0001493152-17-005734.txt : 20170522 0001493152-17-005734.hdr.sgml : 20170522 20170522153356 ACCESSION NUMBER: 0001493152-17-005734 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170522 DATE AS OF CHANGE: 20170522 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECTRASCIENCE INC CENTRAL INDEX KEY: 0000727672 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 411448837 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13092 FILM NUMBER: 17860793 BUSINESS ADDRESS: STREET 1: 11568 SORRENTO VALLEY ROAD STREET 2: SUITE 11 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: (858) 847-0200 MAIL ADDRESS: STREET 1: 11568 SORRENTO VALLEY ROAD STREET 2: SUITE 11 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: GV MEDICAL INC /MN DATE OF NAME CHANGE: 19931119 FORMER COMPANY: FORMER CONFORMED NAME: GV MEDICAL INC DATE OF NAME CHANGE: 19920703 10-Q 1 form10-q.htm

 

 

 

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 March 31, 2017

 

Commission file number 0-13092

 

SPECTRASCIENCE, INC.

(Exact name of registrant

as specified in its charter)

 

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

 

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 [  ]

 

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 [  ] Accelerated filer [  ]
   
Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [  ] NO [X]

 

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding on May 12, 2017 was 1,440,320,059.

 

 

 

   
  

 

SPECTRASCIENCE, INC.

 

FORM 10-Q

For the Three Months Ended March 31, 2017

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION:  
     
Item 1. Financial Statements (Unaudited) 3
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
     
Item 4. Controls and Procedures 25
     
PART II OTHER INFORMATION  
     
Item 1. Legal Proceedings 26
     
Item 1A. Risk Factors 26
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
     
Item 3. Defaults Upon Senior Securities 27
   
Item 4. Mine Safety Disclosures 27
     
Item 5. Other Information 27
     
Item 6. Exhibits 27
     
SIGNATURES 28

 

  2 
  

 

PART I FINANCIAL INFORMATION:

 

Item 1. Financial Statements

 

SpectraScience, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

   March 31, 2017   December 31, 2016 
    (Unaudited)     
ASSETS          
Current assets:          
Cash  $100,001   $3,550 
Accounts receivable, net   -    950 
Inventory   97,423    90,594 
Prepaid expenses and other current assets   225,621    266,749 
Total current assets   423,045    361,843 
           
Patents, net   984,687    1,024,524 
   $1,407,732   $1,386,367 
           
LIABILITIES AND SHAREHOLDERS' DEFICIT          
Current liabilities:          
Accounts payable  $1,499,584   $1,318,737 
Accrued expenses   2,458,162    2,278,042 
Notes payable- related parties   35,000    35,000 
Note payable   112,982    137,982 
Convertible debt, net of discounts of $325,848 as of March 31, 2017 and $203,444 as of December 31, 2016   6,131,274    6,211,861 
Derivative liability   833,082    819,928 
Total current liabilities   11,070,084    10,801,550 
           
Long-term secured convertible debt   1,350,000    1,100,000 
           
COMMITMENTS AND CONTINGENCIES          
           
Mezzanine equity          
Series B Convertible Preferred Stock, $.01 par value; 2,585,000 shares authorized, issued and outstanding as of March 31, 2017 and December 31, 2016; liquidation value of $517,000 plus accumulated and unpaid dividends of $106,931 as of March 31, 2017 and December 31, 2016   25,850    25,850 
Series C Convertible Preferred Stock, $.01 par value; 500,000 shares authorized, issued and outstanding as of March 31, 2017 and December 31, 2016; liquidation value of $100,000 as of March 31, 2017 and December 31, 2016   5,000    5,000 
Total mezzanine equity   30,850    30,850 
           
Shareholders' deficit          
Series A Convertible Preferred Stock, $.01 par value; 0 shares authorized, issued and outstanding as of March 31, 2017 and December 31, 2016   -    - 
Series AA Super Voting Preferred Stock, $.001 par value; 3,000 and 0 shares authorized, issued and outstanding as of March 31, 2017 and December 31, 2016   3    3 
Common stock, $.01 par value; 1,996,000,000 shares authorized; 1,413,320,059 and 883,671,222 shares issued and outstanding as of March 31, 2017 and December 31, 2016   14,133,200    8,836,712 
Additional paid in capital   29,792,890    34,582,771 
Accumulated deficit   (54,969,295)   (53,965,519)
Total shareholders' deficit   (11,043,202)   (10,546,033)
   $1,407,732   $1,386,367 

 

See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.

 

  3 
  

 

SpectraScience, Inc. and Subsidiaries

Condensed Consolidated Statements of Operation

(Unaudited)

 

   Three Months Ended 
   March 31, 
   2017   2016 
         
Operating expenses:          
Research and development  $130,842   $194,007 
General and administrative   279,732    307,841 
Sales and marketing   74,854    79,413 
    485,428    581,261 
           
Loss from operations   (485,428)   (581,261)
           
Other income (expense)          
Interest expense   (184,709)   (374,130)
Change in fair value of derivative and warrant liabilities   167,787    (887,494)
Amortization of derivative and warrant liabilities discount   (130,408)   (141,561)
Amortization of deferred debt issuance costs and original issue discount   (6,734)   (62,530)
Loss on issuance of variable rate debt   (368,743)   - 
Gain on extinguishment of debt   10,551    1,166 
Loss on foreign exchange transactions   (6,092)   (8,924)
Other income (expense), net   -    (1,600)
    (518,348)   (1,475,073)
           
Net loss  $(1,003,776)  $(2,056,334)
           
Basic and diluted loss per share  $(0.00)  $(0.00)
           
Weighted average common shares outstanding: Basic and diluted   1,090,120,075    609,825,530 

 

See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.

 

  4 
  

 

SpectraScience, Inc. and Subsidiaries

Condensed Consolidated Statement of Shareholders' Deficit

For the three months ended March 31, 2017

(unaudited)

 

   Series AA Super           Additional       Total 
   Voting Preferred   Common Stock   Paid-In   Accumulated   Shareholders' 
   Shares   Amount   Shares   Amount   Capital   Deficit   Deficit 
                             
Balance December 31, 2016   3,000   $3    883,671,222   $8,836,712   $34,582,771   $(53,965,519)  $(10,546,033)
                                    
Non cash issuance of stock options   -    -    -    -    40,001    -    40,001 
Conversion of convertible debt   -    -    529,648,837    5,296,488    (4,830,174)   -    466,314 
Non cash issuance of warrant for consulting services   -    -    -    -    292    -    292 
Net loss   -    -    -    -    -    (1,003,776)   (1,003,776)
                                    
Balance March 31, 2017   3,000   $3    1,413,320,059   $14,133,200   $29,792,890   $(54,969,295)  $(11,043,202)

 

See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.

 

  5 
  

 

SpectraScience, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   Three Months Ended March 31, 
   2017   2016 
Operating activities:          
Net loss  $(1,003,776)  $(2,056,334)
Adjustments to reconcile net loss to cash used in operating activities:          
Amortization and depreciation   39,837    40,552 
Non-cash interest from forbearance on and issuance of variable rate convertible debentures   385,102    94,329 
Non-cash issuance of stock options and warrants   40,001    40,001 
Non-cash (income) expense related to commitment of common stock in excess of authorized shares   (38,902)   131,504 
Amortization of derivative and warrant liabilities discount   130,408    141,561 
Amortization of deferred debt issuance costs and original issue discount   6,734    62,530 
Issuance of debt and common stock for services   11,000    350 
Change in fair value of derivative and warrant liabilities   (167,787)   887,494 
Gain on extinguishment of debt   (10,551)   (1,166)
Changes in assets and liabilities:          
Accounts receivable   950    7,061 
Inventory   (6,829)   (31,639)
Prepaid expense and other assets   41,128    36,887 
Accounts payable   180,844    127,720 
Accrued expenses   199,961    112,154 
Net cash used in operating activities   (191,880)   (406,996)
           
Investing activities:          
Net cash used in investing activities   -    - 
           
Financing activities:          
Proceeds from issuance of convertible notes payable   309,000    300,000 
Proceeds from issuance of notes payable to related parties   -    35,000 
Payments on convertible notes payable   (669)   - 
Debt issuance costs   (20,000)   (53,712)
Net cash provided by financing activities   288,331    281,288 
           
Net decrease in cash   96,451    (125,708)
           
Cash, beginning of year   3,550    127,493 
           
Cash, end of period  $100,001   $1,785 
           
Supplemental Disclosure of Cash Flow Information:          
Cash paid during the period for:          
Interest  $1,000   $- 
Income taxes  $-   $- 
Non Cash Investing and Financing Activities:          
Conversion of convertible notes and accrued interest to common stock  $88,419   $75,812 
Conversion of interest payable to increase in note  $13,767   $- 
Conversion of note payable to convertible note payable  $25,000   $- 

 

See accompanying summary of accounting polices and notes to unaudited condensed consolidated financial statements.

 

  6 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements

 

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 subsidiaries Luma Imaging Corporation (“LUMA”), Spectra Science International, Inc. (“International”) and SpectraScience (UK) Limited (“SpectraUK”). Since 1996, the Company has focused primarily on developing the WavSTAT Optical Biopsy System (the “WavSTAT System”).

 

The Company has developed and received the European 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 WavSTAT System operates by using cool, safe 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 version of the product began to be sold in the European Union for clinical trials related to colon cancer detection. In June 2012, the Company entered into a distribution agreement with PENTAX Europe, GmbH.

 

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 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 three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 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, 2016.

 

  7 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

Going Concern

 

Historically, the Company’s sources of cash have come from the issuance and sale of equity securities and debentures. 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 the end of 2017, as it completes proof-of-concept trials, conducts outcome-based clinical studies and increases sales and marketing efforts to commercialize the WavSTAT4 System in Europe. If the Company does not receive sufficient funding, there is substantial doubt that the Company will be able 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.

 

As of March 31, 2017, the Company had a working capital deficit of $10,647,039 and cash of $100,001, compared to a working capital deficit of $10,439,707 and cash of $3,550 as of December 31, 2016. The Company uses agents to assist it with raising capital and has commenced raising capital on its own. During the three months ended March 31, 2017, the Company raised $289,000, net of transaction costs of $20,000, under these agreements. 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 Agreements occur as expected, or if the Company is otherwise able to raise a similar level of funds, 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 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 holders of Convertible Debentures control the conversion of the Convertible Debentures and certain of the Convertible Debentures were not converted at their maturity constituting a potential default on the matured, but unconverted, Convertible Debentures. In the event of such default, principal, accrued interest and other related costs are immediately due and payable in cash. As of March 31, 2017, Convertible Debentures with a face value of $5,998,875 held by 80 individual investors are in default. None of these investors have served notice of default on the Convertible Debentures held by them.

 

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.

 

  8 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

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 price 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 subsidiaries LUMA, International and Spectra UK. 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 including intangible assets, assumptions used to value stock options, assumptions used to value the common stock issued and assumptions related to the determination of the fair value of the derivative components associated with the Company’s Convertible Debentures. Actual results could differ from those estimates.

 

Inventory Valuation

 

The Company states its inventory 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.

 

  9 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

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.

 

Variable Conversion Rate Debentures

 

Starting in 2015, the Company entered into convertible debentures with floating exercise prices discounted to market prices. As a result, a significant number of shares were either issued or may be issued at deeply discounted variable conversion prices. The downward pressure placed on the Company’s stock as a result of these conversions can be classified as “death spirals” since the investors have no incentive to maintain a stable stock price. The Company accounts for these debentures as derivative liabilities which means the debentures are revalued at the end of each period and gains and losses are recognized at the issuance of the debentures and on the conversion of the debentures.

 

Over Commitment of Shares

 

Since the number of shares issuable under convertible debentures with floating exercise prices is undeterminable, the Company may be required to issue shares in excess of the number of shares authorized by its shareholders. As a result, when the Company determines that is does not have sufficient shares to meet the obligations of derivative unexercised debentures, warrants and options, the derivatives must be valued using the Black Scholes Option Pricing method and a liability is recorded as though the obligations would be settled using some means other than stock.

 

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 estimates the fair value of stock-based awards on the date of grant using the Black Scholes 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

 

  10 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

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 reporting period.

 

As of March 31, 2017, 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 40,000,000 shares of common stock. At March 31, 2017, the Company had options outstanding exercisable into up to 34,168,800 shares of stock under the EIP of which up to 26,725,761 shares were exercisable. Awards under the Company’s EIP generally vest over four years.

 

The fair value of options granted are 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. There were no stock options granted during the three month periods ended March 31, 2017 and 2016.

 

Earnings (Loss) Per Share

 

Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss 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 if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

 

For the three month periods ended March 31, 2017 and 2016, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive.

 

  11 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

   March 31, 2017   March 31, 2016 
         
Preferred Stock   3,085,000    3,085,000 
Convertible debentures   1,604,110,127    378,651,041 
Options   34,168,800    34,168,800 
Warrants   111,200,650    132,875,170 
Total   1,752,564,577    548,780,011 

 

The following table sets forth the computation of basic and diluted loss per share for the three month periods ended March 31, 2017 and 2016:

 

   Three Months Ended 
   March 31, 
   2017   2016 
         
Numerator:          
Net loss for basic earnings per share  $(1,003,776)  $(2,056,334)
Net loss for diluted earnings per share  $(1,003,776)  $(2,056,334)
           
Denominator:          
Weighted average basic shares outstanding   1,090,120,075    609,825,530 
Denominator for diluted earnings per share-Adjusted weighted average shares   1,090,120,075    609,825,530 
           
Income (loss) per share          
Basic  $(0.00)  $(0.00)
Diluted  $(0.00)  $(0.00)

 

Inventory

 

Inventory consisted of the following at March 31, 2017 and December 31, 2016:

 

   March 31, 2017   December 31, 2016 
         
Raw materials  $256,163   $256,163 
Finished goods   37,697    30,868 
    293,860    287,031 
Reserve for obsolescence   -    - 
    293,860    287,031 
Less long-term portion   196,437    196,437 
   $97,423   $90,594 

 

  12 
  

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

During the year ended December 31, 2016, the Company purchased the inventory of Oncoscope, Inc. from the Trustee of Ondoscope’s bankruptcy proceeding for a total of $40,000. This amount, net of amounts sold of $2,100, has been included in raw materials.

 

Recently Adopted and Issued Accounting Pronouncements

 

In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. These changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes became effective for the Company for the 2016 annual period. Management has evaluated the impact of the adoption of these changes and has determined there will be no material impact on the consolidated financial statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial statements in a given reporting period.

 

In April 2015, the FASB issued ASU No 2015-3, Simplifying the Presentation of Debt Issuance Costs. This update changes the presentation of debt issuance costs in the balance sheet. ASU 2015-03 requires debt issuance costs related to a recognized debt obligation to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU clarified guidance in ASC 2015-03 stating that the SEC staff would not object to a company presenting debt issuance costs related to a line-of-credit arrangement on the balance sheet as a deferred asset, regardless of whether there were any outstanding borrowings at period-end. This update is effective for annual and interim periods beginning after December 15, 2015, which required us to adopt these provisions in the first quarter of 2016. This update was applied on a retrospective basis, wherein the balance sheet of each period presented was adjusted to reflect the effects of applying the new guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirements for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has early adopted this pronouncement for the fiscal reporting period ended December 31, 2016, and has reclassified the presentation of deferred income taxes in the prior period to conform with the current year classification in the consolidated balance sheets. As a result of the Company having recognized a valuation reserve for the entire deferred tax liability balance at March 31, 2017 and December 31, 2016, there is no impact of the presentation of deferred income taxes in our financial statements.

 

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the impact of the adoption of these changes will have on the consolidated financial statements.

 

Reclassifications

 

Certain reclassifications have been made to the 2016 financial statements in order for them to conform to the 2017 presentation. Such reclassifications have no impact on the Company’s financial position or results of operations.

 

13
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

3. Liabilities

 

Note Payable

 

In November 2014, the Company issued for cash of $100,000 an unsecured note payable and a five-year warrant with an exercise price of $0.09 per share for the purchase of up to 50,000 shares of common stock. The terms of the note were a repayment of $115,000 if paid by February 18, 2015 and, if paid thereafter, the principal balance of the note was to be increased to $137,982 as of October 1, 2015 and interest accrues at 20% from October 1, 2015 until paid. During the three months ended March 31, 2017, $25,000 principal of this note was assigned to a third party who paid a like amount to the holder of the note. The balance of the note outstanding at March 31, 2017, $112,982, continues to accrue interest at 20%.

 

Notes Payable- Related Parties

 

During the three months ended March 31, 2016, two affiliates of the Company advanced to the Company cash in an accumulated amount of $35,000 in exchange for six-month 10% promissory notes. The balance of the notes remains $35,000 at March 31, 2017.

 

Convertible Debentures

 

As of March 31, 2017, the Company has issued and outstanding fixed rate Convertible Debentures (“Debentures”) with original terms of three months to one year, an interest rate ranging from 10-20% per year and an original issue discount ranging from 5% to 10% which, at the option of the holder, may convert into common stock at initial conversion prices ranging from $0.01 to $0.099 per share.

 

14
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

The Debentures were issued with detachable five year cashless 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 ranging from $0.02 to $0.1287 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 exercise prices ranging from $0.0745 to $0.1287 per share. For debentures issued through March 31, 2013, at the option of the Debenture holder, the terms of the Debentures and Holders Warrants are subject to an exchange feature in the event that the Company issues securities with terms more favorable than those of the then outstanding Debentures and Holders Warrants. Debentures issued subsequent to March 31, 2013 do not contain such an exchange clause. During the three months ended March 31, 2017, Debentures with an accumulated principal balance of $150,000 and $13,767 of accrued interest were assigned to a third party note holder. The new notes contain variable conversion rates discussed below. The gross amount of Debentures with fixed conversion rates outstanding is $5,977,082 as of March 31, 2017.

 

During the three months ended March 31, 2017, the Company has issued and outstanding Convertible Debentures (“Variable Debentures”) with original terms of 9 months to one year, interest rates ranging from 0-10% per year and original issue discounts ranging from 0-10% which contain variable conversion rates ranging from discounts of 40-50% of the Company’s common stock based on the Company’s common stock trading prices ranging from 10-25 days previous to conversion. The Variable Debentures contain prepayment options which enable the Company to prepay the notes for periods of 0-180 days subsequent to issuance at premiums ranging from 0-50%. The gross amount of Variable Debentures outstanding is $480,040 as of March 31, 2017.

 

As of March 31, 2017 and December 31, 2016, the balances of the Debentures and Variable Debentures are as follows:

 

   March 31, 2017   December 31, 2016 
         
Balance at beginning of period  $6,415,305   $6,174,760 
Issuance of debentures for cash   60,000    320,000 
Issuance of debentures for services   10,000    15,000 
Issuance of debentures for forbearance   16,064    65,282 
Debentures repaid in cash   (669)   - 
Debentures converted to common stock   (82,345)   (291,754)
Debentures exchanged for new debentures   38,767    132,017 
Convertible debt   6,457,122    6,415,305 
Less unamortized costs of financing   325,848    203,444 
Convertible debt, net of unamortized costs  $6,131,274   $6,211,861 
           
Convertible debt in default  $5,998,875   $5,991,570 

 

Secured Convertible Note

 

During the three months ended March 31, 2017, the Company issued for cash of $250,000 Secured Convertible Debentures (the “Secured Debentures”) to two accredited investors. The terms of the Debentures are for three years, a conversion price of $0.01 per share and an annual interest rate of 8%. The secured interest is on all of the assets of the Company. In addition, the Company issued to the holder of $100,000 Secured Debentures, a five year common stock purchase warrant to purchase up to 5,000,000 shares of common stock with an exercise price of $0.02 per share. The value of this warrant, $292, was determined using the Black Sholes Method and was reflected as a discount to the Secured Debenture.

 

15
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

Derivative Liability

 

Since the Company issued Convertible Debentures which included Holders Warrants, Agent Warrants and a conversion option that includes a possible exchange feature in the event of a future financing on terms more favorable than those of the existing warrants and debentures, this results in the warrants and conversion feature of the debentures being recorded as a liability and measured at

 

fair value. In addition, outstanding Variable Debentures contain variable conversion rates based on unknown future prices of the Company’s common stock resulting in a conversion feature. The Company measures these warrants and conversion features using the Black Scholes Model. The period over which the Company will be required to evaluate the fair value of the warrants is approximately five years and the period over which the Company will be required to evaluate the fair value of the conversion features are six to twelve months or conversion.

 

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, managements’ assessment of the probability of a more favorably priced future financing or significant fluctuations in the volatility of the trading market for the Company’s common stock, the Company’s fair value estimates could be materially different in the future.

 

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 the Company’s control. Therefore, the resulting effect on net loss is subject to significant fluctuation and will continue to be so until the Company’s Debentures, which the convertible feature is associated with, are converted into common stock or paid in full with cash. 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.

 

In addition, since the number of shares issuable under the Variable Debentures are undeterminable, the Company may be required to issue shares in excess of the number of shares authorized by its shareholders. As a result, when the Company determines that is does not have sufficient shares to meet the obligations of derivative unexercised debentures, warrants and options, the derivatives must be valued using the Black Scholes Option Pricing method and a liability is recorded as though the obligations would be settled using some means other than stock. For the three months ended March 31, 2017, the Company determined that it was over committed to the number of shares issuable on the exercise of outstanding debentures, stock options and warrants for approximately 1,166,000,000 shares.

 

As of March 31, 2017 and December 31, 2016, the balances of the Derivative Liability are as follows:

 

16
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

           Commitment     
           In Excess of     
       Conversion   Authorized     
   Warrants   Feature   Stock   Total 
                 
Balance at January 1, 2016  $60,420   $495,473   $64,428   $620,321 
                     
Liability on issuance of debt and warrants   44,394    697,256    -    741,650 
Change in fair value at year end   (22,378)   718,458    -    696,080 
Elimination of liability on conversion   -    (1,232,151)   -    (1,232,151)
Over commitment of stock   -    -    (5,972)   (5,972)
Balance at December 31, 2016  $82,436   $679,036   $58,456   $819,928 
                     
Liability on issuance of debt and warrants   2,842    627,510    -    630,352 
Change in fair value at year end   (55,329)   (112,458)   -    (167,787)
Elimination of liability on conversion   -    (410,509)   -    (410,509)
Over commitment of stock   -    -    (38,902)   (38,902)
Balance at March 31, 2017  $29,949   $783,579   $19,554   $833,082 

 

Debentures with warrants attached issued subsequent to March 31, 2013 did not contain an exchange provision and were accounted for using the equity method of valuing the note and warrant.

 

4. Shareholders’ Deficit

 

Common Stock

 

During the three months ended March 31, 2017, holders of Convertible Debentures with a face value of $82,345 and accrued interest of $6,074 converted their debentures into 529,648,837 shares of common stock. In addition, associated with these debentures, the Company recorded a gain on extinguishment of debt of $15,651.

 

Warrants

 

During the three months ended March 31, 2017, in conjunction with the sale of Convertible Debentures, the Company issued a five-year common stock purchase warrant to acquire up to 5,000,000 shares to holders of the Debentures. In addition, the Company issued a five-year common stock purchase warrant to acquire up to 500,000 shares to an agent who assisted in this financing. These warrants have an exercise price of $0.02 per share. The value of the warrants was determined using the Black Sholes Model. The value of the warrant issued to the note holder, $2,925, was reflected as a discount to the note and the value of the warrant issued to the agent, $292, was reflected as a non-cash operating expense.

 

In March 2016, the Company issued a warrant exercisable into up to 1,000,000 shares of common stock in exchange for services provided by a consultant. The value of these warrants, $1,652, was determined using the Black Scholes Model and was included as non-cash expenses and additional paid-in capital during the three months ended March 31, 2016.

  

17
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

 The balance of all warrants outstanding as of March 31, 2017 is as follows:

 

        Weighted   Weighted 
        Average   Average 
        Exercise   Fair 
    Warrants   Price   Value 
Outstanding at January 1, 2017    132,278,221   $0.0765      
Granted    5,500,000   $0.0200   $0.0006 
Cancelled    (26,577,571)  $0.0745      
Exercised    -   $-      
Outstanding at March 31, 2017    111,200,650   $0.0742      
                 
Exercisable at March 31, 2017    111,200,650   $0.0742      

 

Stock Options

 

Options outstanding as of March 31, 2017 are as follows:

 

       Weighted   Weighted Average    
       Average   Remaining   Aggregate 
       Exercise Price   Contractual   Intrinsic 
   Options   Per Share   Term (years)   Value (1) 
Outstanding at January 1, 2017   34,168,800   $0.02    7.03      
Granted   -   $-    -      
Cancelled   -   $-    -      
Exercised   -   $-    -      
Outstanding at March 31, 2017   34,168,800   $0.02    6.79   $- 
                     
Exercisable at March 31, 2017   26,725,761   $0.02    6.79   $- 
                     
Weighted average fair value of options granted during the period   -   $-           

 

(1) These amounts represent the excess, if any, between the exercise price and $0.0006, the closing market price of the Company’s common stock on March 31, 2017 as quoted on the Pink Sheets under the symbol “SCIE”.

 

At March 31, 2017, total unrecognized estimated employee compensation cost related to non-vested stock options granted prior to that date is $133,323, which we expect to be recognized over the next year.

 

Series AA Preferred Shares

 

On April 15, 2016, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to three thousand (3,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.

 

18
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one million (1,000,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. The holders are restricted from voting the preferred shares for any proposal on the election of directors. The Company recorded a special dividend and valued the Series AA Super Voting Preferred Stock at $25,000 as of March 31, 2017 and December 31, 2016.

 

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. The Black Sholes Model was used to determine the fair value with similar assumptions to those described under “Stock-Based Compensation”. The Company records derivative and warrant liabilities on the condensed consolidated balance sheets at fair value with changes in fair value recorded in the condensed consolidated statements of operation.

 

19
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

The following table presents the balances of derivative liabilities which are measured at fair value on a recurring basis by level as of March 31, 2017:

 

   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 March 31, 2017                    
Derivative liability  $-   $-   $783,579   $783,579 
Warrant liability   -    -    29,949    29,949 
Commitment in excess of authorized stock   -    -    19,554    19,554 
Total  $-   $-   $833,082   $833,082 

 

The following table presents changes in the derivative liabilities with significant unobservable inputs (Level 3) for the three months ended March 31, 2017:

 

           Commitment     
         In Excess of    
   Warrant   Derivative   Authorized   Total 
   Liability   Liability   Stock   Liability 
Balance December 31, 2016  $82,436   $679,036   $58,456   $819,928 
                     
Liability on issuance of debt and warrants   2,842    627,510    -    630,352 
                     
Elimination of liability on conversion   -    (410,509)   -    (410,509)
                     
Change in estimated fair value (1)   (55,329)   (112,458)   -    (167,787)
                     
Change in commitment in excess of authorized stock   -    -    (38,902)   (38,902)
                     
Balance March 31, 2017  $29,949   $783,579   $19,554   $833,082 

 

(1) Included in the Condensed Statements of Operation on the line “Change in fair value of derivative and warrant liabilities.”

 

Management used the following inputs to value the Derivative and Warrant Liabilities for the three months ended March 31, 2017:

 

   Derivative Liability  Warrant Liability
Expected term  6 months to 2 years  5 years
Exercise price  $0.0001 - $0.074  $0.02 - $0.1287
Expected volatility  216% to 240%  242% to 249%
Expected dividends  None  None
Risk-free interest rate  0.79% to 1.06%  1.93%
Forfeitures  None  None

 

In computing the fair value of the derivative and warrant liability at March 31, 2017, management estimated a 60% probability of a down round financing event at a price of $0.025 and a 9% to 34% probability that existing note holders with exchange privileges would exchange their existing debentures and warrants for new debentures and warrants.

 

20
 

 

SpectraScience, Inc.

Notes to Unaudited Condensed Financial Statements (continued)

 

6. Contingencies

 

Legal Proceedings

 

On July 7, 2016, Oakmore Opportunity Fund I LP, a variable rate noteholder of SprectraScience, filed for a preliminary judgement of $116, 500 in the Superior Court for the County of Los Angeles, case number BC622542, related to a Convertible Note. Oakmore asserts that SpectraScience breached the terms of the Convertible Note due to not having sufficient authorized shares to enable Oakmore to convert its Note with a balance of $22,500. The Company did not object to the preliminary judgement. On October 19, 2016, the Judge issued a final judgement of $521,100. The Company is retaining litigation counsel and intends to vigorously defend the amount of the judgement. The amount of ultimate liability with respect to the foregoing cannot be determined, however, the Company has established a $150,000 contingency to cover the costs of litigation and the judgement. Despite the inherent uncertainties of litigation, the Company at this time does not believe that Oakmore’s claim will have a material adverse impact on its financial condition, results of operations, or cash flows.

 

7. Subsequent Events

 

Secured Convertible Debentures

 

In May 2017, the Company issued a $60,000 Secured Convertible Debenture (the “Debenture”) to one accredited investor for cash consideration of $50,000. The Debenture matures in three years, carries a fixed conversion price of $0.01, and an annual interest rate of 8%. The secured interest is on all of the assets of the Company and is shared equally with a previous secured party. In addition, the Company issued a five year common stock purchase warrant exercisable into up to 3,000,000 shares of common stock at an exercise price of $0.02.

 

Variable Rate Convertible Debentures

 

In April 2017, a holder of Variable Rate Convertible Debentures with principal of $4,116 and accrued interest of $3,309 converted the remaining portion of one of their debentures into 27,000,000 shares of common stock. In addition, in May 2017, the Company entered into a variable rate note accumulating $75,000 that can be repaid for a premium ranging from 20% to 35% if paid within 180 days. If paid subsequent to 180 days, the notes are convertible into common stock at a discount to the market price.

 

Increase in Authorized Shares

 

On April 24, 2017, the Company’s shareholders approved an increase in authorized capital stock from 2 billion shares to 3 billion shares. The increase in authorized shares will become effective 20 days after the mailing of a Definitive 14C to shareholders.

 

Subsequent events have been evaluated through the date financial statements are filed with the Securities and Exchange Commission.

 

21
 

 

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, our anticipated duration of periods of net loss, our near term operating goals, our expectations regarding the market for our products, the introduction of our products in new international markets and our beliefs with respect to opportunities and industry conditions in those markets, our beliefs about our products, product development, acquisition or licensing of complementary technologies and expectations with respect to our products’ performance and acceptance, the results of and our intentions with respect to our distribution agreement with PENTAX Europe GmbH, our beliefs about the strengths of our intellectual property portfolio, our regulatory goals and developments, anticipated clinical trials and research, our agreements with Laidlaw and other agents and their effect on our future capital resources and future financial position, our expectations with respect to stock option expense recognition, our future cash needs, the sufficiency of our working capital and our operating losses for the remainder of the current fiscal year. 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. These forward-looking statements involve risks and uncertainties that could cause or contribute to such differences, including, but 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, 2016. 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, 2016.

 

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 fluorescence technology for clinical use. The WavSTAT System carries the CE mark designation which allows for the sale and marketing in the European Union for the diagnosis of cancer. We are developing light-based diagnostics for additional indications including inflammatory bowel disease and esophageal cancer. Once these additional applications are developed we plan 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. We believe we have a strong intellectual property portfolio that will allow us to continue to expand our 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 three month period ended March 31, 2017, SpectraScience carried forward on the improvements made to the WavSTAT4 in fiscal 2011 and continued working with PENTAX Europe, GmbH (“PENTAX”) and other distributors, for distribution of its products in Europe, the Middle East and Africa.

  

22
 

 

Over the next 12 months, SpectraScience intends to:

 

   

Market and sell the WavSTAT4 Optical Biopsy System colon cancer diagnostic application through PENTAX and other distribution channels in the European Union;

     
   

Conduct country-specific evaluation trials to demonstrate the effectiveness and cost benefit of the WavSTAT4 Optical Biopsy System in each relevant European jurisdiction;

     
   

Coordinate the creation and publication of scientific papers and presentations related to the country-specific evaluation trials to support widespread education and adoption of the WavSTAT4;

     
   

Pursue the introduction of the WavSTAT4 colon cancer application in other international markets, in particular China, Saudi Arabia and India;

     
   

Begin meeting with the FDA towards the preparation and submission of a Supplemental PMA filing with the FDA and plan for additional clinical trials to support eventual 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.

     
    Continue to expand and refine our intellectual property portfolio.

 

Results of Operations

 

Comparison of the Three Months Ended March 31, 2017 and 2016

 

   Three Months Ended March 31,   Favorable     
   2017   2016   (Unfavorable)   % 
Operating expenses:                    
Research and development  $130,842   $194,007   $63,165    -32.6%
General and administrative   279,732    307,841    28,109    -9.1%
Sales and marketing   74,854    79,413    4,559    -5.7%
    485,428    581,261    95,833    16.5%
                     
Loss from operations   (485,428)   (581,261)   95,833    16.5%
                     
Other income (expense)   (518,348)   (1,475,073)   956,725    -64.9%
                     
Net loss  $(1,003,776)  $(2,056,334)  $1,052,558    -51.2%

 

Research and Development Expenses

 

Research and development expenses decreased by $63,165, 32.6%, to $130,842 for the quarter ended March 31, 2017 from $194,007 for the three months ended March 31, 2016. This decrease was due to a decrease in clinical costs. We anticipate that clinical costs will increase as we proceed with our introduction of the WaveSTAT4 in Europe.

 

General and Administrative Expenses

 

General and administrative expenses decreased by $28,109, 9.1%, to $279,732 for the quarter ended March 31, 2017 from $307,841 for the three months ended March 31, 2016. This decrease was due to a decrease in travel and convention costs. We anticipate that costs will increase as we proceed with our introduction of the WaveSTAT4 in Europe.

 

23
 

 

Sales and Marketing Expenses

 

Sales and marketing expenses decreased by $4,559, 5.7%, to $74,854 for the quarter ended March 31, 2017 from $79,413 for the quarter ended March 31, 2016. The primary reason for the decrease was a decrease in payroll costs related to the change in foreign currency values. We anticipate that sales and marketing expenses will increase as we increase our activity in Europe.

 

Other Income (Expense)

 

Other income (expense) for the quarter ended March 31, 2017 was expense of $518,348 compared to expense of $1,475,073 for the quarter ended March 31, 2016. This change was due primarily to a change in valuation of our derivative liabilities. We anticipate continued large fluctuations in other income (expense)

 

Liquidity and Capital Resources

 

   As of   Increase 
   March 31, 2017   December 31, 2016   (Decrease) 
Working Capital               
                
Current assets  $423,045   $361,843   $61,202 
Current liabilities   11,070,084    10,801,550    268,534 
Working capital deficit  $(10,647,039)  $(10,439,707)  $207,332 
                
Long-term debt  $1,350,000   $1,100,000   $250,000 
                
Stockholders' deficit  $(11,043,202)  $(10,546,033)  $497,169 

 

   Three Months Ended March 31,      Increase 
    2017    2016    (Decrease) 
Statements of Cash Flows Select Information               
                
Net cash provided (used) by:               
Operating activities  $(191,880)  $(406,996)  $(215,116)
Investing activities  $-   $-   $- 
Financing activities  $288,331   $281,288   $7,043 

 

   As of     Increase 
    March 31, 2017     December 31, 2016     (Decrease) 
Balance Sheet Select Information               
                
Cash  $100,001   $3,550   $96,451 
                
Accounts receivable  $-   $950   $(950)
                
Inventory  $97,423   $90,594   $6,829 
                
Accounts payable and accrued expenses  $3,957,746   $3,596,779   $360,967 

 

24
 

 

Historically, the Company’s sources of cash have come from the issuance and sales of equity securities and debentures. 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 the end of 2017, as it completes proof-of-concept trials, conducts 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, there is substantial doubt that the Company will be able 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.

 

As of March 31, 2017, the Company had a working capital deficit of $10,647,039 and cash of $100,001, compared to a working capital deficit of $10,439,707 and cash of $3,550 as of December 31, 2016. The Company has engaged other agents to assist it Company with raising capital and has commenced raising capital on its own. During the three months ended March 31, 2017, the Company raised $289,000, net of transaction costs of $20,000, under these agreements. 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 Agreements occur as expected, or if the Company is otherwise able to raise a similar level of funds, 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 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.

 

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 (the “Evaluation Date”). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date.

 

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.

 

25
 

 

PART II OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Oakmore Suit

 

On July 7, 2016, Oakmore Opportunity Fund I LP, a variable rate noteholder of SprectraScience, filed for a preliminary judgement of $116, 500 in the Superior Court for the County of Los Angeles, case number BC622542, related to a Convertible Note. Oakmore asserts that SpectraScience breached the terms of the Convertible Note due to not having sufficient authorized shares to enable Oakmore to convert its Note with a balance of $22,500. The Company did not object to the preliminary judgement. On October 19, 2016, the Judge issued a final judgement of $521,100. The Company is retaining litigation counsel and intends to vigorously defend the amount of the judgement. The amount of ultimate liability with respect to the foregoing cannot be determined, however, the Company has established a $150,000 contingency to cover the costs of litigation and the judgement. Despite the inherent uncertainties of litigation, the Company at this time does not believe that Oakmore’s claim will have a material adverse impact on its financial condition, results of operations, or cash flows.

 

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, 2016.

 

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

 

       Number of        
   Date of   Common Shares   Source of    
Common Stock  Issuance   Issued   Payment   Amount
    Various     529,648,837    Conversion of debt   $466,315

 

Common Stock Purchase Warrants                 
Issued With Convertible Debentures   Date of
Issuance
    Number of Shares    Exercise Price   Expiration Date
    3/31/2017    5,000,000   $0.02   3/31/2022

 

Common Stock Purchase Warrants   Date of               
Issued For Services   Issuance    Number of Shares    Exercise Price   Expiration Date
    3/31/2017    500,000   $0.02   3/31/2022

 

With respect to the above equity securities issuances, the Company relied on exemptions provided by Sections 4(a)(2) and 3(a)9 of the Securities Act of 1933, as amended (the “Securities Act”). No advertising or general solicitation was employed in offering the securities. The securities were issued to a limited number of persons all of whom were accredited investors as that term is defined in Rule 501 of Regulation D under the Securities Act. All were capable of analyzing the merits and risks of their investment, acknowledged in writing that they were acquiring the securities for investment and not with a view toward distribution or resale, and understood the speculative nature of their investment. All securities issued contained a restrictive legend prohibiting transfer of the shares except in accordance with federal securities laws.

 

26
 

 

Item 3. Defaults Upon Senior Securities

 

As of May 15, 2017, there are Unsecured Convertible Debentures with a face value of $5,998,875 held by 80 individual Holders in default. As a result, the outstanding principal amount of these Debentures, plus accrued but unpaid interest, liquidated damages and other amounts owing shall become immediately due and payable in cash at the election of the Holders. As of May 15, 2017, none of the Holders of these Debentures have elected to provide notice of default.

 

Item 4. Mine Safety Disclosures

 

None

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

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 March 31, 2016, 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.

 

27
 

 

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: May 22, 2017 /s/ Michael P. Oliver
  Michael P. Oliver
  President and Chief Executive Officer
  (Principal executive officer)
   
Date: May 22, 2017 /s/ Lowell W. Giffhorn
  Lowell W. Giffhorn
  Chief Financial Officer
 

(Principal financial officer and

principal accounting officer)

 

28
 

 

EX-31.1 2 ex31-1.htm

 

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.

 

  By: /s/ Michael P. Oliver
  Name: Michael P. Oliver
  Title: Chief Executive Officer
  Date: May 22, 2017

 

   
  

 

EX-31.2 3 ex31-2.htm

 

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, Lowell W. Giffhorn, 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.

 

  By: /s/ Lowell W. Giffhorn
  Name: Lowell W. Giffhorn
  Title: Chief Financial Officer
  Date: May 22, 2017

 

   
  

 

EX-32.1 4 ex32-1.htm

 

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 March 31, 2017 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: May 22, 2017

 

   
  

 

EX-32.2 5 ex32-2.htm

 

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 March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lowell W. Giffhorn, 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/ Lowell W. Giffhorn
 

Lowell W. Giffhorn

Chief Financial Officer

Date: May 22, 2017

 

   
  

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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2017
May 12, 2017
Document And Entity Information    
Entity Registrant Name SPECTRASCIENCE INC  
Entity Central Index Key 0000727672  
Document Type 10-Q  
Document Period End Date Mar. 31, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   1,440,320,059
Trading Symbol SCIE  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Current assets:    
Cash $ 100,001 $ 3,550
Accounts receivable, net 950
Inventory 97,423 90,594
Prepaid expenses and other current assets 225,621 266,749
Total current assets 423,045 361,843
Patents, net 984,687 1,024,524
Total assets 1,407,732 1,386,367
Current liabilities:    
Accounts payable 1,499,584 1,318,737
Accrued expenses 2,458,162 2,278,042
Notes payable- related parties 35,000 35,000
Note payable 112,982 137,982
Convertible debt, net of discounts of $325,848 as of March 31, 2017 and $203,444 as of December 31, 2016 6,131,274 6,211,861
Derivative liability 833,082 819,928
Total current liabilities 11,070,084 10,801,550
Long-term secured convertible debt 1,350,000 1,100,000
Total mezzanine equity 30,850 30,850
Shareholders' deficit    
Common stock, $.01 par value; 1,996,000,000 shares authorized; 1,413,320,059 and 883,671,222 shares issued and outstanding as of March 31, 2017 and December 31, 2016 14,133,200 8,836,712
Additional paid in capital 29,792,890 34,582,771
Accumulated deficit (54,969,295) (53,965,519)
Total shareholders' deficit (11,043,202) (10,546,033)
Total liabilities and shareholders' deficit 1,407,732 1,386,367
Series B Preferred Stock [Member]    
Current liabilities:    
Convertible Preferred Stock 25,850 25,850
Series C Preferred Stock [Member]    
Current liabilities:    
Convertible Preferred Stock 5,000 5,000
Series A Preferred Stock [Member]    
Shareholders' deficit    
Convertible Preferred Stock, value
Series AA Super Voting Preferred Stock [Member]    
Shareholders' deficit    
Convertible Preferred Stock, value $ 3 $ 3
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Discounts on convertible debt $ 325,848 $ 203,444
Common stock, par value $ 0.01 $ 0.01
Common stock, authorized 1,996,000,000 1,996,000,000
Common stock, issued 1,413,320,059 883,671,222
Common stock, outstanding 1,413,320,059 883,671,222
Series B Preferred Stock [Member]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, authorized 2,585,000 2,585,000
Preferred stock, issued 2,585,000 2,585,000
Preferred stock, outstanding 2,585,000 2,585,000
Preferred stock, liquidation value $ 517,000 $ 517,000
Preferred stock, accumulated and unpaid dividends $ 106,931 $ 106,931
Series C Preferred Stock [Member]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, authorized 500,000 500,000
Preferred stock, issued 500,000 500,000
Preferred stock, outstanding 500,000 500,000
Preferred stock, liquidation value $ 100,000 $ 100,000
Series A Preferred Stock [Member]    
Preferred stock, par value $ 0.01 $ 0.01
Preferred stock, authorized 0 0
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
Series AA Super Voting Preferred Stock [Member]    
Preferred stock, par value $ 0.001 $ .001
Preferred stock, authorized 3,000 0
Preferred stock, issued 3,000 0
Preferred stock, outstanding 3,000 0
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Operation (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating expenses:    
Research and development $ 130,842 $ 194,007
General and administrative 279,732 307,841
Sales and marketing 74,854 79,413
Loss from operations 485,428 581,261
Other income (expense) (485,428) (581,261)
Interest expense    
Change in fair value of derivative and warrant liabilities (184,709) (374,130)
Amortization of derivative and warrant liabilities discount 167,787 (887,494)
Amortization of deferred debt issuance costs and original issue discount (130,408) (141,561)
Loss on issuance of variable rate debt (6,734) (62,530)
Gain on extinguishment of debt (368,743)
Loss on foreign exchange transactions 10,551 1,166
Other income (expense), net (6,092) (8,924)
Net loss (1,600)
Basic and diluted loss per share (518,348) (1,475,073)
Weighted average common shares outstanding: Basic and diluted $ (1,003,776) $ (2,056,334)
Basic and diluted loss per share $ (0.00) $ (0.00)
Weighted average common shares outstanding: Basic and diluted 1,090,120,075 609,825,530
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Condensed Consolidated Statement of Shareholders' Deficit (unaudited) - 3 months ended Mar. 31, 2017 - USD ($)
Series AA Super Voting Preferred [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Total
Balance, beginning at Dec. 31, 2016 $ 3 $ 8,836,712 $ 34,582,771 $ (53,965,519) $ (10,546,033)
Balance, beginning, shares at Dec. 31, 2016 3,000 883,671,222      
Non cash issuance of stock options 40,001 40,001
Conversion of convertible debt $ 5,296,488 (4,830,174) 466,314
Conversion of convertible debt, shares 529,648,837      
Non cash issuance of warrant for consulting services 292 292
Net loss (1,003,776) (1,003,776)
Balance, ending at Mar. 31, 2017 $ 3 $ 14,133,200 $ 29,792,890 $ (54,969,295) $ (11,043,202)
Balance, ending, shares at Mar. 31, 2017 3,000 1,413,320,059      
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating activities:    
Net loss $ (1,003,776) $ (2,056,334)
Adjustments to reconcile net loss to cash used in operating activities:    
Amortization and depreciation 39,837 40,552
Non-cash interest from forbearance on and issuance of variable rate convertible debentures 385,102 94,329
Non-cash issuance of stock options and warrants 40,001 40,001
Non-cash (income) expense related to commitment of common stock in excess of authorized shares (38,902) 131,504
Amortization of derivative and warrant liabilities discount 130,408 141,561
Amortization of deferred debt issuance costs and original issue discount 6,734 62,530
Issuance of debt and common stock for services 11,000 350
Change in fair value of derivative and warrant liabilities (167,787) 887,494
Gain on extinguishment of debt (10,551) (1,166)
Changes in assets and liabilities:    
Accounts receivable 950 7,061
Inventory (6,829) (31,639)
Prepaid expense and other assets 41,128 36,887
Accounts payable 180,844 127,720
Accrued expenses 199,961 112,154
Net cash used in operating activities (191,880) (406,996)
Investing activities:    
Net cash used in investing activities
Financing activities:    
Proceeds from issuance of convertible notes payable 309,000 300,000
Proceeds from issuance of notes payable to related parties 35,000
Payments on convertible notes payable (669)
Debt issuance costs (20,000) (53,712)
Net cash provided by financing activities 288,331 281,288
Net decrease in cash 96,451 (125,708)
Cash, beginning of year 3,550 127,493
Cash, end of period 100,001 1,785
Cash paid during the period for:    
Interest 1,000
Income taxes
Non Cash Investing and Financing Activities:    
Conversion of convertible notes and accrued interest to common stock 88,419 75,812
Conversion of interest payable to increase in note 13,767
Conversion of note payable to convertible note payable $ 25,000
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
Nature of Business and Basis of Presentation
3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business and Basis of Presentation

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 subsidiaries Luma Imaging Corporation (“LUMA”), Spectra Science International, Inc. (“International”) and SpectraScience (UK) Limited (“SpectraUK”). Since 1996, the Company has focused primarily on developing the WavSTAT Optical Biopsy System (the “WavSTAT System”).

 

The Company has developed and received the European 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 WavSTAT System operates by using cool, safe 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 version of the product began to be sold in the European Union for clinical trials related to colon cancer detection. In June 2012, the Company entered into a distribution agreement with PENTAX Europe, GmbH.

 

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 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 three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 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, 2016.

 

Going Concern

 

Historically, the Company’s sources of cash have come from the issuance and sale of equity securities and debentures. 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 the end of 2017, as it completes proof-of-concept trials, conducts outcome-based clinical studies and increases sales and marketing efforts to commercialize the WavSTAT4 System in Europe. If the Company does not receive sufficient funding, there is substantial doubt that the Company will be able 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.

 

As of March 31, 2017, the Company had a working capital deficit of $10,647,039 and cash of $100,001, compared to a working capital deficit of $10,439,707 and cash of $3,550 as of December 31, 2016. The Company uses agents to assist it with raising capital and has commenced raising capital on its own. During the three months ended March 31, 2017, the Company raised $289,000, net of transaction costs of $20,000, under these agreements. 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 Agreements occur as expected, or if the Company is otherwise able to raise a similar level of funds, 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 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 holders of Convertible Debentures control the conversion of the Convertible Debentures and certain of the Convertible Debentures were not converted at their maturity constituting a potential default on the matured, but unconverted, Convertible Debentures. In the event of such default, principal, accrued interest and other related costs are immediately due and payable in cash. As of March 31, 2017, Convertible Debentures with a face value of $5,998,875 held by 80 individual investors are in default. None of these investors have served notice of default on the Convertible Debentures held by them.

 

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.

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Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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 price 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 subsidiaries LUMA, International and Spectra UK. 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 including intangible assets, assumptions used to value stock options, assumptions used to value the common stock issued and assumptions related to the determination of the fair value of the derivative components associated with the Company’s Convertible Debentures. Actual results could differ from those estimates.

 

Inventory Valuation

 

The Company states its inventory 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.

 

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.

 

Variable Conversion Rate Debentures

 

Starting in 2015, the Company entered into convertible debentures with floating exercise prices discounted to market prices. As a result, a significant number of shares were either issued or may be issued at deeply discounted variable conversion prices. The downward pressure placed on the Company’s stock as a result of these conversions can be classified as “death spirals” since the investors have no incentive to maintain a stable stock price. The Company accounts for these debentures as derivative liabilities which means the debentures are revalued at the end of each period and gains and losses are recognized at the issuance of the debentures and on the conversion of the debentures.

 

Over Commitment of Shares

 

Since the number of shares issuable under convertible debentures with floating exercise prices is undeterminable, the Company may be required to issue shares in excess of the number of shares authorized by its shareholders. As a result, when the Company determines that is does not have sufficient shares to meet the obligations of derivative unexercised debentures, warrants and options, the derivatives must be valued using the Black Scholes Option Pricing method and a liability is recorded as though the obligations would be settled using some means other than stock.

 

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 estimates the fair value of stock-based awards on the date of grant using the Black Scholes 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 reporting period.

 

As of March 31, 2017, 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 40,000,000 shares of common stock. At March 31, 2017, the Company had options outstanding exercisable into up to 34,168,800 shares of stock under the EIP of which up to 26,725,761 shares were exercisable. Awards under the Company’s EIP generally vest over four years.

 

The fair value of options granted are 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. There were no stock options granted during the three month periods ended March 31, 2017 and 2016.

 

Earnings (Loss) Per Share

 

Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss 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 if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

 

For the three month periods ended March 31, 2017 and 2016, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive.

 

    March 31, 2017     March 31, 2016  
             
Preferred Stock     3,085,000       3,085,000  
Convertible debentures     1,604,110,127       378,651,041  
Options     34,168,800       34,168,800  
Warrants     111,200,650       132,875,170  
Total     1,752,564,577       548,780,011  

 

The following table sets forth the computation of basic and diluted loss per share for the three month periods ended March 31, 2017 and 2016:

 

    Three Months Ended  
    March 31,  
    2017     2016  
             
Numerator:                
Net loss for basic earnings per share   $ (1,003,776 )   $ (2,056,334 )
Net loss for diluted earnings per share   $ (1,003,776 )   $ (2,056,334 )
                 
Denominator:                
Weighted average basic shares outstanding     1,090,120,075       609,825,530  
Denominator for diluted earnings per share-Adjusted weighted average shares     1,090,120,075       609,825,530  
                 
Income (loss) per share                
Basic   $ (0.00 )   $ (0.00 )
Diluted   $ (0.00 )   $ (0.00 )

 

Inventory

 

Inventory consisted of the following at March 31, 2017 and December 31, 2016:

 

    March 31, 2017     December 31, 2016  
             
Raw materials   $ 256,163     $ 256,163  
Finished goods     37,697       30,868  
      293,860       287,031  
Reserve for obsolescence     -       -  
      293,860       287,031  
Less long-term portion     196,437       196,437  
    $ 97,423     $ 90,594  

 

During the year ended December 31, 2016, the Company purchased the inventory of Oncoscope, Inc. from the Trustee of Ondoscope’s bankruptcy proceeding for a total of $40,000. This amount, net of amounts sold of $2,100, has been included in raw materials.

 

Recently Adopted and Issued Accounting Pronouncements

 

In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. These changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes became effective for the Company for the 2016 annual period. Management has evaluated the impact of the adoption of these changes and has determined there will be no material impact on the consolidated financial statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial statements in a given reporting period.

 

In April 2015, the FASB issued ASU No 2015-3, Simplifying the Presentation of Debt Issuance Costs. This update changes the presentation of debt issuance costs in the balance sheet. ASU 2015-03 requires debt issuance costs related to a recognized debt obligation to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU clarified guidance in ASC 2015-03 stating that the SEC staff would not object to a company presenting debt issuance costs related to a line-of-credit arrangement on the balance sheet as a deferred asset, regardless of whether there were any outstanding borrowings at period-end. This update is effective for annual and interim periods beginning after December 15, 2015, which required us to adopt these provisions in the first quarter of 2016. This update was applied on a retrospective basis, wherein the balance sheet of each period presented was adjusted to reflect the effects of applying the new guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirements for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has early adopted this pronouncement for the fiscal reporting period ended December 31, 2016, and has reclassified the presentation of deferred income taxes in the prior period to conform with the current year classification in the consolidated balance sheets. As a result of the Company having recognized a valuation reserve for the entire deferred tax liability balance at March 31, 2017 and December 31, 2016, there is no impact of the presentation of deferred income taxes in our financial statements.

 

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the impact of the adoption of these changes will have on the consolidated financial statements.

 

Reclassifications

 

Certain reclassifications have been made to the 2016 financial statements in order for them to conform to the 2017 presentation. Such reclassifications have no impact on the Company’s financial position or results of operations.

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Liabilities
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Liabilities

3. Liabilities

 

Note Payable

 

In November 2014, the Company issued for cash of $100,000 an unsecured note payable and a five-year warrant with an exercise price of $0.09 per share for the purchase of up to 50,000 shares of common stock. The terms of the note were a repayment of $115,000 if paid by February 18, 2015 and, if paid thereafter, the principal balance of the note was to be increased to $137,982 as of October 1, 2015 and interest accrues at 20% from October 1, 2015 until paid. During the three months ended March 31, 2017, $25,000 principal of this note was assigned to a third party who paid a like amount to the holder of the note. The balance of the note outstanding at March 31, 2017, $112,982, continues to accrue interest at 20%.

 

Notes Payable- Related Parties

 

During the three months ended March 31, 2016, two affiliates of the Company advanced to the Company cash in an accumulated amount of $35,000 in exchange for six-month 10% promissory notes. The balance of the notes remains $35,000 at March 31, 2017.

 

Convertible Debentures

 

As of March 31, 2017, the Company has issued and outstanding fixed rate Convertible Debentures (“Debentures”) with original terms of three months to one year, an interest rate ranging from 10-20% per year and an original issue discount ranging from 5% to 10% which, at the option of the holder, may convert into common stock at initial conversion prices ranging from $0.01 to $0.099 per share.

 

The Debentures were issued with detachable five year cashless 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 ranging from $0.02 to $0.1287 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 exercise prices ranging from $0.0745 to $0.1287 per share. For debentures issued through March 31, 2013, at the option of the Debenture holder, the terms of the Debentures and Holders Warrants are subject to an exchange feature in the event that the Company issues securities with terms more favorable than those of the then outstanding Debentures and Holders Warrants. Debentures issued subsequent to March 31, 2013 do not contain such an exchange clause. During the three months ended March 31, 2017, Debentures with an accumulated principal balance of $150,000 and $13,767 of accrued interest were assigned to a third party note holder. The new notes contain variable conversion rates discussed below. The gross amount of Debentures with fixed conversion rates outstanding is $5,977,082 as of March 31, 2017.

 

During the three months ended March 31, 2017, the Company has issued and outstanding Convertible Debentures (“Variable Debentures”) with original terms of 9 months to one year, interest rates ranging from 0-10% per year and original issue discounts ranging from 0-10% which contain variable conversion rates ranging from discounts of 40-50% of the Company’s common stock based on the Company’s common stock trading prices ranging from 10-25 days previous to conversion. The Variable Debentures contain prepayment options which enable the Company to prepay the notes for periods of 0-180 days subsequent to issuance at premiums ranging from 0-50%. The gross amount of Variable Debentures outstanding is $480,040 as of March 31, 2017.

 

As of March 31, 2017 and December 31, 2016, the balances of the Debentures and Variable Debentures are as follows:

 

    March 31, 2017     December 31, 2016  
             
Balance at beginning of period   $ 6,415,305     $ 6,174,760  
Issuance of debentures for cash     60,000       320,000  
Issuance of debentures for services     10,000       15,000  
Issuance of debentures for forbearance     16,064       65,282  
Debentures repaid in cash     (669 )     -  
Debentures converted to common stock     (82,345 )     (291,754 )
Debentures exchanged for new debentures     38,767       132,017  
Convertible debt     6,457,122       6,415,305  
Less unamortized costs of financing     325,848       203,444  
Convertible debt, net of unamortized costs   $ 6,131,274     $ 6,211,861  
                 
Convertible debt in default   $ 5,998,875     $ 5,991,570  

 

Secured Convertible Note

 

During the three months ended March 31, 2017, the Company issued for cash of $250,000 Secured Convertible Debentures (the “Secured Debentures”) to two accredited investors. The terms of the Debentures are for three years, a conversion price of $0.01 per share and an annual interest rate of 8%. The secured interest is on all of the assets of the Company. In addition, the Company issued to the holder of $100,000 Secured Debentures, a five year common stock purchase warrant to purchase up to 5,000,000 shares of common stock with an exercise price of $0.02 per share. The value of this warrant, $292, was determined using the Black Sholes Method and was reflected as a discount to the Secured Debenture.

 

Derivative Liability

 

Since the Company issued Convertible Debentures which included Holders Warrants, Agent Warrants and a conversion option that includes a possible exchange feature in the event of a future financing on terms more favorable than those of the existing warrants and debentures, this results in the warrants and conversion feature of the debentures being recorded as a liability and measured at

 

fair value. In addition, outstanding Variable Debentures contain variable conversion rates based on unknown future prices of the Company’s common stock resulting in a conversion feature. The Company measures these warrants and conversion features using the Black Scholes Model. The period over which the Company will be required to evaluate the fair value of the warrants is approximately five years and the period over which the Company will be required to evaluate the fair value of the conversion features are six to twelve months or conversion.

 

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, managements’ assessment of the probability of a more favorably priced future financing or significant fluctuations in the volatility of the trading market for the Company’s common stock, the Company’s fair value estimates could be materially different in the future.

 

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 the Company’s control. Therefore, the resulting effect on net loss is subject to significant fluctuation and will continue to be so until the Company’s Debentures, which the convertible feature is associated with, are converted into common stock or paid in full with cash. 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.

 

In addition, since the number of shares issuable under the Variable Debentures are undeterminable, the Company may be required to issue shares in excess of the number of shares authorized by its shareholders. As a result, when the Company determines that is does not have sufficient shares to meet the obligations of derivative unexercised debentures, warrants and options, the derivatives must be valued using the Black Scholes Option Pricing method and a liability is recorded as though the obligations would be settled using some means other than stock. For the three months ended March 31, 2017, the Company determined that it was over committed to the number of shares issuable on the exercise of outstanding debentures, stock options and warrants for approximately 1,166,000,000 shares.

 

As of March 31, 2017 and December 31, 2016, the balances of the Derivative Liability are as follows:

 

                Commitment        
                In Excess of        
          Conversion     Authorized        
    Warrants     Feature     Stock     Total  
                         
Balance at January 1, 2016   $ 60,420     $ 495,473     $ 64,428     $ 620,321  
                                 
Liability on issuance of debt and warrants     44,394       697,256       -       741,650  
Change in fair value at year end     (22,378 )     718,458       -       696,080  
Elimination of liability on conversion     -       (1,232,151 )     -       (1,232,151 )
Over commitment of stock     -       -       (5,972 )     (5,972 )
Balance at December 31, 2016   $ 82,436     $ 679,036     $ 58,456     $ 819,928  
                                 
Liability on issuance of debt and warrants     2,842       627,510       -       630,352  
Change in fair value at year end     (55,329 )     (112,458 )     -       (167,787 )
Elimination of liability on conversion     -       (410,509 )     -       (410,509 )
Over commitment of stock     -       -       (38,902 )     (38,902 )
Balance at March 31, 2017   $ 29,949     $ 783,579     $ 19,554     $ 833,082  

 

Debentures with warrants attached issued subsequent to March 31, 2013 did not contain an exchange provision and were accounted for using the equity method of valuing the note and warrant.

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Shareholders’ Deficit
3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Shareholders' Deficit

4. Shareholders’ Deficit

 

Common Stock

 

During the three months ended March 31, 2017, holders of Convertible Debentures with a face value of $82,345 and accrued interest of $6,074 converted their debentures into 529,648,837 shares of common stock. In addition, associated with these debentures, the Company recorded a gain on extinguishment of debt of $15,651.

 

Warrants

 

During the three months ended March 31, 2017, in conjunction with the sale of Convertible Debentures, the Company issued a five-year common stock purchase warrant to acquire up to 5,000,000 shares to holders of the Debentures. In addition, the Company issued a five-year common stock purchase warrant to acquire up to 500,000 shares to an agent who assisted in this financing. These warrants have an exercise price of $0.02 per share. The value of the warrants was determined using the Black Sholes Model. The value of the warrant issued to the note holder, $2,925, was reflected as a discount to the note and the value of the warrant issued to the agent, $292, was reflected as a non-cash operating expense.

 

In March 2016, the Company issued a warrant exercisable into up to 1,000,000 shares of common stock in exchange for services provided by a consultant. The value of these warrants, $1,652, was determined using the Black Scholes Model and was included as non-cash expenses and additional paid-in capital during the three months ended March 31, 2016.

  

 The balance of all warrants outstanding as of March 31, 2017 is as follows:

 

            Weighted     Weighted  
            Average     Average  
            Exercise     Fair  
      Warrants     Price     Value  
Outstanding at January 1, 2017       132,278,221     $ 0.0765          
Granted       5,500,000     $ 0.0200     $ 0.0006  
Cancelled       (26,577,571 )   $ 0.0745          
Exercised       -     $ -          
Outstanding at March 31, 2017       111,200,650     $ 0.0742          
                           
Exercisable at March 31, 2017       111,200,650     $ 0.0742          

 

Stock Options

 

Options outstanding as of March 31, 2017 are as follows:

 

          Weighted     Weighted Average        
          Average     Remaining     Aggregate  
          Exercise Price     Contractual     Intrinsic  
    Options     Per Share     Term (years)     Value (1)  
Outstanding at January 1, 2017     34,168,800     $ 0.02       7.03          
Granted     -     $ -       -          
Cancelled     -     $ -       -          
Exercised     -     $ -       -          
Outstanding at March 31, 2017     34,168,800     $ 0.02       6.79     $ -  
                                 
Exercisable at March 31, 2017     26,725,761     $ 0.02       6.79     $ -  
                                 
Weighted average fair value of options granted during the period     -     $ -                  

 

(1) These amounts represent the excess, if any, between the exercise price and $0.0006, the closing market price of the Company’s common stock on March 31, 2017 as quoted on the Pink Sheets under the symbol “SCIE”.

 

At March 31, 2017, total unrecognized estimated employee compensation cost related to non-vested stock options granted prior to that date is $133,323, which we expect to be recognized over the next year.

 

Series AA Preferred Shares

 

On April 15, 2016, the Board of Directors of the Company authorized an amendment to the Company’s Articles of Incorporation, as amended (the “Articles of Incorporation”), in the form of a Certificate of Designation that authorized the issuance of up to three thousand (3,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.

 

Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one million (1,000,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company. The holders are restricted from voting the preferred shares for any proposal on the election of directors. The Company recorded a special dividend and valued the Series AA Super Voting Preferred Stock at $25,000 as of March 31, 2017 and December 31, 2016.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements

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. The Black Sholes Model was used to determine the fair value with similar assumptions to those described under “Stock-Based Compensation”. The Company records derivative and warrant liabilities on the condensed consolidated balance sheets at fair value with changes in fair value recorded in the condensed consolidated statements of operation.

 

The following table presents the balances of derivative liabilities which are measured at fair value on a recurring basis by level as of March 31, 2017:

 

    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 March 31, 2017                                
Derivative liability   $ -     $ -     $ 783,579     $ 783,579  
Warrant liability     -       -       29,949       29,949  
Commitment in excess of authorized stock     -       -       19,554       19,554  
Total   $ -     $ -     $ 833,082     $ 833,082  

 

The following table presents changes in the derivative liabilities with significant unobservable inputs (Level 3) for the three months ended March 31, 2017:

 

                Commitment        
                In Excess of        
    Warrant     Derivative     Authorized     Total  
    Liability     Liability     Stock     Liability  
Balance December 31, 2016   $ 82,436     $ 679,036     $ 58,456     $ 819,928  
                                 
Liability on issuance of debt and warrants     2,842       627,510       -       630,352  
                                 
Elimination of liability on conversion     -       (410,509 )     -       (410,509 )
                                 
Change in estimated fair value (1)     (55,329 )     (112,458 )     -       (167,787 )
                                 
Change in commitment in excess of authorized stock     -       -       (38,902 )     (38,902 )
                                 
Balance March 31, 2017   $ 29,949     $ 783,579     $ 19,554     $ 833,082  

 

(1) Included in the Condensed Statements of Operation on the line “Change in fair value of derivative and warrant liabilities.”

 

Management used the following inputs to value the Derivative and Warrant Liabilities for the three months ended March 31, 2017:

 

    Derivative Liability   Warrant Liability
Expected term   6 months to 2 years   5 years
Exercise price   $0.0001 - $0.074   $0.02 - $0.1287
Expected volatility   216% to 240%   242% to 249%
Expected dividends   None   None
Risk-free interest rate   0.79% to 1.06%   1.93%
Forfeitures   None   None

 

In computing the fair value of the derivative and warrant liability at March 31, 2017, management estimated a 60% probability of a down round financing event at a price of $0.025 and a 9% to 34% probability that existing note holders with exchange privileges would exchange their existing debentures and warrants for new debentures and warrants.

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Contingencies
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
Contingencies

6. Contingencies

 

Legal Proceedings

 

On July 7, 2016, Oakmore Opportunity Fund I LP, a variable rate noteholder of SprectraScience, filed for a preliminary judgement of $116, 500 in the Superior Court for the County of Los Angeles, case number BC622542, related to a Convertible Note. Oakmore asserts that SpectraScience breached the terms of the Convertible Note due to not having sufficient authorized shares to enable Oakmore to convert its Note with a balance of $22,500. The Company did not object to the preliminary judgement. On October 19, 2016, the Judge issued a final judgement of $521,100. The Company is retaining litigation counsel and intends to vigorously defend the amount of the judgement. The amount of ultimate liability with respect to the foregoing cannot be determined, however, the Company has established a $150,000 contingency to cover the costs of litigation and the judgement. Despite the inherent uncertainties of litigation, the Company at this time does not believe that Oakmore’s claim will have a material adverse impact on its financial condition, results of operations, or cash flows.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2017
Subsequent Events [Abstract]  
Subsequent Events

7. Subsequent Events

 

Secured Convertible Debentures

 

In May 2017, the Company issued a $60,000 Secured Convertible Debenture (the “Debenture”) to one accredited investor for cash consideration of $50,000. The Debenture matures in three years, carries a fixed conversion price of $0.01, and an annual interest rate of 8%. The secured interest is on all of the assets of the Company and is shared equally with a previous secured party. In addition, the Company issued a five year common stock purchase warrant exercisable into up to 3,000,000 shares of common stock at an exercise price of $0.02.

 

Variable Rate Convertible Debentures

 

In April 2017, a holder of Variable Rate Convertible Debentures with principal of $4,116 and accrued interest of $3,309 converted the remaining portion of one of their debentures into 27,000,000 shares of common stock. In addition, in May 2017, the Company entered into a variable rate note accumulating $75,000 that can be repaid for a premium ranging from 20% to 35% if paid within 180 days. If paid subsequent to 180 days, the notes are convertible into common stock at a discount to the market price.

 

Increase in Authorized Shares

 

On April 24, 2017, the Company’s shareholders approved an increase in authorized capital stock from 2 billion shares to 3 billion shares. The increase in authorized shares will become effective 20 days after the mailing of a Definitive 14C to shareholders.

 

Subsequent events have been evaluated through the date financial statements are filed with the Securities and Exchange Commission.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Revenue recognition

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 price 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

Consolidation

 

The accompanying consolidated financial statements include the accounts of SpectraScience, Inc. and its wholly-owned subsidiaries LUMA, International and Spectra UK. All significant intercompany balances and transactions have been eliminated in consolidation.

Risks and Uncertainties

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

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 including intangible assets, assumptions used to value stock options, assumptions used to value the common stock issued and assumptions related to the determination of the fair value of the derivative components associated with the Company’s Convertible Debentures. Actual results could differ from those estimates.

Inventory Valuation

Inventory Valuation

 

The Company states its inventory 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.

Valuation of Long-lived Assets

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.

Variable Conversion Rate Debentures

Variable Conversion Rate Debentures

 

Starting in 2015, the Company entered into convertible debentures with floating exercise prices discounted to market prices. As a result, a significant number of shares were either issued or may be issued at deeply discounted variable conversion prices. The downward pressure placed on the Company’s stock as a result of these conversions can be classified as “death spirals” since the investors have no incentive to maintain a stable stock price. The Company accounts for these debentures as derivative liabilities which means the debentures are revalued at the end of each period and gains and losses are recognized at the issuance of the debentures and on the conversion of the debentures.

Over Commitment of Shares

Over Commitment of Shares

 

Since the number of shares issuable under convertible debentures with floating exercise prices is undeterminable, the Company may be required to issue shares in excess of the number of shares authorized by its shareholders. As a result, when the Company determines that is does not have sufficient shares to meet the obligations of derivative unexercised debentures, warrants and options, the derivatives must be valued using the Black Scholes Option Pricing method and a liability is recorded as though the obligations would be settled using some means other than stock.

Stock-based Compensation

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 estimates the fair value of stock-based awards on the date of grant using the Black Scholes 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 reporting period.

 

As of March 31, 2017, 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 40,000,000 shares of common stock. At March 31, 2017, the Company had options outstanding exercisable into up to 34,168,800 shares of stock under the EIP of which up to 26,725,761 shares were exercisable. Awards under the Company’s EIP generally vest over four years.

 

The fair value of options granted are 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. There were no stock options granted during the three month periods ended March 31, 2017 and 2016.

Earnings (loss) Per Share

Earnings (Loss) Per Share

 

Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss 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 if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

 

For the three month periods ended March 31, 2017 and 2016, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive.

 

    March 31, 2017     March 31, 2016  
             
Preferred Stock     3,085,000       3,085,000  
Convertible debentures     1,604,110,127       378,651,041  
Options     34,168,800       34,168,800  
Warrants     111,200,650       132,875,170  
Total     1,752,564,577       548,780,011  

 

The following table sets forth the computation of basic and diluted loss per share for the three month periods ended March 31, 2017 and 2016:

 

    Three Months Ended  
    March 31,  
    2017     2016  
             
Numerator:                
Net loss for basic earnings per share   $ (1,003,776 )   $ (2,056,334 )
Net loss for diluted earnings per share   $ (1,003,776 )   $ (2,056,334 )
                 
Denominator:                
Weighted average basic shares outstanding     1,090,120,075       609,825,530  
Denominator for diluted earnings per share-Adjusted weighted average shares     1,090,120,075       609,825,530  
                 
Income (loss) per share                
Basic   $ (0.00 )   $ (0.00 )
Diluted   $ (0.00 )   $ (0.00 )

Inventory

Inventory

 

Inventory consisted of the following at March 31, 2017 and December 31, 2016:

 

    March 31, 2017     December 31, 2016  
             
Raw materials   $ 256,163     $ 256,163  
Finished goods     37,697       30,868  
      293,860       287,031  
Reserve for obsolescence     -       -  
      293,860       287,031  
Less long-term portion     196,437       196,437  
    $ 97,423     $ 90,594  

 

During the year ended December 31, 2016, the Company purchased the inventory of Oncoscope, Inc. from the Trustee of Ondoscope’s bankruptcy proceeding for a total of $40,000. This amount, net of amounts sold of $2,100, has been included in raw materials.

Recently Adopted and Issued Accounting Pronouncements

Recently Adopted and Issued Accounting Pronouncements

 

In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. These changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes became effective for the Company for the 2016 annual period. Management has evaluated the impact of the adoption of these changes and has determined there will be no material impact on the consolidated financial statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial statements in a given reporting period.

 

In April 2015, the FASB issued ASU No 2015-3, Simplifying the Presentation of Debt Issuance Costs. This update changes the presentation of debt issuance costs in the balance sheet. ASU 2015-03 requires debt issuance costs related to a recognized debt obligation to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset. Amortization of debt issuance costs will continue to be reported as interest expense. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”. This ASU clarified guidance in ASC 2015-03 stating that the SEC staff would not object to a company presenting debt issuance costs related to a line-of-credit arrangement on the balance sheet as a deferred asset, regardless of whether there were any outstanding borrowings at period-end. This update is effective for annual and interim periods beginning after December 15, 2015, which required us to adopt these provisions in the first quarter of 2016. This update was applied on a retrospective basis, wherein the balance sheet of each period presented was adjusted to reflect the effects of applying the new guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In November 2015, the FASB issued ASU No 2015-17, Income Taxes (Topic 740). The amendments in ASU 2015-17 change the requirements for the classification of deferred taxes on the balance sheet. Currently, GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company has early adopted this pronouncement for the fiscal reporting period ended December 31, 2016, and has reclassified the presentation of deferred income taxes in the prior period to conform with the current year classification in the consolidated balance sheets. As a result of the Company having recognized a valuation reserve for the entire deferred tax liability balance at March 31, 2017 and December 31, 2016, there is no impact of the presentation of deferred income taxes in our financial statements.

 

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is evaluating the impact of the adoption of these changes will have on the consolidated financial statements.

Reclassifications

Reclassifications

 

Certain reclassifications have been made to the 2016 financial statements in order for them to conform to the 2017 presentation. Such reclassifications have no impact on the Company’s financial position or results of operations.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2017
Accounting Policies [Abstract]  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

For the three month periods ended March 31, 2017 and 2016, the following common equivalent shares were excluded from the computation of loss per share since their effects are anti-dilutive.

 

    March 31, 2017     March 31, 2016  
             
Preferred Stock     3,085,000       3,085,000  
Convertible debentures     1,604,110,127       378,651,041  
Options     34,168,800       34,168,800  
Warrants     111,200,650       132,875,170  
Total     1,752,564,577       548,780,011  

Schedule of Earnings Per Share Basic and Diluted

The following table sets forth the computation of basic and diluted loss per share for the three month periods ended March 31, 2017 and 2016:

 

    Three Months Ended  
    March 31,  
    2017     2016  
             
Numerator:                
Net loss for basic earnings per share   $ (1,003,776 )   $ (2,056,334 )
Net loss for diluted earnings per share   $ (1,003,776 )   $ (2,056,334 )
                 
Denominator:                
Weighted average basic shares outstanding     1,090,120,075       609,825,530  
Denominator for diluted earnings per share-Adjusted weighted average shares     1,090,120,075       609,825,530  
                 
Income (loss) per share                
Basic   $ (0.00 )   $ (0.00 )
Diluted   $ (0.00 )   $ (0.00 )

Schedule of Inventory

Inventory consisted of the following at March 31, 2017 and December 31, 2016:

 

    March 31, 2017     December 31, 2016  
             
Raw materials   $ 256,163     $ 256,163  
Finished goods     37,697       30,868  
      293,860       287,031  
Reserve for obsolescence     -       -  
      293,860       287,031  
Less long-term portion     196,437       196,437  
    $ 97,423     $ 90,594  

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Liabilities (Tables)
3 Months Ended
Mar. 31, 2017
Debt Disclosure [Abstract]  
Schedule of Balance of Debentures

As of March 31, 2017 and December 31, 2016, the balances of the Debentures and Variable Debentures are as follows:

 

    March 31, 2017     December 31, 2016  
             
Balance at beginning of period   $ 6,415,305     $ 6,174,760  
Issuance of debentures for cash     60,000       320,000  
Issuance of debentures for services     10,000       15,000  
Issuance of debentures for forbearance     16,064       65,282  
Debentures repaid in cash     (669 )     -  
Debentures converted to common stock     (82,345 )     (291,754 )
Debentures exchanged for new debentures     38,767       132,017  
Convertible debt     6,457,122       6,415,305  
Less unamortized costs of financing     325,848       203,444  
Convertible debt, net of unamortized costs   $ 6,131,274     $ 6,211,861  
                 
Convertible debt in default   $ 5,998,875     $ 5,991,570  

Schedule of Balances of Derivative Liability

As of March 31, 2017 and December 31, 2016, the balances of the Derivative Liability are as follows:

 

                Commitment        
                In Excess of        
          Conversion     Authorized        
    Warrants     Feature     Stock     Total  
                         
Balance at January 1, 2016   $ 60,420     $ 495,473     $ 64,428     $ 620,321  
                                 
Liability on issuance of debt and warrants     44,394       697,256       -       741,650  
Change in fair value at year end     (22,378 )     718,458       -       696,080  
Elimination of liability on conversion     -       (1,232,151 )     -       (1,232,151 )
Over commitment of stock     -       -       (5,972 )     (5,972 )
Balance at December 31, 2016   $ 82,436     $ 679,036     $ 58,456     $ 819,928  
                                 
Liability on issuance of debt and warrants     2,842       627,510       -       630,352  
Change in fair value at year end     (55,329 )     (112,458 )     -       (167,787 )
Elimination of liability on conversion     -       (410,509 )     -       (410,509 )
Over commitment of stock     -       -       (38,902 )     (38,902 )
Balance at March 31, 2017   $ 29,949     $ 783,579     $ 19,554     $ 833,082  

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Shareholders’ Deficit (Tables)
3 Months Ended
Mar. 31, 2016
Equity [Abstract]  
Schedule of Warrants Outstanding

 The balance of all warrants outstanding as of March 31, 2017 is as follows:

 

            Weighted     Weighted  
            Average     Average  
            Exercise     Fair  
      Warrants     Price     Value  
Outstanding at January 1, 2017       132,278,221     $ 0.0765          
Granted       5,500,000     $ 0.0200     $ 0.0006  
Cancelled       (26,577,571 )   $ 0.0745          
Exercised       -     $ -          
Outstanding at March 31, 2017       111,200,650     $ 0.0742          
                           
Exercisable at March 31, 2017       111,200,650     $ 0.0742          

Schedule of Stock Options Outstanding

Options outstanding as of March 31, 2017 are as follows:

 

          Weighted     Weighted Average        
          Average     Remaining     Aggregate  
          Exercise Price     Contractual     Intrinsic  
    Options     Per Share     Term (years)     Value (1)  
Outstanding at January 1, 2017     34,168,800     $ 0.02       7.03          
Granted     -     $ -       -          
Cancelled     -     $ -       -          
Exercised     -     $ -       -          
Outstanding at March 31, 2017     34,168,800     $ 0.02       6.79     $ -  
                                 
Exercisable at March 31, 2017     26,725,761     $ 0.02       6.79     $ -  
                                 
Weighted average fair value of options granted during the period     -     $ -                  

 

(1) These amounts represent the excess, if any, between the exercise price and $0.0006, the closing market price of the Company’s common stock on March 31, 2017 as quoted on the Pink Sheets under the symbol “SCIE”.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2016
Fair Value Disclosures [Abstract]  
Schedule of Balances of Liabilities Measured at Fair Value on Recurring Basis

The following table presents the balances of derivative liabilities which are measured at fair value on a recurring basis by level as of March 31, 2017:

 

    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 March 31, 2017                                
Derivative liability   $ -     $ -     $ 783,579     $ 783,579  
Warrant liability     -       -       29,949       29,949  
Commitment in excess of authorized stock     -       -       19,554       19,554  
Total   $ -     $ -     $ 833,082     $ 833,082  

Schedule Changes in Liabilities with Significant Unobservable Inputs

The following table presents changes in the derivative liabilities with significant unobservable inputs (Level 3) for the three months ended March 31, 2017:

 

                Commitment        
                In Excess of        
    Warrant     Derivative     Authorized     Total  
    Liability     Liability     Stock     Liability  
Balance December 31, 2016   $ 82,436     $ 679,036     $ 58,456     $ 819,928  
                                 
Liability on issuance of debt and warrants     2,842       627,510       -       630,352  
                                 
Elimination of liability on conversion     -       (410,509 )     -       (410,509 )
                                 
Change in estimated fair value (1)     (55,329 )     (112,458 )     -       (167,787 )
                                 
Change in commitment in excess of authorized stock     -       -       (38,902 )     (38,902 )
                                 
Balance March 31, 2017   $ 29,949     $ 783,579     $ 19,554     $ 833,082  

 

(1) Included in the Condensed Statements of Operation on the line “Change in fair value of derivative and warrant liabilities.”

Schedule of Derivative and Warrant Liabilities

Management used the following inputs to value the Derivative and Warrant Liabilities for the three months ended March 31, 2017:

 

    Derivative Liability   Warrant Liability
Expected term   6 months to 2 years   5 years
Exercise price   $0.0001 - $0.074   $0.02 - $0.1287
Expected volatility   216% to 240%   242% to 249%
Expected dividends   None   None
Risk-free interest rate   0.79% to 1.06%   1.93%
Forfeitures   None   None

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Nature of Business and Basis of Presentation (Details Narrative)
3 Months Ended
Mar. 31, 2017
USD ($)
IndividualInvestors
IntellectualProperty
Dec. 31, 2016
USD ($)
Mar. 31, 2016
USD ($)
Dec. 31, 2015
USD ($)
Number of U.S. patents | IndividualInvestors 34      
Number of additional patent issued | IntellectualProperty 28      
Working capital deficit $ 10,647,039 $ 10,439,707    
Cash 100,001 3,550 $ 1,785 $ 127,493
Convertible debentures face amount 5,998,875 $ 5,991,570    
Convertible Debentures [Member]        
Convertible debentures face amount $ 5,998,875      
Number of individual default | IndividualInvestors 80      
Engagement Agreement [Member]        
Maximum capital raising $ 289,000      
Payments of transaction costs $ 20,000      
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Significant Accounting Policies [Line Items]    
Options outstanding exercisable 34,168,800  
Inventory raw materials $ 256,163 $ 256,163
Inventory raw material sold   2,100
Oncoscope, Inc [Member]    
Significant Accounting Policies [Line Items]    
Inventory raw materials   $ 40,000
Equity Incentive Plan 2011 [Member]    
Significant Accounting Policies [Line Items]    
Number of shares reserved 40,000,000  
Options outstanding exercisable 26,725,761  
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Antidilutive securities excluded from computation of earnings per share, amount 1,752,564,577 548,780,011
Preferred Stock [Member]    
Antidilutive securities excluded from computation of earnings per share, amount 3,085,000 3,085,000
Convertible Debentures [Member]    
Antidilutive securities excluded from computation of earnings per share, amount 1,604,110,127 378,651,041
Options [Member]    
Antidilutive securities excluded from computation of earnings per share, amount 34,168,800 34,168,800
Warrant [Member]    
Antidilutive securities excluded from computation of earnings per share, amount 111,200,650 132,875,170
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Earnings Per Share Basic and Diluted (Details) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Accounting Policies [Abstract]    
Net loss for basic earnings per share $ (1,003,776) $ (2,056,334)
Net loss for diluted earnings per share $ (1,003,776) $ (2,056,334)
Weighted average basic shares outstanding 1,090,120,075 609,825,530
Denominator for diluted earnings per share-adjusted weighted average shares 1,090,120,075 609,825,530
Basic $ (0.00) $ 0.00
Diluted $ (0.00) $ 0.00
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Inventory (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Accounting Policies [Abstract]    
Raw materials $ 256,163 $ 256,163
Finished goods 37,697 30,868
Inventory, gross 293,860 287,031
Reserve for obsolescence
Inventories current and non current 293,860 287,031
Less long-term portion 196,437 196,437
Inventories $ 97,423 $ 90,594
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Liabilities (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Oct. 02, 2015
Feb. 18, 2015
Nov. 30, 2014
Mar. 31, 2017
Mar. 31, 2016
Debt Instrument [Line Items]          
Accrued interest rate       10.00%  
Note payable       $ 112,982  
Notes payable- related parties       35,000  
Unsecured Note Payable [Member]          
Debt Instrument [Line Items]          
Debt instruments face amount     $ 100,000    
Warrant term     5 years    
Exercise price per share     $ 0.09    
Repayment of debt   $ 115,000      
Number of stock issued during period for debt offering costs     50,000    
Remaining balance of notes payable $ 137,982        
Increased principal balance note payable     $ 137,982    
Accrued interest rate 20.00%        
Third Party [Member]          
Debt Instrument [Line Items]          
Note payable       25,000  
Debentures outstanding       150,000  
Accrued interest       13,767  
10% promissory notes [Member] | Two Affiliates [Member]          
Debt Instrument [Line Items]          
Notes payable- related parties         $ 35,000
ConvertibleDebenturesMember          
Debt Instrument [Line Items]          
Debt instruments face amount       $ 82,345  
Warrant term       5 years  
Debentures outstanding       $ 5,977,082  
ConvertibleDebenturesMember | Minimum [Member]          
Debt Instrument [Line Items]          
Exercise price per share       $ 0.0745  
Accrued interest rate       10.00%  
Percent original issue discount       5.00%  
Conversion price per share       $ 0.01  
Convertible debentures exercise price       0.0745  
ConvertibleDebenturesMember | Maximum [Member]          
Debt Instrument [Line Items]          
Exercise price per share       $ 0.1287  
Accrued interest rate       20.00%  
Percent original issue discount       10.00%  
Conversion price per share       $ 0.099  
Convertible debentures exercise price       $ 0.1287  
Variable Debentures [Member]          
Debt Instrument [Line Items]          
Debentures outstanding       $ 480,040  
Variable Debentures [Member] | Minimum [Member]          
Debt Instrument [Line Items]          
Accrued interest rate       0.00%  
Percent original issue discount       0.00%  
Variable issue discount rate       40.00%  
Debt payment term       9 months  
Debt subsequent issuance premiums       0.00%  
Variable Debentures [Member] | Maximum [Member]          
Debt Instrument [Line Items]          
Accrued interest rate       10.00%  
Percent original issue discount       10.00%  
Variable issue discount rate       50.00%  
Debt payment term       1 year  
Debt subsequent issuance premiums       10.00%  
Secured Convertible Debenture [Member]          
Debt Instrument [Line Items]          
Accrued interest rate       8.00%  
Conversion price per share       $ 0.01  
Debt payment term       3 years  
Issued debenture for cash       $ 250,000  
Secured Convertible Debenture [Member] | Holder [Member]          
Debt Instrument [Line Items]          
Warrant term       5 years  
Issued debenture for cash       $ 100,000  
Warrant to purchase of common stock       5,000,000  
Warrant exercise price       $ 0.02  
Fair value of warrants       $ 292  
Derivative Financial Instruments, Liabilities [Member]          
Debt Instrument [Line Items]          
Number of shares issued upon conversion       1,166,000,000  
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Liabilities - Schedule of Balance of Debentures (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Debt Disclosure [Abstract]    
Balance at beginning of period $ 6,415,305 $ 6,174,760
Issuance of debentures for cash 60,000 320,000
Issuance of debentures for services 10,000 15,000
Issuance of debentures for forbearance 16,064 65,282
Debentures repaid in cash (669)
Debentures converted to common stock (82,345) (291,754)
Debenture exchanged for new debentures 38,767 132,017
Convertible debt 6,457,122 6,415,305
Less unamortized costs of financing 325,848 203,444
Convertible debt, net of unamortized costs 6,131,274 6,211,861
Convertible debt in default $ 5,998,875 $ 5,991,570
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Liabilities - Schedule of Balances of Derivative Liability (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Debt Instrument [Line Items]    
Balance at beginning $ 819,928 $ 620,321
Liability on issuance of debt and warrants 630,352 741,650
Change in fair value at year end (167,787) 696,080
Elimination of liability on conversion (410,509) (1,232,151)
Over commitment of stock (38,902) (5,972)
Balance at ending 833,082 819,928
Warrant [Member]    
Debt Instrument [Line Items]    
Balance at beginning 82,436 60,420
Liability on issuance of debt and warrants 2,842 44,394
Change in fair value at year end (55,329) (22,378)
Elimination of liability on conversion
Over commitment of stock
Balance at ending 29,949 82,436
Conversion Feature [Member]    
Debt Instrument [Line Items]    
Balance at beginning 679,036 495,473
Liability on issuance of debt and warrants 627,510 697,256
Change in fair value at year end (112,458) 718,458
Elimination of liability on conversion (410,509) (1,232,151)
Over commitment of stock
Balance at ending 783,579 679,036
Commitment In Excess of Authorized Stock [Member]    
Debt Instrument [Line Items]    
Balance at beginning 58,456 64,428
Liability on issuance of debt and warrants
Change in fair value at year end
Elimination of liability on conversion
Over commitment of stock (38,902) (5,972)
Balance at ending $ 19,554 $ 58,456
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Shareholders' Deficit (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Gain on extinguishment of debt $ 10,551 $ 1,166  
Total unrecognized estimated employee compensation cost $ 133,323    
Series AA Super Voting Preferred Stock [Member]      
Preferred stock, authorized 3,000   0
Preferred stock, par value $ 0.001   $ .001
Preferred stock voting rights Each holder of outstanding shares of Series AA Super Voting Preferred Stock shall be entitled to one million (1,000,000) votes for each share of Series AA Super Voting Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company    
Dividend preferred stock $ 25,000   $ 25,000
Convertible Debentures [Member]      
Debt instruments face amount 82,345    
Accrued interest $ 6,074    
Warrant term 5 years    
Convertible Debentures [Member] | Common Stock [Member]      
Number of common stock converted into shares of common stock 529,648,837    
Gain on extinguishment of debt $ 15,651    
Warrants [Member]      
Warrant term 5 years    
Number of warrant issued 500,000    
Non cash operating expenses $ 292    
Warrants [Member] | Holder [Member]      
Fair value of warrants 2,925    
Warrants [Member] | Consultant [Member]      
Number of warrant issued   1,000,000  
Fair value of warrants $ 1,652    
Warrants [Member] | Convertible Debentures [Member]      
Warrant term 5 years    
Number of warrant issued 5,000,000    
Warrants exercise price $ 0.02    
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Shareholders' Deficit - Schedule of Warrants Outstanding (Details) - Warrant [Member]
3 Months Ended
Mar. 31, 2017
$ / shares
shares
Shares, Outstanding at beginning | shares 132,278,221
Shares, Granted | shares 5,500,000
Shares, Cancelled | shares (26,577,571)
Shares, Exercised | shares
Shares, Outstanding at ending | shares 111,200,650
Shares, Exercisable at ending | shares 111,200,650
Weighted Average Exercise Price, Outstanding at beginning $ 0.0765
Weighted Average Exercise Price, Granted 0.0200
Weighted Average Exercise Price, Cancelled 0.0745
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Outstanding at ending 0.0742
Weighted Average Exercise Price, Exercisable at ending 0.0742
Weighted Average Fair Value, Granted $ 0.0006
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Shareholders' Deficit - Schedule of Stock Options Outstanding (Details)
3 Months Ended
Mar. 31, 2017
USD ($)
$ / shares
shares
Shares, Exercisable at ending 34,168,800
Equity Incentive Plan 2011 [Member]  
Shares, Outstanding at beginning 34,168,800
Shares, Granted
Shares, Cancelled
Shares, Exercised
Shares, Outstanding at ending 34,168,800
Shares, Exercisable at ending 26,725,761
Weighted Average Exercise Price, Outstanding at beginning | $ / shares $ 0.02
Weighted Average Exercise Price, Granted | $ / shares
Weighted Average Exercise Price, Cancelled | $ / shares
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price, Outstanding at ending | $ / shares 0.02
Weighted Average Exercise Price, Exercisable at ending | $ / shares $ 0.02
Weighted Average Remaining Contractual Terms in Years, Outstanding at beginning 7 years 11 days
Weighted Average Remaining Contractual Terms in Years, Outstanding at ending 6 years 9 months 15 days
Weighted Average Remaining Contractual Terms in Years, Exercisable at ending 6 years 9 months 15 days
Aggregate Intrinsic Value Outstanding at ending | $ [1]
Aggregate Intrinsic Value Exercisable at ending | $ [1]
[1] These amounts represent the excess, if any, between the exercise price and $0.0006, the closing market price of the Company's common stock on March 31, 2017 as quoted on the Pink Sheets under the symbol "SCIE".
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements (Details Narartive)
3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Description of valuation of derivative and warrant liability In computing the fair value of the derivative and warrant liability at March 31, 2017, management estimated a 60% probability of a down round financing event at a price of $0.025 and a 9% to 34% probability that existing note holders with exchange privileges would exchange their existing debentures and warrants for new debentures and warrants.
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements - Schedule of Balances of Liabilities Measured at Fair Value on Recurring Basis (Details) - Fair Value, Measurements, Recurring [Member]
Mar. 31, 2017
USD ($)
Total Liability $ 833,082
Fair Value, Inputs, Level 1 [Member]  
Total Liability
Fair Value, Inputs, Level 2 [Member]  
Total Liability
Fair Value, Inputs, Level 3 [Member]  
Total Liability 833,082
Derivative Financial Instruments, Liabilities [Member]  
Total Liability 783,579
Derivative Financial Instruments, Liabilities [Member] | Fair Value, Inputs, Level 1 [Member]  
Total Liability
Derivative Financial Instruments, Liabilities [Member] | Fair Value, Inputs, Level 2 [Member]  
Total Liability
Derivative Financial Instruments, Liabilities [Member] | Fair Value, Inputs, Level 3 [Member]  
Total Liability 783,579
Warrant liability [Member]  
Total Liability 29,949
Warrant liability [Member] | Fair Value, Inputs, Level 1 [Member]  
Total Liability
Warrant liability [Member] | Fair Value, Inputs, Level 2 [Member]  
Total Liability
Warrant liability [Member] | Fair Value, Inputs, Level 3 [Member]  
Total Liability 29,949
Commitment In Excess of Authorized Stock [Member]  
Total Liability 19,554
Commitment In Excess of Authorized Stock [Member] | Fair Value, Inputs, Level 1 [Member]  
Total Liability
Commitment In Excess of Authorized Stock [Member] | Fair Value, Inputs, Level 2 [Member]  
Total Liability
Commitment In Excess of Authorized Stock [Member] | Fair Value, Inputs, Level 3 [Member]  
Total Liability $ 19,554
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements - Schedule Changes in Liabilities with Significant Unobservable Inputs (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Balance at beginning $ 819,928 $ 620,321
Change in estimated fair value 167,787 (696,080)
Balance at ending 833,082 819,928
Fair Value, Inputs, Level 3 [Member]    
Balance at beginning 819,928  
Liability on issuance of debt and warrants 630,352  
Elimination of liability on conversion (410,509)  
Change in estimated fair value [1] (167,787)  
Change in commitment in excess of authorized stock (38,902)  
Balance at ending 833,082 819,928
Warrant liability [Member] | Fair Value, Inputs, Level 3 [Member]    
Balance at beginning 82,436  
Liability on issuance of debt and warrants 2,842  
Elimination of liability on conversion  
Change in estimated fair value [1] (55,329)  
Change in commitment in excess of authorized stock  
Balance at ending 29,949 82,436
Derivative Financial Instruments, Liabilities [Member] | Fair Value, Inputs, Level 3 [Member]    
Balance at beginning 679,036  
Liability on issuance of debt and warrants 627,510  
Elimination of liability on conversion (410,509)  
Change in estimated fair value [1] (112,458)  
Change in commitment in excess of authorized stock  
Balance at ending 783,579 679,036
Commitment In Excess of Authorized Stock [Member]    
Balance at beginning 58,456 64,428
Change in estimated fair value
Balance at ending 19,554 58,456
Commitment In Excess of Authorized Stock [Member] | Fair Value, Inputs, Level 3 [Member]    
Balance at beginning 58,456  
Liability on issuance of debt and warrants  
Elimination of liability on conversion  
Change in estimated fair value [1]  
Change in commitment in excess of authorized stock (38,902)  
Balance at ending $ 19,554 $ 58,456
[1] Included in the Condensed Statements of Operation on the line "Change in fair value of derivative and warrant liabilities."
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value Measurements - Schedule of Derivative and Warrant Liabilities (Details)
3 Months Ended
Mar. 31, 2017
$ / shares
Derivative Financial Instruments, Liabilities [Member]  
Expected dividends 0.00%
Forfeitures 0.00%
Derivative Financial Instruments, Liabilities [Member] | Minimum [Member]  
Expected term 6 months
Exercise price $ 0.0001
Expected volatility 216.00%
Risk-free interest rate 0.79%
Derivative Financial Instruments, Liabilities [Member] | Maximum [Member]  
Expected term 2 years
Exercise price $ 0.074
Expected volatility 240.00%
Risk-free interest rate 1.06%
Warrant liability [Member]  
Expected term 5 years
Expected dividends 0.00%
Risk-free interest rate 1.93%
Forfeitures 0.00%
Warrant liability [Member] | Minimum [Member]  
Exercise price $ 0.02
Expected volatility 242.00%
Warrant liability [Member] | Maximum [Member]  
Exercise price $ 0.1287
Expected volatility 249.00%
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
Contingencies (Details Narrative) - Oakmore Opportunity Fund I LP [Member] - USD ($)
Oct. 19, 2016
Jul. 07, 2016
Preliminary judgement amount   $ 116,500
Convertible note payable   22,500
Judgement amount $ 521,100  
Litigation cost   $ 150,000
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
May 31, 2017
Apr. 30, 2017
Mar. 31, 2017
Apr. 24, 2017
Dec. 31, 2016
Increase in authorized capital stock     1,996,000,000   1,996,000,000
Minimum [Member] | Subsequent Event [Member]          
Increase in authorized capital stock       2,000,000,000  
Maximum [Member] | Subsequent Event [Member]          
Increase in authorized capital stock       3,000,000,000  
Secured Convertible Debenture [Member]          
Debt maturity term     3 years    
Debt conversion price per share     $ 0.01    
Secured Convertible Debenture [Member] | Subsequent Event [Member]          
Debt instruments face amount $ 60,000        
Cash consideration $ 50,000        
Debt maturity term 3 years        
Debt conversion price per share $ 0.01        
Debt annual interest rate 8.00%        
Warrant term 5 years        
Number of warrant to purchase of common stock 3,000,000        
Warrant exercise price $ 0.02        
Variable Rate Convertible Debentures [Member] | Subsequent Event [Member]          
Debt instruments face amount   $ 4,116      
Accrued interest   $ 3,309      
Number of common shares issued   27,000,000      
Repayment of debt $ 75,000        
Variable Rate Convertible Debentures [Member] | Minimum [Member] | Subsequent Event [Member]          
Debt subsequent issuance premiums 20.00%        
Variable Rate Convertible Debentures [Member] | Maximum [Member] | Subsequent Event [Member]          
Debt subsequent issuance premiums 35.00%        
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