warranties are expressly contingent (and shall otherwise be void) upon use of the Product strictly in accordance with such specifications and without misuse, damage, alteration, or modification thereto. As DISTRIBUTOR’s exclusive remedy for any defective Product, SpectraScience shall repair or replace the Product, or, at SpectraScience’s sole discretion, repay or credit the actual price paid by DISTRIBUTOR therefore. SpectraScience must receive warranty claims within thirty (30) days after the claim arises, but no later than the stated expiration date of the applicable warranty period, and must be made in writing in sufficient detail to allow SpectraScience to reproduce the defect. DISTRIBUTOR shall have in addition all remedies, the law of the State Minnesota provides.

8.2 Limitation of Warranty. Except as provided in Section 8.1, SpectraScience makes not warranties or representations as to the performance of the products to DISTRIBUTOR or to any other person or entity.

SECTION 9. CONFIDENTIAL INFORMATION

9.1 Confidentiality. During the Term and for a period of three (3) years following the effective date of termination or expiration of this Agreement, each party agrees not to disclose to any third party or to use any information regarding the terms of this Agreement or information obtained from the other party concerning operations, technical information, or financial information without advance written approval of the other party, except (i) information generally available to the public without breach of this Agreement, (ii) information provably developed independently by the receiving party, (iii) information obtained from a third party not under any obligation of nondisclosure; and (iv) information required to be disclosed by law or governmental regulation; provided, however, that before making any use or disclosure in reliance on any of such exceptions (i) through (iv) the party that intends to use or disclose such information shall give at least fifteen (15) business days’ prior written notice to the other party specifying the applicable exception(s) and circumstances giving rise thereto.

9.2 Injunctive Relief. The parties agree that any breach of this Section 9 would constitute irreparable harm, and that either party shall be entitled to seek specific performance or injunctive relief to enforce this Section 9 in addition to whatever remedies such party may otherwise be entitled to at law or in equity.

SECTION 10. COMPLIANCE WITH LAWS

10.1 General. DISTRIBUTOR shall promote the Products and shall conduct its business in a highly ethical manner and in accordance with all applicable statues, laws and regulations in the Territories.

SECTION 11. COMPETING PRODUCTS

DISTRIBUTOR represents and warrants that it does not currently market optical biopsy systems and that it shall not, directly or indirectly market or sell other products competitive with the Products. To the extent permitted by law, during the Term of this Agreement, DISTRIBUTOR shall not develop any products competitive with the Products, acquire the right to market, distribute, or license any such competitive products within the Territory, or take any action that is adverse to SpectraScience’s interests, Products, market, goodwill, or reputation.

SECTION 12. TERM AND TERMINATION

12.1 Term. This Agreement shall have an initial term as set forth in Schedule 1 hereof, subject to early termination as provided in Section 13.

12.2 Renewal. After the initial term has elapsed, this Agreement shall automatically be extended (renewed) for subsequent one (1) year increments provided the DISTRIBUTOR has met its minimum purchase requirements. After the 5th year, this Agreement shall be terminated automatically. The parties will negotiate about a prolongation at due time.

SECTION 13. TERMINATION

13.1 Termination for Just Cause. This Agreement may be terminated prior to expiration as follows:

13.1.1 This Agreement shall terminate thirty (30) days after notice of termination by one party to the other for the material breach of any other provision, covenant, or obligation of this Agreement unless such breach is corrected to the non breaching party’s reasonable satisfaction within such thirty (30) day notice period.

13.1.2 In the event of Termination, SpectraScience will undertake to continue the supply of Products until such time as the DISTRIBUTOR fulfills all hospital tenders and contractual commitments undertaken by DISTRIBUTOR on behalf of SpectraScience, prior to the termination or expiration of this Agreement.

A breach of this Agreement will cause irreparable and continuing damage to either party for which money damages are insufficient and either party shall be entitled to injunctive relief and/or a decree for specific performance without posting a bond or other security, and such other relief as may be proper (including money damages if appropriate).

SECTION 14. GENERAL

14.1 Governing Law. This Agreement, including the validity hereof and the rights and obligations of the parties hereof, shall be exclusively construed in accordance with and governed by the laws of the State of Minnesota without regard to its conflicts of laws principles, and, as applicable, European Union law. The parties expressly reject the applicability to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods. Exclusive place of venue for all disputes arising from this Agreement shall be the courts in Hamburg, Germany. However, the Plaintiff is also entitled alternatively to bring a claim before the Court of Arbitration of the International Chamber of Commerce. In this case, place of arbitration shall be Hamburg, Germany.

14.2 Entire Agreement. This Agreement, including the schedules and exhibits, constitutes the entire understanding of the parties relating to the subject matter hereof, and merges all prior agreements, understandings, and communications. No modification of this Agreement other than pricing for products contained in Exhibit A will be effective unless made in writing signed by both parties by their duly authorized representatives.

14.3 Translations. The official language of this Agreement and to the extent permitted by law all future communications with respect to, and contracts executed pursuant to this Agreement shall be in English.

14.4 Publicity. Either party may announce the existence of an agreement for DISTRIBUTOR’s distribution of the Products. The specific terms of this Agreement are deemed confidential by the parties pursuant to Section 9 hereof.

14.5 Assignment. This Agreement may not be assigned without the written approval of both parties. In the event of a change of control transaction involving either SpectraScience or DISTRIBUTOR, such written approval is not required and assignment shall inure to Successor Company.

IN WITNESS WHEREOF, the parties have each caused this Agreement to be executed by its duly authorized representative as of the date first written above.

SpectraScience, Inc.   By: /s/ Michael Oliver   Name: Michael Oliver   Title: President & CEO   Date: June 13, 2012 PENTAX Europe, GmbH   By: /s/ Girts Cimermans   Name: Girts Cimermans   Title: President EMEA   Date: June 16, 2012

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Oliver, certify that:

1. I have reviewed this quarterly 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 registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 the registrant’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 registrant’s internal control over financial reporting.

/s/ Michael P. Oliver

Name: Michael P. Oliver

Title: Chief Executive Officer

Date:    August 14, 2012

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

I, James Dorst, certify that:

1. I have reviewed this quarterly 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 registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 the registrant’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 registrant’s internal control over financial reporting.

/s/ James Dorst

Name: James Dorst

Title: Chief Financial Officer

Date:  August 14, 2012

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 period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. Oliver, 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/ Michael P. Oliver

Michael P. Oliver

Chief Executive Officer

Date: August 14, 2012

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 period ended June 30, 2012 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

Date: August 14, 2012