**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        D.C. 20549**

**FORM        10-KSB**

**SPECTRASCIENCE,        INC.**

| MINNESOTA                                 | 41-1448837                                                             |
|-------------------------------------------|------------------------------------------------------------------------|
| (State                  of incorporation) | (I.R.S.                  Employer Identification                  No.) |

----

**ISSUERS        INVOLVED IN BANKRUPTCY**

**PROCEEDINGS        DURING THE PAST FIVE YEARS**

----

**SPECTRASCIENCE,        INC.**

**FORM        10-KSB**

**For        the Fiscal Years Ended December 31, 2004, 2003 and 2002**

|                                                                                                                                                          | Page   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                          |   |
| BACKGROUND                                                                                                                                                    | 4      |
| PART                    I                                                                                                                                     | 5      |
| Item                    1. Description of Business                                                                                                            | 5      |
| Item                    2. Description of Property                                                                                                            | 20     |
| Item                    3. Legal Proceedings                                                                                                                  | 21     |
| Item                    4. Submission of Matters to a Vote of Security Holders                                                                                | 22     |
| PART                    II                                                                                                                                    | 22     |
| Item                    5. Market for Common Equity and Related Shareholder                    Matters                                                        | 22     |
| Item                    6. Management’s Discussion and Analysis or Plan of                    Operations                                                | 25     |
| Item                    7. Financial Statements and Supplemental Data                                                                                         | 50     |
| Item                    8. Changes in and Disagreements with Accountants on Accounting                    and                    Financial Disclosure         | 79     |
| Item                    8A. Controls and Procedures                                                                                                           | 79     |
| Item                    8B. Other Information                                                                                                                 | 80     |
| PART                    III                                                                                                                                   | 80     |
| Item                    9. Directors, Executive Officers, Promoters and Control Persons;                    Compliance with Section 16(a) of the Exchange Act | 80     |
| Item                    10. Executive Compensation                                                                                                            | 81     |
| Item                    11. Security Ownership of Certain Beneficial Owners and                    Management                                                 | 83     |
| Item                    12. Certain Relationships and Related Transactions                                                                                    | 85     |
| Item                    13. Exhibits                                                                                                                          | 86     |
| Item                    14. Principal Accountant Fees and Services                                                                                            | 86     |
| SIGNATURES                                                                                                                                                    | 87     |
|                                                                                                                                                          |   |

----

----

| §   | the                  fiscal years ended December 31, 2004, 2003 and 2002, including                  financial                  statements and notes thereto for each                  year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | fiscal                  quarters during the fiscal years ended December 31, 2004, 2003                  and 2002                  (except for the first two quarters of 2002, for which reports were                  timely                  filed). |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**PART        I**

----

| §   | settled                  and canceled notes, warrants and monetary claims on August 23,                  2004 of                  $952,570 ($331,270 from the former CEO, $535,000 from note and                  warrant                  holders and $86,300 in accrued interest) by the issuance of 6,250,020                  shares of common stock. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  11,076,447 shares of common stock to stockholders who participated                  in an                  offering of three new shares of common stock in exchange for cancellation                  of one outstanding share and $0.24 cash generating cash proceeds                  of                  $886,116. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  12,384,298 shares to Spectra Acquisition LLC (“SA LLC”), the sponsor of                  the Plan, in satisfaction of a $50,000 investment and as an incentive                  to                  carrying out the Plan. On the Effective Date, the Company established                  a                  new Board of Directors consisting of Jim Hitchin, Mark D. McWilliams,                  Rand                  Mulford and Chester Sievert. Mr. Hitchin was elected President,                  Chief                  Executive Officer, Secretary and Chief Financial Officer. Under                  the Plan                  of Reorganization, the Board of Directors shall remain in place                  for three                  years after the Effective Date at which time the bylaws then in                  effect                  shall determine elections. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to vendors of $66,222 through the payment of cash in the                  amount of                  $5,885. The remaining amount of $60,337 was written                  off. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to employees in the amount of $34,762 through the payment                  of cash                  of $6,273. The remaining amount of $28,489 was written                  off. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | wrote                  off liabilities in the amount of $108,699 for accrued liabilities                  and                  trade notes payable that was not to be paid as part of the                  Plan. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | 90%                  of patients live five years or longer, if the cancer is detected                  and                  treated at an early stage; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | only                  67% of patients live five years or longer, if the cancer spreads                  outside                  the polyp and colon to nearby organs or lymph nodes;                  and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the                  five-year survival rate for those patients in whom the cancer has                  spread                  further to the liver or other organs drops dramatically to                  10%. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | Significantly                  improve the physician's diagnostic accuracy to determine whether                  small                  polyps in the colon are pre-cancerous or                  cancerous; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Improve                  patient survival rates by earlier detection and treatment of cancers,                  and                  more importantly pre-cancers, by more accurately identifying cancers                  or                  pre-cancers the physician may                  misdiagnose; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Improve                  the patient's quality of life by providing an immediate analysis                  of the                  tissue thereby eliminating the anxiety of waiting several days                  to hear the                  pathology results; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Enable                  the physician to diagnose and treat the patient during the same                  endoscopy                  procedure with the same biopsy instrument, thereby potentially                  reducing                  the need for scheduling a second expensive endoscopy for treatment                  purposes; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Be                  cost effective by significantly reducing the number of physical                  biopsies                  performed and by reducing the need for an unnecessary second endoscopy;                  and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Be                  cost effective by reducing the number of misdiagnosed patients,                  thereby                  potentially eliminating the need for more costly advanced treatments                  such                  as surgery, chemotherapy and/or                  radiation. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1.   | Patients                  with chronic GERD receive a screening endoscopy of the esophagus                  with                  multiple biopsies to check for Barrett's                  esophagus; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Patients                  with Barrett's esophagus receive an endoscopy with multiple biopsies                  every                  two years to check for dysplasia; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Patients                  with Barrett's esophagus that has progressed to include low grade                  dysplasia receive an endoscopy with multiple biopsies every 6 months                  to                  check for high grade dysplasia; and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Patients                  with Barrett's esophagus that has progressed to include high grade                  dysplasia receive an endoscopy with multiple biopsies every 3 months                  to                  check for cancer and/or may be referred for esophageal surgical                  resection,                  photodynamic therapy or electrical                  ablation. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | a                  console which houses a laser, electronic components that collect                  emitted                  fluorescent signals, and a computer that operates the WavSTAT(TM)                  System, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | WavSTAT(TM)                  Optical Biopsy Forceps which incorporate an optical fiber that                  transmits                  and collects light energy to and from the tissue being evaluated;                  the                  WavSTAT(TM) Optical Biopsy Forceps can also be used to treat the                  patient                  by removing diseased tissue after diagnosis has been made,                  and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | proprietary                  software that manages system operations and a statistical tissue                  recognition algorithm that facilitates data analysis and provides                  an                  interpretation of the tissue. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*United        States*

| §   | fines,                  injunctions or civil penalties |
|--------------------|--------------------------------------------------------|

| §   | recall                  or seizure of our products |
|--------------------|----------------------------------------------------|

| §   | criminal                  prosecution |
|--------------------|---------------------------------------|

| §   | a                  recommendation that we not be allowed to contract with the                  government |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| §   | total                  or partial suspension of production |
|--------------------|------------------------------------------------------------|

| §   | inability                  to obtain pre-market clearance/approval for our                  devices |
|--------------------|-----------------------------------------------------------------------------------------------------|

| §   | withdrawal                  of marketing approvals |
|--------------------|----------------------------------------------------|

----

----

*European        Union and Other Countries*

----

----

----

----

----

| §   | Xillix                  Technologies (Richmond, British Columbia, Canada-OTC:XLLTF.PK)                  has a FDA                  approved product that uses light-based (not laser) spectroscopy                  for                  detection of cancer in the lungs, which is different from the Company’s                  technologies. The LIFE-Lung system began commercialization in 1998                  at a                  price significantly higher than the Company’s system. Although they are                  focused primarily on the lung application, Xillix has publicly                  announced                  its intentions to expand into the gastrointestinal                  tract. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | MediSpectra,                  Inc. (Lexington, MA) has been focused on developing a system that                  improves                  on the current medical standards for cervical cancer detection.                  The system                  consists of an in-vivo, non-contact device that simultaneously                  uses UV                  fluorescence and white light to scan the cervix in a single measurement.                  It then uses the measurement to localize sites for biopsy, the                  goal being                  to detect precursors to cervical cancer. In November 1999, MediSpectra                  announced that preliminary data they collected using their                  second-generation research device, correctly identified pre-cancerous                  cervical lesions with an accuracy superior to the current diagnostic                  standard of care. They have filed with the FDA for approval for                  this                  application and expect to receive such approval in                  2005. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Mediscience                  Technology (Cherry Hill, New Jersey-OTC:MDSC.OB) has conducted                  feasibility                  clinical studies for oral leukopakia, a pre-cancerous condition                  of the                  mouth, with a prototype product called CD SCAN, which uses a light-based                  spectroscopy system. They also plan to conduct clinical studies                  in the                  areas of cervical cancer with products using spectroscopic                  technology. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | greater                  capital resources, |
|--------------------|---------------------------------------------|

| §   | greater                  manufacturing resources, |
|--------------------|---------------------------------------------------|

| §   | greater                  resources and expertise in testing products in clinical                  trials, |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| §   | greater                  resources and expertise in the areas of research and                  development, |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| §   | greater                  expertise in obtaining regulatory approvals,                  and |
|--------------------|--------------------------------------------------------------------------------------------|

| §   | greater                  resources for marketing and sales                  activities. |
|--------------------|-----------------------------------------------------------------------------------------|

----

----

----

| §   | settled                  and canceled notes, warrants and monetary claims on August 23,                  2004 of                  $952,570 ($331,270 from the former CEO, $535,000 from note and                  warrant                  holders and $86,300 in accrued interest) by the issuance of 6,250,020                  shares of common stock. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  11,076,447 shares of common stock to stockholders who participated                  in an                  offering of three new shares of common stock in exchange for cancellation                  of one outstanding share and $0.24 cash, generating cash proceeds                  of                  $886,116. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  12,384,298 shares to Spectra Acquisition LLC, the sponsor of the                  Plan, in                  satisfaction of a $50,000 investment and as an incentive to carrying                  out                  the Plan. On the Effective Date, the Company established a new                  Board of                  Directors consisting of Jim Hitchin, Mark D. McWilliams, Rand P.                  Mulford                  and Chester E. Sievert. Mr. Hitchin was elected President, Chief                  Executive                  Officer, Secretary and Chief Financial Officer. Under the Plan                  of                  Reorganization, the Board of Directors shall remain in place for                  three                  years after the Effective Date, at which time the bylaws then in                  effect                  shall determine elections. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to vendors of $66,222 through the payment of cash in the                  amount of                  $5,885. The remaining amount of $60,337 was written                  off. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to employees in the amount of $34,762 through the payment                  of cash                  of $6,273. The remaining amount of $28,489 was written                  off. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | wrote                  off liabilities in the amount of $108,699 for accrued liabilities                  and                  trade notes payable that was not to be paid as part of the                  Plan. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**PART        II**

----

|                           |   | 2002                  Stock Prices(1) |                      | 2003                  Stock Prices(1) |   | 2004                  Stock Prices(1) |   |
|--------------------------------|--------|---------------------------------------|---------------------------|---------------------------------------|--------|---------------------------------------|--------|
| QUARTER                  ENDED |   |                                  | High                  Bid |                                  |   | Low                  Bid              |   |   | High                  Bid |   |   | Low                  Bid |   |   | High                  Bid |   |   | Low                  Bid |   |
| March                  31      |   |                                  | 3.70                      |                                  |   | 1.50                                  |   |   | 0.50 |   |   | 0.13 |   |   | 0.12 |   |   | 0.01 |   |
| June                  30       |   |                                  | 4.75                      |                                  |   | 2.80                                  |   |   | 0.18 |   |   | 0.08 |   |   | 0.51 |   |   | 0.11 |   |
| September                  30  |   |                                  | 3.30                      |                                  |   | 0.10                                  |   |   | 0.08 |   |   | 0.08 |   |   | 0.65 |   |   | 0.11 |   |
| December                  31   |   |                                  | 0.22                      |                                  |   | 0.06                                  |   |   | 0.08 |   |   | 0.01 |   |   | 2.00 |   |   | 0.19 |   |

----

|                                         |   | Private                  Placement                                             |   | Chapter                  11 Plan                                             |
|----------------------------------------------|--------|--------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| No.                  of Shares               |   | 4,378,333                                                                      |   | 29,710,766(2)                                                                |
| Type                  of purchasers          |   | Accredited                  Investors(1)                                       |   | Participants                  in Rights Offering, Claimants, Plan Sponsor(2) |
| Price/Share                                  |   | $0.12                                                                          |   | See                  Note (2), below                                         |
| Aggregate                  Cash Proceeds     |   | $525,400                                                                       |   | $936,116                                                                     |
| Exemption                  from Registration |   | Sections                  4(2) and 4(6) of the Securities Act and Regulation D |   | §1145                  of the Bankruptcy Act                            |

| 1.   | As                  defined in Regulation D under the Securities                  Act. |
|----------------|----------------------------------------------------------------------------------------|

| 2.   | In                  the Rights Offering a holder of common stock was required to exchange                  one                  share and $0.24 for three new shares. The trading price of the                  common                  stock during the Rights Offering ranged from approximately $0.12                  to $0.45.                  11,076,447 shares were issued in the Rights Offering in August                  2004.                  Creditors consisted of the former CEO (600,000 shares) and Noteholders                  and                  warrant holders (5,650,020 shares). The price paid by them was                  extinguishment of all claims (approximately $0.10 per share). SA                  LLC, the                  Plan Sponsor, received 12,384,298 shares, consisting of 5,000,000                  of                  common stock issued at $0.01 per share and the balance in connection                  with                  the level of success of the Rights                  Offering. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | settled                  and canceled notes, warrants and monetary claims on August 23,                  2004 of                  $952,570 ($331,270 from the former CEO, $535,000 from note and                  warrant                  holders and $86,300 in accrued interest) by the issuance of 6,250,020                  shares of common stock. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  11,076,447 shares of common stock to stockholders who participated                  in an                  offering of three new shares of common stock in exchange for cancellation                  of one outstanding share and $0.24 cash, generating cash proceeds                  of                  $886,116. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  12,384,298 shares to Spectra Acquisition LLC, the sponsor of the                  Plan, in                  satisfaction of a $50,000 investment and as an incentive to carrying                  out                  the Plan. On the Effective Date, the Company established a new                  Board of                  Directors consisting of Jim Hitchin, Mark D. McWilliams, Rand P.                  Mulford                  and Chester E. Sievert. Mr. Hitchin was elected President, Chief                  Executive                  Officer, Secretary and Chief Financial Officer. Under the Plan                  of                  Reorganization, the Board of Directors shall remain in place for                  three                  years after the Effective Date at which time the bylaws then in                  effect                  shall determine elections. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | settled                  claims to vendors of $66,222 through the payment of cash in the                  amount of                  $5,885. The remaining amount of $60,337 was written                  off. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to employees in the amount of $34,762 through the payment                  of cash                  of $6,273. The remaining amount of $28,489 was written                  off. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | wrote                  off liabilities in the amount of $108,699 for accrued liabilities                  and                  trade notes payable that was not to be paid as part of the                  Plan. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Fresh-Start        Adjustments.*

*Gain        on Debt Discharge.*

----

| §   | complete                  outcome based clinical studies for the colon application, |
|--------------------|-------------------------------------------------------------------------------------|

| §   | submit                  to CMS, an application for reimbursement codes for use of the WavSTAT(TM)                  System upon completion of an outcome based clinical                  study, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | begin                  Phase II clinical studies with our Barrett’s esophagus                  application, |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| §   | continue                  to develop the market with key physician opinion leaders, both                  international and domestic, for our approved product as well as                  for a                  Barrett’s esophagus application, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | begin                  sales both domestically and internationally,                  and |
|--------------------|------------------------------------------------------------------------------------------|

| §   | develop                  strategic relationships for distribution and                  marketing. |
|--------------------|---------------------------------------------------------------------------------------------------|

----

| §   | the                  timing and progress of outcome-based clinical                  trials, |
|--------------------|---------------------------------------------------------------------------------------------|

| §   | the                  timing and extent to which SpectraScience’s products gain market                  acceptance, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| §   | the                  timing and expense of product                  introduction, |
|--------------------|-----------------------------------------------------------------------------------|

| §   | the                  timing and expense of developing marketing and distribution                  channels, |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| §   | the                  progress and expense of developing next generation products and                  new                  applications for the WavSTAT(TM)                  System, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the                  potential requirements and related costs for product modifications,                  the                  timing and expense of various U.S. and foreign regulatory                  filings, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the                  maintenance of various U.S. and foreign government approvals, or                  the                  timing of receipt to obtain additional approvals,                  and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | the                  status and maintenance of SpectraScience’s patent                  portfolio. |
|--------------------|----------------------------------------------------------------------------------------------------------|

----

***Fiscal        Year Ended December 31, 2004 As Compared To Fiscal Year Ended December 31,        2003***

----

***2004        Nine Months As Compared To 2003 Nine Months***

----

***2004        Third Quarter As Compared To 2003 Third Quarter***

***2004        Six Months As Compared To 2003 Six Months***

***2004        Second Quarter As Compared To 2003 Second Quarter***

***2004        First Quarter As Compared To 2003 First Quarter***

----

***Fiscal        Year Ended December 31, 2003 As Compared To Fiscal Year Ended December 31,        2002***

***Nine        Months Ended September 30, 2003 As Compared To Nine Months Ended September        30,        2002***

----

***2003        Third Quarter As Compared To 2002 Third Quarter***

***2003        Six Months As Compared To 2002 Six Months***

----

***2003        Second Quarter As Compared To 2002 Second Quarter***

***2003        First Quarter As Compared To First Quarter 2002***

***Fiscal        Year Ended December 31, 2002 As Compared To Fiscal Year Ended December 31,        2001***

----

***Nine        Months Ended September 30, 2002 As Compared To Nine Months Ended September        30,        2001***

----

***2002        Third Quarter As Compared To Third Quarter 2001***

----

*Fresh-Start        Reporting*

----

*Accounting        For Transactions Involving Stock Compensation*

*Impairment        or Disposal of Long-Lived Assets *

*Inventory        Costs*

----

*Exchanges        of Nonmonetary Assets*

**Investment        Considerations**

----

| §   | are                  more effective; |
|--------------------|--------------------------------------|

| §   | or                  are less expensive than the products or product candidates we are                  developing. |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

----

----

| §   | The                  FDA may refuse to approve an application if they believe that applicable                  regulatory criteria are not                  satisfied. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The                  FDA may require additional testing for safety and                  effectiveness. |
|--------------------|--------------------------------------------------------------------------------------------------------|

| §   | The                  FDA may interpret data from pre-clinical testing and clinical trials                  in                  different ways than we interpret                  them. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | If                  regulatory approval of a product is granted, the approval may be                  limited                  to specific indications or limited with respect to its                  distribution. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | The                  FDA may change their approval policies and/or adopt new                  regulations. |
|--------------------|------------------------------------------------------------------------------------------------------------|

----

| §   | warning                  letters; |
|--------------------|-----------------------------------|

| §   | civil                  penalties; |
|--------------------|-----------------------------------|

| §   | criminal                  penalties; |
|--------------------|--------------------------------------|

| §   | injunctions; |
|--------------------|--------------|

| §   | product                  seizure or detention; |
|--------------------|------------------------------------------------|

| §   | product                  recalls; and |
|--------------------|---------------------------------------|

| §   | total                  or partial suspension of                  productions. |
|--------------------|-------------------------------------------------------------------------------|

| §   | unsatisfactory                  results of any clinical trial; |
|--------------------|----------------------------------------------------------------|

| §   | the                  failure of our principal third-party investigators to perform our                  clinical                  trials on our anticipated                  schedules; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | different                  interpretations of our pre-clinical and clinical data, which could                  initially lead to inconclusive                  results. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | lack                  of adequate quality or sufficient prevention benefit, or unacceptable                  safety during pre-clinical studies or clinical                  trials; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | failure                  to receive necessary regulatory                  approvals; |
|--------------------|--------------------------------------------------------------------------------------|

| §   | existence                  of proprietary rights of third parties;                  and/or |
|--------------------|--------------------------------------------------------------------------------------------|

| §   | inability                  to develop manufacturing methods that are efficient, cost-effective                  and                  capable of meeting stringent regulatory                  standards. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

**.**

----

----

|                                                                                                                                                                                                                                                     | Page |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------|
| Report                    of Independent Registered Public Accounting Firm                                                                                                                                                                               | 52   |
| Balance                    Sheets at December 31, 2004, 2003 and 2002                                                                                                                                                                                    | 54   |
| Statements                    of Operations for the five months ended December 31, 2004, seven                    months                    ended August 1, 2004 and years ended December 31, 2003 and                    2002                           | 55   |
| Statements                    of Stockholders’ Equity (Deficit) for the five months ended December 31,                    2004, seven months ended August 1, 2004 and years ended December                    31, 2003                    and 2002 | 56   |
| Statements                    of Cash Flows for the five months ended December 31, 2004, seven                    months                    ended August 1, 2004 and years ended December 31, 2003 and                    2002                           | 57   |
| Notes                    to Financial Statements                                                                                                                                                                                                         | 58   |

----

----

----

|                                                                                                                                                                                                                              |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **SpectraScience,                        Inc.****(A                        Development Stage Enterprise)****Balance                          Sheets****December                            31, 2004, 2003, and 2002**   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| **ASSETS**                                                                                                                                                                                                                        |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   | **SuccessorCompany** |   | **Predecessor                        Company** |   | **Predecessor                        Company** |   |
|                                                                                                                                                                                                                              |   | **December                        31, 2004** |   | **December                        31, 2003** |   | **December                        31, 2002** |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |
| CURRENT                        ASSETS                                                                                                                                                                                             |   |   |   |   |   |   |   |
| Cash                        and cash equivalents                                                                                                                                                                                  |   | $ | 1,132,505 |   | $ | 73,487 |   | $ | 227,367 |   |
| Inventories                                                                                                                                                                                                                       |   |   | 149,169 |   |   | 149,169 |   |   | 149,169 |   |
| Prepaid                        expenses and other                                                                                                                                                                                 |   |   | 54,400 |   |   |   |   |   | 23,204 |   |
| TOTAL                        CURRENT ASSETS                                                                                                                                                                                       |   |   | 1,336,074 |   |   | 222,656 |   |   | 399,740 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| FIXED                        ASSETS                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |
| Office                        furniture                                                                                                                                                                                           |   |   | 1,000 |   |   | 59,886 |   |   | 59,886 |   |
| Computer                        equipment                                                                                                                                                                                         |   |   | 4,323 |   |   | 46,643 |   |   | 46,643 |   |
| Machinery                        and equipment                                                                                                                                                                                    |   |   | 13,868 |   |   | 319,155 |   |   | 319,155 |   |
|                                                                                                                                                                                                                              |   |   | 19,191 |   |   | 425,684 |   |   | 425,684 |   |
| Less                        accumulated depreciation                                                                                                                                                                              |   |   | (3,199 | ) |   | (367,823 | ) |   | (367,823 | ) |
| TOTAL                        FIXED ASSETS                                                                                                                                                                                         |   |   | 15,992 |   |   | 57,861 |   |   | 57,861 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| Patents,                        net                                                                                                                                                                                               |   |   | 281,949 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| TOTAL                        ASSETS                                                                                                                                                                                               |   | $ | 1,634,015 |   | $ | 280,517 |   | $ | 457,601 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                        AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                        NOT SUBJECT TO COMPROMISE                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |
| Accounts                        payable                                                                                                                                                                                           |   | $ | 12,215 |   |   |   |   |   |   |   |
| Accrued                        compensation and taxes                                                                                                                                                                             |   |   | 7,684 |   |   |   |   |   |   |   |
| Accrued                        expenses                                                                                                                                                                                           |   |   |   |   | $ | 24,126 |   | $ | 20,653 |   |
| TOTAL                        CURRENT LIABILITIES                                                                                                                                                                                  |   |   | 19,899 |   |   | 24,126 |   |   | 20,653 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                        SUBJECT TO COMPROMISE                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Accounts                        payable                                                                                                                                                                                           |   |   |  |   |   | 66,222 |   |   | 66,222 |   |
| Note                        payable - trade creditors                                                                                                                                                                             |   |   |   |   |   | 8,514 |   |   | 8,514 |   |
| Accrued                        compensation and taxes                                                                                                                                                                             |   |   |   |   |   | 366,032 |   |   | 366,032 |   |
| Accrued                        expenses                                                                                                                                                                                           |   |   |   |   |   | 100,185 |   |   | 100,185 |   |
| Accrued                        interest                                                                                                                                                                                           |   |   |   |   |   | 61,333 |   |   | 18,533 |   |
| Convertible                        notes payable                                                                                                                                                                                  |   |   |   |   |   | 535,000 |   |   | 535,000 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| TOTAL                        LIABILITIES SUBJECT TO COMPROMISE                                                                                                                                                                    |   |   |   |   |   | 1,137,286 |   |   | 1,094,486 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| COMMITMENTS                        AND CONTINGENCIES                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| STOCKHOLDERS'                        EQUITY (DEFICIT)                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| Undesignated                        capital stock, undesignated par value, 25,000,000                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |
| shares                        authorized                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Common                        stock, par value $0.25, 17,000,000 shares authorized                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |
| 7,153,813                        issued and outstanding                                                                                                                                                                           |   |   |   |   |   | 1,788,453 |   |   | 1,788,453 |   |
| Common                        stock, par value of $0.01, 100,000,000 shares authorized                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |
| 37,550,762                        issued and outstanding in 2004                                                                                                                                                                  |   |   | 375,508 |   |   |   |   |   |   |   |
| Additional                        paid-in capital                                                                                                                                                                                 |   |   | 1,780,122 |   |   | 54,332,013 |   |   | 54,332,013 |   |
| Deferred                        compensation                                                                                                                                                                                      |   |   | (163,823 | ) |   |   |   |   |   |   |
| Deficit                        accumulated during the development stage                                                                                                                                                           |   |   | (377,691 | ) |   | (57,001,361 | ) |   | (56,778,004 | ) |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| TOTAL                        STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                                                       |   |   | 1,614,116 |   |   | (880,895 | ) |   | (657,538 | ) |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
| TOTAL                        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                                       |   | $ | 1,634,015 |   | $ | 280,517 |   | $ | 457,601 |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |

*See          Report of Independent Registered Public Accounting Firm and Notes to the          Financial Statements*

----

|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
| **SpectraScience,                          Inc.******(A                          Development Stage Enterprise)******Statements                            of Operations****For                              the 5 months ended December 31, 2004, the 7 months                              ended August 1, 2004                              and the years ended December 31, 2003 and                              2002** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   | **(unaudited)** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Successor                          Company** |   | **Predecessor                          Company** |   | **Predecessor                          Company** |   | **Predecessor                          Company** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **5                          months ended** |   | **7                          months ended** |   | **Year                          Ended** |   | **Year                          Ended** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **December                          31,2004** |   | **August                          1,2004** |   | **December                          31,2003** |   | **December                          31, 2002** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Gross                          Revenue                                                                                                                                                                                                                                                                                                                                                                                      |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                          EXPENSES                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research                          and development                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   | 488,917 |   |
| General                          and administrative                                                                                                                                                                                                                                                                                                                                                                         |   |   | 388,886 |   |   | 105,960 |   |   | 181,268 |   |   | 1,211,886 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 388,886 |   |   | 105,960 |   |   | 181,268 |   |   | 1,700,803 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                          LOSS                                                                                                                                                                                                                                                                                                                                                                                     |   |   | (388,886 | ) |   | (105,960 | ) |   | (181,268 | ) |   | (1,700,803 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                          INCOME (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                          expense                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   | (24,967 | ) |   | (42,800 | ) |   | (554,711 | ) |
| Interest                          income                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 7,006 |   |   | 145 |   |   | 711 |   |   | 5,253 |   |
| Gain                          (loss) on disposal of fixed assets                                                                                                                                                                                                                                                                                                                                                            |   |   | 4,189 |   |   |   |   |   |   |   |   | (82,035 | ) |
| Writedown                          of obsolete inventory                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   | (335,916 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 11,195 |   |   | (24,822 | ) |   | (42,089 | ) |   | (967,409 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS                          BEFORE REORGANIZATION ITEMS                                                                                                                                                                                                                                                                                                                                                                   |   |   | (377,691 | ) |   | (130,782 | ) |   | (223,357 | ) |   | (2,668,212 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gain                          on debt discharge                                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   | 525,380 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                          INCOME (LOSS)                                                                                                                                                                                                                                                                                                                                                                                  |   | $ | (377,691 | ) | $ | 394,598 |   | $ | (223,357 | ) | $ | (2,668,212 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                          and diluted net earnings (loss) per share                                                                                                                                                                                                                                                                                                                                                    |   | $ | (0.01 | ) | $ | 0.05 |   | $ | (0.03 | ) | $ | (0.37 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                          average number of common                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares                          outstanding                                                                                                                                                                                                                                                                                                                                                                                 |   |   | 32,313,705 |   |   | 7,874,884 |   |   | 7,153,813 |   |   | 7,153,813 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |

*See                Report of Independent Registered Public Accounting Firm and Notes                to the                Financial Statements*

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
| **SpectraScience,                          Inc.****(A                          Development Stage Enterprise)****Statements                            of Stockholders' Equity (Deficit)****For                              the Years ended December 31, 2002, December 31, 2003,                              the 7 months ended                              August 1, 2004 and the 5 months ended December 31,                              2004**  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Common                          Stock - old** |   | **Additional** |   | **Common                          Stock - new** |   | **Additional** |   |  |   | **Deficit                          Accumulated During The** |   | **TotalStockholders'** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   | **Paid-In** |   |   |   |   |   | **Paid-In** |   | **Deferred** |   | **Development** |   | **Equity/** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Shares** |   | **Amount** |   | **Capital** |   | **Shares** |   | **Amount** |   | **Capital** |   | **Compensation** |   | **Stage** |   | **(Deficit)** |   |
| **Balance                          January 1, 2002 (unaudited)**                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 7,153,813 |   | $ | 1,788,453 |   | $ | 53,797,013 |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (54,109,792 | ) | $ | 1,475,674 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                          stock warrants issued in connection with borrowings                          (unaudited)                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   | 535,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 535,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                          loss (unaudited)                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (2,668,212 | ) |   | (2,668,212 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance,                          December 31, 2002**                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 7,153,813 |   |   | 1,788,453 |   |   | 54,332,013 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (56,778,004 | ) |   | (657,538 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                          loss                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (223,357 | ) |   | (223,357 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Balance,                          December 31, 2003**                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 7,153,813 |   |   | 1,788,453 |   |   | 54,332,013 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (57,001,361 | ) |   | (880,895 | ) |
| Issuance                          of stock options to employees, directors and consultants                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 201,514 |   | $ | (201,514 | ) |   |   |   |   |   |   |
| Amortization                          of deferred compensation                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 758 |   |   |   |   |   | 758 |   |
| Adjustment                          for common stock to par value of $0.01                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   | (1,716,915 | ) |   | 1,716,915 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion                          of 3,692,149 old shares into 11,076,447 new shares plus                          $0.24 per                          share                                                                                                                                                                                                                                                                                               |   |   | (3,692,149 | ) |   | (36,921 | ) |   |   |   |   | 11,076,447 |   | $ | 110,764 |   |   | 812,273 |   |   |   |   |   |   |   |   | 886,116 |   |
| Issuance                          of common stock for payment of notes payable and interest                          at $0.10 per                          share                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   | 5,650,020 |   |   | 56,500 |   |   | 508,500 |   |   |   |   |   |   |   |   | 565,000 |   |
| Sale                          of common stock at $0.12 per share                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   | 4,211,666 |   |   | 42,117 |   |   | 463,283 |   |   |   |   |   |   |   |   | 505,400 |   |
| Settlement                          of old claim at $0.10 per share                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   | 600,000 |   |   | 6,000 |   |   | 54,000 |   |   |   |   |   |   |   |   | 60,000 |   |
| Sale                          of common stock at $0.01 per share                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   | 12,384,298 |   |   | 123,843 |   |   | (73,843 | ) |   |   |   |   |   |   |   | 50,000 |   |
| Fresh                          start adjustment                                                                                                                                                                                                                                                                                                                                                                                                             |   |   | (3,461,664 | ) |   | (34,617 | ) |   | (56,048,928 | ) |   | 3,461,664 |   |   | 34,617 |   |   | (302,456 | ) |   |   |   |   | 56,606,763 |   |   | 255,379 |   |
| Net                          income                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 394,598 |   |   | 394,598 |   |
| **Balance,                          August 2, 2004**                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   | 37,384,095 |   |   | 373,841 |   |   | 1,663,271 |   |   | (200,756 | ) |   |   |   |   | 1,836,356 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                          of common stock at $0.12 per share                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   | 166,667 |   |   | 1,667 |   |   | 18,333 |   |   |   |   |   |   |   |   | 20,000 |   |
| Issuance                          of stock options to employees, directors and consultants                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 98,518 |   |   | (98,518 | ) |   |   |   |   |   |   |
| Amortization                          of deferred compensation                                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 135,451 |   |   |   |   |   | 135,451 |   |
| Net                          loss                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (377,691 | ) |   | (377,691 | ) |
| **Balance,                          December 31, 2004**                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   | $ | — |   | $ | — |   |   | 37,550,762 |   | $ | 375,508 |   | $ | 1,780,122 |   | $ | (163,823 | ) | $ | (377,691 | ) | $ | 1,614,116 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

*See                Report of Independent Registered Public Accounting Firm and Notes                to the                Financial Statements*

----

|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **SpectraScience,                        Inc. (A Development Stage Enterprise)****Statements                        of Cash Flows****For                          the 5 months ended December 31, 2004, for the 7 months                          ended August 1,                          2004****and                            for the years ended December 31, 2003 and                            2002**   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   | **(unaudited)** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **Successor                        Company** |   | **Predecessor                        Company** |   | **Predecessor                        Company** |   | **Predecessor                        Company** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **5                        months ended** |   | **7                        months ended** |   | **Year                        Ended** |   | **Year                        Ended** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **December                        31, 2004** |   | **August                        1, 2004** |   | **December                        31,2003** |   | **December                        31,2002** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |
| Cash                        flows from operating activities:                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |
| Net                        income (loss)                                                                                                                                                                                                                                                                                                                                                                                  |   | $ | (377,691 | ) | $ | 394,598 |   | $ | (223,357 | ) | $ | (2,668,212 | ) |
| Adjustments                        to reconcile net income (loss) to net cash used in                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| operating                        activities:                                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                        and amortization                                                                                                                                                                                                                                                                                                                                                                 |   |   | 11,250 |   |   |   |   |   |   |   |   | 57,832 |   |
| Gain                        on discharge of debt                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   | (525,380 | ) |   |   |   |   |   |   |
| Amortization                        of deferred compensation                                                                                                                                                                                                                                                                                                                                                         |   |   | 135,451 |   |   | 758 |   |   |   |   |   |   |   |
| Amortization                        of debt discount                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   | 535,000 |   |
| Loss                        (gain) on disposal of fixed assets                                                                                                                                                                                                                                                                                                                                                       |   |   | (4,189 | ) |   |   |   |   |   |   |   | 82,035 |   |
| Writeoff                        of obsolete inventory                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   | 335,916 |   |
| Changes                        in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Inventories                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   | 25,056 |   |
|  Prepaids                        and other current assets                                                                                                                                                                                                                                                                                                                                                            |   |   | (30,650 | ) |   | (23,750 | ) |   | 23,203 |   |   | 84,513 |   |
| Other                        assets                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
| Accounts                        payable                                                                                                                                                                                                                                                                                                                                                                                   |   |   | (47,487 | ) |   | 53,817 |   |   |   |   |   | (111,864 | ) |
| Accrued                        expenses and other liabilities                                                                                                                                                                                                                                                                                                                                                             |   |   | (24,409 | ) |   | 26,944 |   |   | 46,274 |   |   | 373,925 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        cash used in operating activities                                                                                                                                                                                                                                                                                                                                                              |   |   | (337,725 | ) |   | (73,013 | ) |   | (153,880 | ) |   | (1,235,799 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                        flows from investing activities - proceeds from the sale                        of fixed                        assets                                                                                                                                                                                                                                                                        |   |   | 8,240 |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                        flows from financing activities:                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds                        from exchange of common stock                                                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   | 886,116 |   |   |   |   |   |   |   |
| Proceeds                        from issuance of common stock in reorganization                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   | 50,000 |   |   |   |   |   |   |   |
| Proceeds                        from the issuance of common stock                                                                                                                                                                                                                                                                                                                                                         |   |   | 20,000 |   |   | 505,400 |   |   |   |   |   |   |   |
| Principal                        payments on long-term debt                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   | (41,695 | ) |
| Proceeds                        from long-term debt                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   | 535,000 |   |
| Net                        cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                          |   |   | 20,000 |   |   | 1,441,516 |   |   |   |   |   | 493,305 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                        (decrease) increase in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                               |   |   | (309,485 | ) |   | 1,368,503 |   |   | (153,880 | ) |   | (742,494 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                        and cash equivalents at beginning of period                                                                                                                                                                                                                                                                                                                                                   |   |   | 1,441,990 |   |   | 73,487 |   |   | 227,367 |   |   | 969,861 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                        and cash equivalents at end of period                                                                                                                                                                                                                                                                                                                                                         |   | $ | 1,132,505 |   | $ | 1,441,990 |   | $ | 73,487 |   | $ | 227,367 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental                        disclosure of non-cash investing and financing activities                                                                                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion                        of notes payable and accrued interest to common stock                                                                                                                                                                                                                                                                                                                                   |   | $ | 565,000 |   |   |   |   |   |   |   |   |   |   |
| Issuance                        of common stock in settlement of bankruptcy debt                                                                                                                                                                                                                                                                                                                                          |   | $ | 60,000 |   |   |   |   |   |   |   |   |   |   |
| Fresh                        start adjustment to fixed assets and patents                                                                                                                                                                                                                                                                                                                                                 |   | $ | 255,379 |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |

*See          Report of Independent Registered Public Accounting Firm and Notes to the          Financial Statements*

----

**SpectraScience,          Inc.**

**(A        Development Stage Enterprise)**

**Notes        to Financial Statements**

**(Information        Related to the Year Ended December 31, 2002 is Unaudited)**

----

----

|                                                                                                      |   |   | 5                  months endedDecember                  31, 2004 |   |   | 7                  months endedAugust                  1, 2004 |   |   | December                  31,2003 |   |   | December                  31,2002(Unaudited) |   |
|-----------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------------------|--------|
| Net                  income (loss):                                                                       |   |   |                                                              |   |   |                                                           |   |   |                              |   |   |                                         |   |
| As                  reported                                                                              |   | $      | (377,691                                                          | )      | $      | 394,598                                                        |   | $      | (223,357                          | )      | $      | (2,668,212                                   | )      |
| Stock                  based compensation expense included in reported net income                  (loss) |   |   | 135,451                                                           |   |   |                                                           |   |   |                              |   |   |                                         |   |
| Stock                  based compensation                                                                 |   |   | (135,451                                                          | )      |   | (146,962                                                       | )      |   | (391,694                          | )      |   | (569,826                                     | )      |
| Pro                  forma net income                  (loss)                                             |   | $      | (377,691                                                          | )      | $      | 247,636                                                        |   | $      | (615,051                          | )      | $      | (3,238,038                                   | )      |
| As                  reported earnings (loss) per share                                                    |   | $      | (0.01                                                             | )      | $      | 0.05                                                           |   | $      | (0.03                             | )      | $      | (0.37                                        | )      |
| Pro                  forma earnings (loss) per share                                                      |   | $      | (0.01                                                             | )      | $      | 0.03                                                           |   | $      | (0.09                             | )      | $      | (0.45                                        | )      |

| Expected life             | 5                years |
|------------------------------------------|------------------------|
| Risk-free interest rate                  | 3.89%                  |
| Expected volatility                      | 141%                   |
| Expected                  dividend yield | 0%                     |

----

----

| §   | settled                  and canceled notes, warrants and monetary claims on August 23,                  2004 of                  $952,570 ($331,270 from the former CEO, $535,000 from note and                  warrant                  holders and $86,300 in accrued interest) by the issuance of 6,250,020                  shares of common stock. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | issued                  11,076,447 shares of common stock to stockholders who participated                  in an                  offering of three new shares of common stock in exchange for one                  outstanding share and $0.24 cash generating cash proceeds of                  $886,116. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| §   | issued                  12,384,298 shares of common stock to Spectra Acquisition LLC, the                  sponsor                  of the Plan, in satisfaction of a $50,000 investment and as an                  incentive                  to carrying out the Plan. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to vendors of $66,222 through the payment of cash in the                  amount of                  $5,885. The remaining amount of $60,337 was written                  off. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | settled                  claims to employees in the amount of $34,762 through the payment                  of cash                  of $6,273. The remaining amount of $28,489 was written                  off. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | wrote                  off liabilities in the amount of $108,699 for accrued liabilities                  and                  trade notes payable that was not to be paid as part of the                  Plan. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |
|------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|-------------|-------------------------------|--------|------------|--------|----------------------------------------------------|-----------|--------|--------|-------------------------------------------------------|--------|--------|---------|---------------------------------------------------------------|--------|
| **ASSETS**                                                                               |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |
|                                                                                     |   |                                                                 |        |                          |   |       |   |                                                    |      |   |   |                                                  |   |   |    |                                                               |   |
|                                                                                     |   | **PredecessorCompanyAugust                            1, 2004** |        | **Reorganization**Adjustments |   |       |   | Exchange                            ofCommon Stock |      |   |   | **Fresh                            Start**Adjustments |   |   |    | **SuccessorCompany**August                            2, 2004 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |
| CURRENT                          ASSETS                                                  |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |
| Cash                          and cash equivalents                                       |   | $                                                               | 517,747     |                          | $      | 38,127     |   |                                               | **a/e**   |   | $      | 886,116                                               |   |   | **g**   |                                                          |   |   |   |   |   |   | $ | 1,441,990 |   |
| Inventories                                                                              |   |                                                            | 149,169     |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   | 149,169 |   |
| Prepaid                          expenses                                                |   |                                                            | 23,750      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   | 23,750 |   |
| TOTAL                          CURRENT ASSETS                                            |   |                                                            | 690,666     |                          |   | 38,127     |   |                                               |      |   |   | 886,116                                               |   |   |    |                                                          |   |   |   |   |   |   |   | 1,614,909 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| FIXED                          ASSETS                                                    |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Office                          furniture                                                |   |                                                            | 59,886      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          | $      | (54,837 | ) |   | **i** |   |   | 5,049 |   |
| Computer                          equipment                                              |   |                                                            | 46,643      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | (42,320 | ) |   | **i** |   |   | 4,323 |   |
| Machinery                          and equipment                                         |   |                                                            | 319,155     |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | (305,287 | ) |   | **i** |   |   | 13,868 |   |
|                                                                                     |   |                                                            | 425,684     |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | (402,444 | ) |   |   |   |   | 23,240 |   |
| Less                          accumulated depreciation                                   |   |                                                            | (367,823    | )                             |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | 367,823 |   |   | **i** |   |   |   |   |
| TOTAL                          FIXED ASSETS                                              |   |                                                            | 57,861      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | (34,621 | ) |   |   |   |   | 23,240 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Patents                                                                                  |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | 290,000 |   |   | **j** |   |   | 290,000 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| TOTAL                          ASSETS                                                    |   | $                                                               | 748,527     |                          | $      | 38,127     |   |                                               |      |   | $      | 886,116                                               |   |   |    |                                                          | $      | 255,379 |   |   |   |   | $ | 1,928,149 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                          AND STOCKHOLDERS' EQUITY (DEFICIT)**              |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| LIABILITIES                          NOT SUBJECT TO COMPROMISE                           |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Accounts                          payable                                                |   | $                                                               | 59,702      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   | $ | 59,702 |   |
| Accrued                          expenses                                                |   |                                                            | 32,091      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   | 32,091 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| TOTAL                          CURRENT LIABILITIES                                       |   |                                                            | 91,793      |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   | 91,793 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| LIABILITIES                          SUBJECT TO COMPROMISE                               |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Accounts                          payable                                                |   |                                                            | 66,222      |                          | $      | (66,222    | )      |                                               | **a**     |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Note                          payable - trade creditors                                  |   |                                                            | 8,514       |                          |   | (8,514     | )      |                                               | **d**     |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Accrued                          compensation and taxes                                  |   |                                                            | 366,032     |                          |   | (366,032   | )      |                                               | **a/c**   |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Accrued                          expenses                                                |   |                                                            | 100,185     |                          |   | (100,185   | )      |                                               | **d**     |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Accrued                          interest                                                |   |                                                            | 86,300      |                          |   | (86,300    | )      |                                               | **b**     |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Convertible                          notes payable                                       |   |                                                            | 535,000     |                          |   | (535,000   | )      |                                               | **b**     |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| TOTAL                          LIABILITIES SUBJECT TO COMPROMISE                         |   |                                                            | 1,162,253   |                          |   | (1,162,253 | )      |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| STOCKHOLDERS'                          EQUITY (DEFICIT)                                  |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| Common                          stock, par value of $0.25, 17,000,000 shares authorized  |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| 7,153,813                          issued and outstanding                                |   |                                                            | 1,788,453   |                          |   |       |   |                                               |      |   | $      | (1,753,836                                            | )      |   | **g/h** |                                                          | $      | (34,617 | ) |   |   |   |   |   |   |
| Common                          stock, par value of $0.01, 100,000,000 shares authorized |   |                                                            | 42,117      |                          |   | 112,500    |   |                                               | **b/c/e** |   |   | 184,607                                               |   |   | **g**   |                                                          |   | 34,617 |   |   |   |   |   | 373,841 |   |
| Additional                          paid-in capital                                      |   |                                                            | 54,996,811  |                          |   | 562,500    |   |                                               | **b/c**   |   |   | 2,455,345                                             |   |   | **g/h** |                                                          |   | (56,351,385 | ) |   | **k** |   |   | 1,663,271 |   |
| Deferred                          compensation                                           |   |                                                            | (200,756    | )                             |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   | (200,756 | ) |
| Deficit                          accumulated during the development stage                |   |                                                            | (57,132,144 | )                             |   | 525,380    |   |                                               | **f**     |   |   |                                                  |   |   |    |                                                          |   | 57,132,144 |   |   | **k** |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   | (525,380 | ) |   | **k** |   |   |   |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| TOTAL                          STOCKHOLDERS' EQUITY (DEFICIT)                            |   |                                                            | (505,519    | )                             |   | 1,200,380  |   |                                               |      |   |   | 886,116                                               |   |   |    |                                                          |   | 255,379 |   |   |   |   |   | 1,836,356 |   |
|                                                                                     |   |                                                            |        |                          |   |       |   |                                               |      |   |   |                                                  |   |   |    |                                                          |   |   |   |   |   |   |   |   |   |
| TOTAL                          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)            |   | $                                                               | 748,527     |                          | $      | 38,127     |   |                                               |      |   | $      | 886,116                                               |   |   |    |                                                          | $      | 255,379 |   |   |   |   | $ | 1,928,149 |   |

----

*See                    Report of Independent Registered Public Accounting Firm and Notes                    to the                    Financial Statements*

----

----

| Raw                  materials   |   | $      | 98,346  |   |
|----------------------------------|--------|--------|---------|--------|
| Work                  in process |   |   | 4,832   |   |
| Finished                  goods  |   |   | 45,991  |   |
|                             |   | $      | 149,169 |   |

----

|                                             |   |   | Five                  monthsEndedDecember                  31,2004  |   |   | Seven                  monthsEndedAugust                  1,2004 |   |   | Year                  EndedDecember                  31,2003 |   |   | Year                  EndedDecember                  31,2002 |   |
|--------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|
| Deferred                  tax assets:            |   |   |                                                                     |   |   |                                                             |   |   |                                                         |   |   |                                                         |   |
| Net                  operating lossCarryforward  |   | $      | 14,695,000                                                               |   | $      | 16,232,000                                                       |   | $      | 16,189,000                                                   |   | $      | 17,554,000                                                   |   |
| Research                  and developmentcredits |   |   | 644,000                                                                  |   |   | 644,000                                                          |   |   | 640,000                                                      |   |   | 640,000                                                      |   |
| Inventory                  reserve               |   |   | 136,000                                                                  |   |   | 136,000                                                          |   |   | 136,000                                                      |   |   | 136,000                                                      |   |
| Accrued                  liabilities             |   |   | 3,000                                                                    |   |   |                                                             |   |   | 202,000                                                      |   |   | 185,000                                                      |   |
| Deferred                  compensation           |   |   | 54,000                                                                   |   |   |                                                             |   |   |                                                         |   |   |                                                         |   |
| Total                  deferred tax assets       |   |   | 15,532,000                                                               |   |   | 17,012,000                                                       |   |   | 17,167,000                                                   |   |   | 18,515,000                                                   |   |
| Valuation                  allowance             |   |   | (15,416,000                                                              | )      |   | (17,012,000                                                      | )      |   | (17,167,000                                                  | )      |   | (18,515,000                                                  | )      |
| Net                  deferred tax assets         |   |   | 116,000                                                                  |   |   | -                                                                |   |   | -                                                            |   |   | -                                                            |   |
|                                             |   |   |                                                                     |   |   |                                                             |   |   |                                                         |   |   |                                                         |   |
| Deferred                  tax liability:         |   |   |                                                                     |   |   |                                                             |   |   |                                                         |   |   |                                                         |   |
| Patents                                          |   |   | (116,000                                                                 | )      |   | -                                                                |   |   | -                                                            |   |   | -                                                            |   |
|                                             |   |   |                                                                     |   |   |                                                             |   |   |                                                         |   |   |                                                         |   |
| Net                  deferred taxes              |   | $      | -                                                                        |   | $      | -                                                                |   | $      | -                                                            |   | $      | -                                                            |   |

|                                                                     |   |   | Five                  monthsEndedDecember                  31,2004  |   |   | Seven                  monthsEndedAugust                  1,2004 |   |   | Year                  EndedDecember                  31,2003 |   |   | Year                  EndedDecember                  31,2002(Unaudited) |   |
|--------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|
| Expected                  tax at Federalstatutory                  rates |   | $      | (131,000                                                                 | )      | $      | 134,000                                                          |   | $      | (76,000                                                      | )      | $      | (907,000                                                                | )      |
| Permanent                  difference - amortization of discount         |   |   |                                                                     |   |   |                                                             |   |   |                                                         |   |   | 182,000                                                                 |   |
| Change                  in valuation allowance                           |   |   | (1,596,000                                                               | )      |   | (155,000                                                         | )      |   | (1,348,000                                                   | )      |   | (252,000                                                                | )      |
| Expiration                  of Federal net operating loss carryforwards  |   |   | 1,560,000                                                                |   |   |                                                             |   |   | 1,351,000                                                    |   |   | 1,139,000                                                               |   |
| Utilization                  of net operating loss carryforwards         |   |   |                                                                     |   |   |                                                             |   |   |                                                         |   |   |                                                                    |   |
| State                  taxes, net                                        |   |   | 65,000                                                                   |   |   | 25,000                                                           |   |   | 73,000                                                       |   |   | (68,000                                                                 | )      |
| Tax                  credits                                             |   |   | -                                                                        |   |   | (4,000                                                           | )      |   |                                                         |   |   | (94,000                                                                 | )      |
| Fresh                  start accounting                                  |   |   | 102,000                                                                  |   |   |                                                             |   |   |                                                         |   |   |                                                                    |   |
| Tax                  provision                                           |   | $      | -                                                                        |   | $      | -                                                                |   | $      | -                                                            |   | $      | -                                                                       |   |

----

|                                |   |   |                                               |   | Options                      Outstanding |                                                 | Options                      Exercisable |   |
|-------------------------------------|--------|--------|----------------------------------------------------|--------|------------------------------------------|------------------------------------------------------|------------------------------------------|--------|
|                                |   |   |                                               |   | Weighted                      Average    |                                                 |                                     |   |   |   |   |   |
| Exercise                      Price |   |   | Number                      of Options Outstanding |   |                                     | Weighted                      Average Exercise Price |                                     |   | Remaining                      Contractual Life |   |   | Number                      of Options Exercisable |   |   | Weighted                      Average Exercise Price |   |
|                                |   |   |                                               |   |                                     |                                                 |                                     |   |   |   |   |   |   |   |   |   |
| $0.15                               |   |   | 1,500,000                                          |   | $                                        | 0.15                                                 |                                     |   | 9.57 |   |   | 500,000 |   | $ | 0.15 |   |
| $0.40                               |   |   | 275,000                                            |   | $                                        | 0.40                                                 |                                     |   | 9.79 |   |   | 91,667 |   | $ | 0.40 |   |
| Totals                              |   |   | 1,775,000                                          |   | $                                        | 0.19                                                 |                                     |   | 9.60 |   |   | 591,667 |   | $ | 0.19 |   |

----

|                                                    |   |   | Options                  Available For Grant |   |   | Plan                  Options Outstanding |   |   | Non-Plan                  Options Outstanding |   |   | Weighted                  Average Exercise Price Share |   |
|---------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|-------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|--------------------------------------------------------|--------|
|                                                    |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Balance,                  December 31, 2001 (Unaudited) |   |   | 750,000                                      |   |   | 1,057,712                                 |   |   | 343,000                                       |   | $      | 4.92                                                   |   |
| Options                  granted                        |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Options                  exercised                      |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Balance,                  December 31, 2002 (Unaudited) |   |   | 750,000                                      |   |   | 1,057,712                                 |   |   | 343,000                                       |   | $      | 4.92                                                   |   |
| Options                  granted                        |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Options                  exercised                      |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Options                  canceled                       |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Balance,                  December 31, 2003             |   |   | 750,000                                      |   |   | 1,057,712                                 |   |   | 343,000                                       |   | $      | 4.92                                                   |   |
| Options                  authorized                     |   |   | 4,882,614                                    |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Options                  granted                        |   |   | (1,500,000                                   | )      |   | 1,500,000                                 |   |   |                                          |   | $      | 0.15                                                   |   |
| Options                  exercised                      |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Options                  cancelled under Plan           |   |   |                                         |   |   | (1,057,712                                | )      |   | (343,000                                      | )      | $      | (4.92                                                  | )      |
| Balance,                  August 1, 2004                |   |   | 4,132,614                                    |   |   | 1,500,000                                 |   |   | -                                             |   | $      | 0.15                                                   |   |
| Options                  granted                        |   |   | (275,000                                     | )      |   | 275,000                                   |   |   |                                          |   | $      | 0.40                                                   |   |
| Options                  exercised                      |   |   |                                         |   |   |                                      |   |   |                                          |   |   |                                                   |   |
| Balance,                  December 31, 2004             |   |   | 3,857,614                                    |   |   | 1,775,000                                 |   |   | -                                             |   | $      | 0.19                                                   |   |

----

----

|                                                                                                                          |
|-------------------------------------------------------------------------------------------------------------------------------|
| **SpectraScience,                        Inc.**                                                                               |
| **(A                        Development Stage Enterprise)**                                                                   |
| **Balance                        Sheets**                                                                                     |
| **For                        the quarters ended March 31, 2004, June 30, 2004 and September                        30, 2004** |
| **(unaudited)**                                                                                                               |
|                                                                                                                          |

| **ASSETS**                                                                             |   |                                                     |        |                                                    |   |                                                         |   |
|----------------------------------------------------------------------------------------|--------|----------------------------------------------------------|-------------|---------------------------------------------------------|--------|--------------------------------------------------------------|--------|
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |
|                                                                                   |   | **Quarter                          Ended**March 31, 2004 |        | **Quarter                          Ended**June 30, 2004 |   | **Quarter                          Ended**September 30, 2004 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |
| CURRENT                        ASSETS                                                  |   |                                                     |        |                                                    |   |                                                         |   |
| Cash                        and cash equivalents                                       |   | $                                                        | 54,447      |                                                    | $      | 383,731                                                      |   | $ | 1,265,113 |   |
| Inventories                                                                            |   |                                                     | 149,169     |                                                    |   | 149,169                                                      |   |   | 149,169 |   |
| Prepaid                        expenses and other                                      |   |                                                     |        |                                                    |   |                                                         |   |   | 29,664 |   |
| TOTAL                        CURRENT ASSETS                                            |   |                                                     | 203,616     |                                                    |   | 532,900                                                      |   |   | 1,443,946 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| FIXED                        ASSETS                                                    |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| Office                        furniture                                                |   |                                                     | 59,886      |                                                    |   | 59,886                                                       |   |   | 4,050 |   |
| Computer                        equipment                                              |   |                                                     | 46,643      |                                                    |   | 46,643                                                       |   |   | 4,323 |   |
| Machinery                        and equipment                                         |   |                                                     | 319,155     |                                                    |   | 319,155                                                      |   |   | 13,868 |   |
|                                                                                   |   |                                                     | 425,684     |                                                    |   | 425,684                                                      |   |   | 22,241 |   |
| Less                        accumulated depreciation                                   |   |                                                     | (367,823    | )                                                       |   | (367,823                                                     | )      |   | (800 | ) |
| TOTAL                        FIXED ASSETS                                              |   |                                                     | 57,861      |                                                    |   | 57,861                                                       |   |   | 21,441 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| Patents,                        net                                                    |   |                                                     |        |                                                    |   |                                                         |   |   | 286,779 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| TOTAL                        ASSETS                                                    |   | $                                                        | 261,477     |                                                    | $      | 590,761                                                      |   | $ | 1,752,166 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| **LIABILITIES                        AND STOCKHOLDERS' EQUITY (DEFICIT)**              |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| LIABILITIES                        NOT SUBJECT TO COMPROMISE                           |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| Accounts                        payable                                                |   | $                                                        | 8,908       |                                                    | $      | 22,984                                                       |   | $ | 33,704 |   |
| Accrued                        expenses                                                |   |                                                     | 33,777      |                                                    |   | 29,763                                                       |   |   |   |   |
| Accrued                        compensation and taxes                                  |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| TOTAL                        CURRENT LIABILITIES                                       |   |                                                     | 42,685      |                                                    |   | 52,747                                                       |   |   | 33,704 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| LIABILITIES                        SUBJECT TO COMPROMISE                               |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| Accounts                        payable                                                |   |                                                     | 66,222      |                                                    |   | 66,275                                                       |   |   |   |   |
| Note                        payable - trade creditors                                  |   |                                                     | 8,514       |                                                    |   | 8,514                                                        |   |   |   |   |
| Accrued                        compensation and taxes                                  |   |                                                     | 366,032     |                                                    |   | 366,032                                                      |   |   |   |   |
| Accrued                        expenses                                                |   |                                                     | 100,185     |                                                    |   | 100,185                                                      |   |   |   |   |
| Accrued                        interest                                                |   |                                                     | 72,033      |                                                    |   | 82,733                                                       |   |   |   |   |
| Convertible                        notes payable                                       |   |                                                     | 535,000     |                                                    |   | 535,000                                                      |   |   |   |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| TOTAL                        LIABILITIES SUBJECT TO COMPROMISE                         |   |                                                     | 1,147,986   |                                                    |   | 1,158,739                                                    |   |   |   |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| STOCKHOLDERS'                        EQUITY (DEFICIT)                                  |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| Common                        stock, par value of $0.25, 17,000,000 shares authorized, |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| 7,153,813                        issued and outstanding                                |   |                                                     | 1,788,453   |                                                    |   | 1,788,453                                                    |   |   |   |   |
| Common                        stock, par value of $0.01, 100,000,000 shares authorized |   |                                                     |        |                                                    |   | 29,417                                                       |   |   | 375,508 |   |
| Additional                        paid-in capital                                      |   |                                                     | 54,332,013  |                                                    |   | 54,655,596                                                   |   |   | 1,681,604 |   |
| Deferred                        compensation                                           |   |                                                     |        |                                                    |   |                                                         |   |   | (123,147 | ) |
| Deficit                        accumulated during the development stage                |   |                                                     | (57,049,660 | )                                                       |   | (57,094,191                                                  | )      |   | (215,503 | ) |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| TOTAL                        STOCKHOLDERS' EQUITY (DEFICIT)                            |   |                                                     | (929,194    | )                                                       |   | (620,725                                                     | )      |   | 1,718,462 |   |
|                                                                                   |   |                                                     |        |                                                    |   |                                                         |   |   |   |   |
| TOTAL                        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)            |   | $                                                        | 261,477     |                                                    | $      | 590,761                                                      |   | $ | 1,752,166 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                                                                                                           |
|------------------------------------------------------------------------------------------------------------------------------------------|
| **SpectraScience,                    Inc.**                                                                                              |
| **Balance                    Sheets**                                                                                                    |
| **For                    the quarters ended March 31, 2003, June 30, 2003 and September                    30,                    2003** |
| **(unaudited)**                                                                                                                          |

| **ASSETS**                                                                            |   |                                      |        |                                     |   |                                          |   |
|---------------------------------------------------------------------------------------|--------|-------------------------------------------|-------------|------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                  |   | **Quarter                        Ended**  |        | **Quarter                        Ended** |   | **Quarter                        Ended**      |   |
|                                                                                  |   | **March                        31, 2003** |        | **June                        30, 2003** |   | **September                        30, 2003** |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |
| CURRENT                        ASSETS                                                 |   |                                      |        |                                     |   |                                          |   |
| Cash                        and cash equivalents                                      |   | $                                         | 169,353     |                                     | $      | 175,750                                       |   | $ | 141,148 |   |
| Inventories                                                                           |   |                                      | 149,169     |                                     |   | 149,169                                       |   |   | 149,169 |   |
| Prepaid                        expenses                                               |   |                                      | 15,766      |                                     |   |                                          |   |   |   |   |
| TOTAL                        CURRENT ASSETS                                           |   |                                      | 334,288     |                                     |   | 324,919                                       |   |   | 290,317 |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| FIXED                        ASSETS                                                   |   |                                      |        |                                     |   |                                          |   |   |   |   |
| Office                        furniture                                               |   |                                      | 59,886      |                                     |   | 59,886                                        |   |   | 59,886 |   |
| Computer                        equipment                                             |   |                                      | 46,643      |                                     |   | 46,643                                        |   |   | 46,643 |   |
| Machinery                        and equipment                                        |   |                                      | 319,155     |                                     |   | 319,155                                       |   |   | 319,155 |   |
|                                                                                  |   |                                      | 425,684     |                                     |   | 425,684                                       |   |   | 425,684 |   |
| Less                        accumulated depreciation                                  |   |                                      | (367,823    | )                                        |   | (367,823                                      | )      |   | (367,823 | ) |
| TOTAL                        FIXED ASSETS                                             |   |                                      | 57,861      |                                     |   | 57,861                                        |   |   | 57,861 |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| TOTAL                        ASSETS                                                   |   | $                                         | 392,149     |                                     | $      | 382,780                                       |   | $ | 348,178 |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| **LIABILITIES                        AND STOCKHOLDERS' DEFICIT**                      |   |                                      |        |                                     |   |                                          |   |   |   |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| LIABILITIES                        NOT SUBJECT TO COMPROMISE                          |   |                                      |        |                                     |   |                                          |   |   |   |   |
| Accrued                        expenses                                               |   | $                                         | 5,876       |                                     | $      | 35,768                                        |   | $ | 53,854 |   |
| TOTAL                        CURRENT LIABILITIES                                      |   |                                      | 5,876       |                                     |   | 35,768                                        |   |   | 53,854 |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| LIABILITIES                        SUBJECT TO COMPROMISE                              |   |                                      |        |                                     |   |                                          |   |   |   |   |
| Accounts                        payable                                               |   |                                      | 66,222      |                                     |   | 66,222                                        |   |   | 66,222 |   |
| Note                        payable - trade creditors                                 |   |                                      | 8,514       |                                     |   | 8,514                                         |   |   | 8,514 |   |
| Accrued                        compensation and taxes                                 |   |                                      | 366,032     |                                     |   | 366,032                                       |   |   | 366,032 |   |
| Accrued                        expenses                                               |   |                                      | 100,185     |                                     |   | 100,185                                       |   |   | 100,185 |   |
| Accrued                        Interest                                               |   |                                      | 29,233      |                                     |   | 39,933                                        |   |   | 50,633 |   |
| Convertible                        notes payable                                      |   |                                      | 535,000     |                                     |   | 535,000                                       |   |   | 535,000 |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| TOTAL                        LIABILITIES SUBJECT TO COMPROMISE                        |   |                                      | 1,105,186   |                                     |   | 1,115,886                                     |   |   | 1,126,586 |   |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| STOCKHOLDERS'                        DEFICIT                                          |   |                                      |        |                                     |   |                                          |   |   |   |   |
| Common                        stock, par value of $0.25, 17,000,000 shares authorized |   |                                      |        |                                     |   |                                          |   |   |   |   |
| 7,153,813                        issued and outstanding                               |   |                                      | 1,788,453   |                                     |   | 1,788,453                                     |   |   | 1,788,453 |   |
| Additional                        paid-in capital                                     |   |                                      | 54,332,013  |                                     |   | 54,332,013                                    |   |   | 54,332,013 |   |
| Deficit                        accumulated during the development stage               |   |                                      | (56,839,379 | )                                        |   | (56,889,340                                   | )      |   | (56,952,728 | ) |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| TOTAL                        STOCKHOLDERS' DEFICIT                                    |   |                                      | (718,913    | )                                        |   | (768,874                                      | )      |   | (832,262 | ) |
|                                                                                  |   |                                      |        |                                     |   |                                          |   |   |   |   |
| TOTAL                        LIABILITIES AND STOCKHOLDERS' DEFICIT                    |   | $                                         | 392,149     |                                     | $      | 382,780                                       |   | $ | 348,178 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                                                |
|---------------------------------------------------------------------|
| **SpectraScience,                        Inc.**                     |
| **Balance                        Sheet**                            |
| **For                        the quarter ended September 30, 2002** |
| **(unaudited)**                                                     |

| **ASSETS**                                                                                |   |                                                         |        |
|-------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-------------|
|                                                                                      |   | **Quarter                          Ended**September 30, 2002 |        |
|                                                                                      |   |                                                         |        |
| CURRENT                        ASSETS                                                     |   |                                                         |        |
| Cash                        and cash equivalents                                          |   | $                                                            | 244,241     |   |
| Inventories                                                                               |   |                                                         | 161,586     |   |
| Prepaid                        expenses and other                                         |   |                                                         | 30,938      |   |
| TOTAL                        CURRENT ASSETS                                               |   |                                                         | 436,765     |   |
|                                                                                      |   |                                                         |        |   |
| FIXED                        ASSETS                                                       |   |                                                         |        |   |
| Office                        furniture                                                   |   |                                                         | 59,886      |   |
| Computer                        equipment                                                 |   |                                                         | 46,643      |   |
| Machinery                        and equipment                                            |   |                                                         | 319,155     |   |
|                                                                                      |   |                                                         | 425,684     |   |
| Less                        accumulated depreciation                                      |   |                                                         | (367,823    | ) |
| TOTAL                        FIXED ASSETS                                                 |   |                                                         | 57,861      |   |
|                                                                                      |   |                                                         |        |   |
| TOTAL                        ASSETS                                                       |   | $                                                            | 494,626     |   |
|                                                                                      |   |                                                         |        |   |
|                                                                                      |   |                                                         |        |   |
| **LIABILITIES                        AND STOCKHOLDERS' DEFICIT**                          |   |                                                         |        |   |
|                                                                                      |   |                                                         |        |   |
| LIABILITIES                        NOT SUBJECT TO COMPROMISE                              |   |                                                         |        |   |
| Accrued                        expenses                                                   |   | $                                                            | 5,163       |   |
| TOTAL                        CURRENT LIABILITIES                                          |   |                                                         | 5,163       |   |
|                                                                                      |   |                                                         |        |   |
| LIABILITIES                        SUBJECT TO COMPROMISE                                  |   |                                                         |        |   |
| Accounts                        payable                                                   |   |                                                         | 66,222      |   |
| Note                        payable - trade creditors                                     |   |                                                         | 8,514       |   |
| Accrued                        compensation and taxes                                     |   |                                                         | 366,032     |   |
| Accrued                        expenses                                                   |   |                                                         | 100,185     |   |
| Accrued                        interest                                                   |   |                                                         | 7,833       |   |
| Convertible                        notes payable, net of unamortized discount of $320,000 |   |                                                         | 214,000     |   |
|                                                                                      |   |                                                         |        |   |
| TOTAL                        LIABILITIES SUBJECT TO COMPROMISE                            |   |                                                         | 762,786     |   |
|                                                                                      |   |                                                         |        |   |
| STOCKHOLDERS'                        DEFICIT                                              |   |                                                         |        |   |
| Common                        stock, par value of $0.25, 17,000,000 shares authorized,    |   |                                                         |        |   |
| 7,153,813                        issued and outstanding                                   |   |                                                         | 1,788,453   |   |
| Additional                        paid-in capital                                         |   |                                                         | 54,332,013  |   |
| Deficit                        accumulated during the development stage                   |   |                                                         | (56,393,789 | ) |
|                                                                                      |   |                                                         |        |   |
| TOTAL                        STOCKHOLDERS' DEFICIT                                        |   |                                                         | (273,323    | ) |
|                                                                                      |   |                                                         |        |   |
| TOTAL                        LIABILITIES AND STOCKHOLDERS' DEFICIT                        |   | $                                                            | 494,626     |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                                                |
|---------------------------------------------------------------------|
| **SpectraScience,                        Inc.**                     |
| **(A                        Development Stage Enterprise)**         |
| **Statements                        of Operations**                 |
| **For                        the First, Second and Third Quarters** |
| **for                        the years 2004 and 2003**              |
| **(unaudited)**                                                     |
|                                                                |

|                                                                      |   | **3                        months ended** |                                      | **3                        months ended** |   |                                          |   |   |                                          |   |   |                                      |   |
|---------------------------------------------------------------------------|--------|-------------------------------------------|-------------------------------------------|-------------------------------------------|--------|-----------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|-------------------------------------------|--------|
|                                                                      |   | **March                        31, 2004** |                                      | **March                        31, 2003** |   |                                          |   |   |                                          |   |   |                                      |   |
| Gross                        Revenue                                      |   | $                                         | -                                         |                                      | $      | -                                             |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OPERATING                        EXPENSES                                 |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| General                        and administrative                         |   |                                      | 37,614                                    |                                      |   | 51,054                                        |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      | 37,614                                    |                                      |   | 51,054                                        |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OPERATING                        LOSS                                     |   |                                      | (37,614                                   | )                                         |   | (51,054                                       | )      |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OTHER                        INCOME (EXPENSE)                             |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Interest                        expense                                   |   |                                      | (10,700                                   | )                                         |   | (10,700                                       | )      |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Interest                        income                                    |   |                                      | 16                                        |                                      |   | 379                                           |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      | (10,684                                   | )                                         |   | (10,321                                       | )      |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| NET                        LOSS                                           |   | $                                         | (48,298                                   | )                                         | $      | (61,375                                       | )      |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Basic                        and diluted net loss available to            |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| common                        stockholders per share                      |   | $                                         | (0.01                                     | )                                         | $      | (0.01                                         | )      |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Weighted                        average number of common                  |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| shares                        outstanding                                 |   |                                      | 7,153,813                                 |                                      |   | 7,153,813                                     |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      | **3                        months ended** |                                      |   | **3                        months ended**     |   |   | **6                        months ended**     |   |   | **6                        months ended** |   |   |   |   |   |   |   |
|                                                                      |   |                                      | **June                        30, 2004**  |                                      |   | **June                        30, 2003**      |   |   | **June                        30, 2004**      |   |   | **June                        30, 2003**  |   |   |   |   |   |   |   |
| Gross                        Revenue                                      |   | $                                         | -                                         |                                      | $      | -                                             |   | $      | -                                             |   | $      | -                                         |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OPERATING                        EXPENSES                                 |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| General                        and administrative                         |   |                                      | 33,843                                    |                                      |   | 39,466                                        |   |   | 71,456                                        |   |   | 90,519                                    |   |   |   |   |   |   |   |
|                                                                      |   |                                      | 33,843                                    |                                      |   | 39,466                                        |   |   | 71,456                                        |   |   | 90,519                                    |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OPERATING                        LOSS                                     |   |                                      | (33,843                                   | )                                         |   | (39,466                                       | )      |   | (71,456                                       | )      |   | (90,519                                   | )      |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OTHER                        INCOME (EXPENSE)                             |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Interest                        expense                                   |   |                                      | (10,700                                   | )                                         |   | (10,700                                       | )      |   | (21,400                                       | )      |   | (21,400                                   | )      |   |   |   |   |   |   |
| Interest                        income                                    |   |                                      | 10                                        |                                      |   | 204                                           |   |   | 26                                            |   |   | 582                                       |   |   |   |   |   |   |   |
|                                                                      |   |                                      | (10,690                                   | )                                         |   | (10,496                                       | )      |   | (21,374                                       | )      |   | (20,818                                   | )      |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| NET                        LOSS                                           |   | $                                         | (44,533                                   | )                                         | $      | (49,962                                       | )      | $      | (92,830                                       | )      | $      | (111,337                                  | )      |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Basic                        and diluted net loss available to            |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| common                        stockholders per share                      |   | $                                         | (0.01                                     | )                                         | $      | (0.01                                         | )      | $      | (0.01                                         | )      | $      | (0.02                                     | )      |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Weighted                        average number of common                  |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| shares                        outstanding                                 |   |                                      | 7,644,091                                 |                                      |   | 7,153,813                                     |   |   | 7,398,952                                     |   |   | 7,153,813                                 |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      | **1                        months ended** |                                      |   | **2                        months ended**     |   |   | **3                        months ended**     |   |   | **7                        months ended** |   |   | **2                        months ended** |   |   | **9                        months ended** |   |
|                                                                      |   |                                      | **August                        1, 2004** |                                      |   | **September                        30, 2004** |   |   | **September                        30, 2003** |   |   | **August                        1, 2004** |   |   | **September                        30, 2004** |   |   | **September                        30, 2003** |   |
| Gross                        Revenue                                      |   | $                                         | -                                         |                                      | $      | -                                             |   | $      | -                                             |   | $      | -                                         |   | $ | - |   | $ | - |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OPERATING                        EXPENSES                                 |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| General                        and administrative                         |   |                                      | 34,504                                    |                                      |   | 218,689                                       |   |   | 52,770                                        |   |   | 105,960                                   |   |   | 218,689 |   |   | 143,290 |   |
|                                                                      |   |                                      | 34,504                                    |                                      |   | 218,689                                       |   |   | 52,770                                        |   |   | 105,960                                   |   |   | 218,689 |   |   | 143,290 |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OPERATING                        LOSS                                     |   |                                      | (34,504                                   | )                                         |   | (218,689                                      | )      |   | (52,770                                       | )      |   | (105,960                                  | )      |   | (218,689 | ) |   | (143,290 | ) |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| OTHER                        INCOME (EXPENSE)                             |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Interest                        expense                                   |   |                                      | (3,567                                    | )                                         |   |                                          |   |   | (10,700                                       | )      |   | (24,967                                   | )      |   |   |   |   | (32,100 | ) |
| Interest                        income                                    |   |                                      | 119                                       |                                      |   | 1,936                                         |   |   | 83                                            |   |   | 145                                       |   |   | 1,936 |   |   | 665 |   |
| Gain                        on disposal of fixed assets                   |   |                                      |                                      |                                      |   | 1,250                                         |   |   |                                          |   |   |                                      |   |   | 1,250 |   |   |   |   |
|                                                                      |   |                                      | (3,448                                    | )                                         |   | 3,186                                         |   |   | (10,617                                       | )      |   | (24,822                                   | )      |   | 3,186 |   |   | (31,435 | ) |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| LOSS                        BEFORE REORGANIZATION ITEMS                   |   |                                      | (37,952                                   | )                                         |   | (215,503                                      | )      |   | (63,387                                       | )      |   | (130,782                                  | )      |   | (215,503 | ) |   | (174,725 | ) |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Gain                        on debt forgiveness                           |   |                                      | 525,380                                   |                                      |   |                                          |   |   |                                          |   |   | 525,380                                   |   |   |   |   |   |   |   |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| NET                        INCOME (LOSS)                                  |   | $                                         | 487,428                                   |                                      | $      | (215,503                                      | )      | $      | (63,387                                       | )      | $      | 394,598                                   |   | $ | (215,503 | ) | $ | (174,725 | ) |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Basic                        and diluted net earnings (loss) available to |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| common                        stockholders per share                      |   | $                                         | 0.02                                      |                                      | $      | (0.01                                         | )      | $      | (0.01                                         | )      | $      | 0.03                                      |   | $ | (0.01 | ) | $ | (0.02 | ) |
|                                                                      |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| Weighted                        average number of common                  |   |                                      |                                      |                                      |   |                                          |   |   |                                          |   |   |                                      |   |   |   |   |   |   |   |
| shares                        outstanding                                 |   |                                      | 24,246,454                                |                                      |   | 24,246,454                                    |   |   | 7,153,813                                     |   |   | 13,014,786                                |   |   | 24,246,454 |   |   | 7,153,813 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                       |
|---------------------------------------------------------------------|
| **SpectraScience,                        Inc.**                     |
| **Statements                        of Operations**                 |
| **For                        the First, Second and Third Quarters** |
| **for                        the years 2003 and 2002**              |
| **(unaudited)**                                                     |
|                                                                |

|                                                           |   | **3                        months ended** |                                          | **3                        months ended** |   |                                          |   |   |                                          |
|----------------------------------------------------------------|--------|-------------------------------------------|-----------------------------------------------|-------------------------------------------|--------|-----------------------------------------------|--------|--------|-----------------------------------------------|
|                                                           |   | **March                        31, 2003** |                                          | **March                        31, 2002** |   |                                          |   |   |                                          |
| Gross                        Revenue                           |   | $                                         | -                                             |                                      | $      | -                                             |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OPERATING                        EXPENSES                      |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Research                        and development                |   |                                      |                                          |                                      |   | 259,591                                       |   |   |                                          |   |   |   |   |
| General                        and administrative              |   |                                      | 51,054                                        |                                      |   | 221,649                                       |   |   |                                          |   |   |   |   |
|                                                           |   |                                      | 51,054                                        |                                      |   | 481,240                                       |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OPERATING                        LOSS                          |   |                                      | (51,054                                       | )                                         |   | (481,240                                      | )      |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OTHER                        INCOME (EXPENSE)                  |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Interest                        expense                        |   |                                      | (10,700                                       | )                                         |   |                                          |   |   |                                          |   |   |   |   |
| Interest                        income                         |   |                                      | 379                                           |                                      |   | 2,373                                         |   |   |                                          |   |   |   |   |
|                                                           |   |                                      | (10,321                                       | )                                         |   | 2,373                                         |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| NET                        LOSS                                |   | $                                         | (61,375                                       | )                                         | $      | (478,867                                      | )      |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Basic                        and diluted net loss available to |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| common                        stockholders per share           |   | $                                         | (0.01                                         | )                                         | $      | (0.07                                         | )      |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Weighted                        average number of common       |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| shares                        outstanding                      |   |                                      | 7,153,813                                     |                                      |   | 7,153,813                                     |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
|                                                                |   |                                      | **3                        months ended**     |                                      |   | **3                        months ended**     |   |   | **6                        months ended**     |   |   | **6                        months ended** |   |
|                                                                |   |                                      | **June                        30, 2003**      |                                      |   | **June                        30, 2002**      |   |   | **June                        30, 2003**      |   |   | **June                        30, 2002** |   |
| Gross                        Revenue                           |   | $                                         | -                                             |                                      | $      | -                                             |   | $      | -                                             |   | $ | - |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OPERATING                        EXPENSES                      |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Research                        and development                |   |                                      |                                          |                                      |   | 229,326                                       |   |   |                                          |   |   | 488,917 |   |
| General                        and administrative              |   |                                      | 39,466                                        |                                      |   | 196,510                                       |   |   | 90,519                                        |   |   | 418,159 |   |
|                                                           |   |                                      | 39,466                                        |                                      |   | 425,836                                       |   |   | 90,519                                        |   |   | 907,076 |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OPERATING                        LOSS                          |   |                                      | (39,466                                       | )                                         |   | (425,836                                      | )      |   | (90,519                                       | ) |   | (907,076 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OTHER                        INCOME (EXPENSE)                  |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Interest                        expense                        |   |                                      | (10,700                                       | )                                         |   |                                          |   |   | (21,400                                       | ) |   |   |   |
| Interest                        income                         |   |                                      | 204                                           |                                      |   | 1,000                                         |   |   | 582                                           |   |   | 3,373 |   |
|                                                           |   |                                      | (10,496                                       | )                                         |   | 1,000                                         |   |   | (20,818                                       | ) |   | 3,373 |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| NET                        LOSS                                |   | $                                         | (49,962                                       | )                                         | $      | (424,836                                      | )      | $      | (111,337                                      | ) | $ | (903,703 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Basic                        and diluted net loss available to |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| common                        stockholders per share           |   | $                                         | (0.01                                         | )                                         | $      | (0.06                                         | )      | $      | (0.02                                         | ) | $ | (0.13 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Weighted                        average number of common       |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| shares                        outstanding                      |   |                                      | 7,153,813                                     |                                      |   | 7,153,813                                     |   |   | 7,153,813                                     |   |   | 7,153,813 |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
|                                                                |   |                                      | **3                        months ended**     |                                      |   | **3                        months ended**     |   |   | **9                        months ended**     |   |   | **9                        months ended** |   |
|                                                                |   |                                      | **September                        30, 2003** |                                      |   | **September                        30, 2002** |   |   | **September                        30, 2003** |   |   | **September                        30, 2002** |   |
| Gross                        Revenue                           |   | $                                         | -                                             |                                      | $      | -                                             |   | $      | -                                             |   | $ | - |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OPERATING                        EXPENSES                      |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Research                        and development                |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   | 488,917 |   |
| General                        and administrative              |   |                                      | 52,770                                        |                                      |   | 753,059                                       |   |   | 143,290                                       |   |   | 1,171,218 |   |
|                                                           |   |                                      | 52,770                                        |                                      |   | 753,059                                       |   |   | 143,290                                       |   |   | 1,660,135 |   |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OPERATING                        LOSS                          |   |                                      | (52,770                                       | )                                         |   | (753,059                                      | )      |   | (143,290                                      | ) |   | (1,660,135 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| OTHER                        INCOME (EXPENSE)                  |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Interest                        expense                        |   |                                      | (10,700                                       | )                                         |   | (221,843                                      | )      |   | (32,100                                       | ) |   | (223,011 | ) |
| Interest                        income                         |   |                                      | 83                                            |                                      |   | 142                                           |   |   | 665                                           |   |   | 4,683 |   |
| Loss                        on disposal of fixed assets        |   |                                      |                                          |                                      |   | (82,035                                       | )      |   |                                          |   |   | (82,035 | ) |
| Writedown                        of obsolete inventory         |   |                                      |                                          |                                      |   | (323,500                                      | )      |   |                                          |   |   | (323,500 | ) |
|                                                           |   |                                      | (10,617                                       | )                                         |   | (627,236                                      | )      |   | (31,435                                       | ) |   | (623,863 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| NET                        LOSS                                |   | $                                         | (63,387                                       | )                                         | $      | (1,380,295                                    | )      | $      | (174,725                                      | ) | $ | (2,283,998 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Basic                        and diluted net loss available to |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| common                        stockholders per share           |   | $                                         | (0.01                                         | )                                         | $      | (0.19                                         | )      | $      | (0.02                                         | ) | $ | (0.32 | ) |
|                                                           |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| Weighted                        average number of common       |   |                                      |                                          |                                      |   |                                          |   |   |                                          |   |   |   |   |
| shares                        outstanding                      |   |                                      | 7,153,813                                     |                                      |   | 7,153,813                                     |   |   | 7,153,813                                     |   |   | 7,153,813 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                                                                                                                                                                                                                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SpectraScience,                        Inc.**                                                                                                                                                                                       |
| **Statements                        of Cash Flows**                                                                                                                                                                                   |
| **For                        the 3 months ended March 31, 2004, June 30, 2004, for the                        1 month ended                        August 1, 2004, for the 2 months ended September 30,                        2004** |
| **for                        the 6 months ended June 30, 2004, for the 7 months ended                        August 1, 2004                        and for the 2 months ended September 30, 2004**                                    |
| **(unaudited)**                                                                                                                                                                                                                       |

|                                                                                                                                               |   | **3                        months**      |    | **3                        months**      |   | **1                        month**      |   | **2                        months**      |      | **6                        months**      |   | **7                        months**     |   | **2                        months**      |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|---------|------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|-----------|------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|---------|
|                                                                                                                                               |   | **ended                        3/31/04** |    | **ended                        6/30/04** |   | **ended                        8/1/04** |   | **ended                        9/30/04** |      | **ended                        6/30/04** |   | **ended                        8/1/04** |   | **ended                        9/30/04** |    |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |
| Cash                        flows from operating activities:                                                                                       |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |
| Net                        income (loss)                                                                                                           |   | $                                        | (48,298 | )                                        | $      | (44,534                                 | )      | $                                        | 487,430   |                                     | $      | (215,503                                | )      | $                                        | (92,831 | ) | $ | 394,599 |   | $ | (215,503 | ) |
| Adjustments                        to reconcile net income (loss) to net cash used in                                                              |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| operating                        activities:                                                                                                       |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Depreciation                        and amortization                                                                                          |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   | 4,021                                   |   |                                     |    |   |   | - |   |   | 4,021 |   |
| Gain                        on discharge of debt                                                                                              |   |                                     |    |                                     |   |                                    |   |                                     | (525,380  | )                                        |   |                                    |   |                                     |    |   |   | (525,380 | ) |   |   |   |
| Amortization                        of deferred compensation                                                                                  |   |                                     |    |                                     |   |                                    |   |                                     | 758       |                                     |   | 77,609                                  |   |                                     |    |   |   | 758 |   |   | 77,609 |   |
| Changes                        in operating assets and liabilities:                                                                           |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
|  Prepaid                        expenses and other current assets                                                                             |   |                                     |    |                                     |   |                                    |   |                                     | (23,750   | )                                        |   | (5,913                                  | )      |                                     |    |   |   | (23,750 | ) |   | (5,913 | ) |
|  Accounts                        payable                                                                                                      |   |                                     | 8,908   |                                     |   | 14,130                                  |   |                                     | 30,780    |                                     |   | (25,998                                 | )      |                                     | 23,038  |   |   | 53,818 |   |   | (25,998 | ) |
|  Accrued                        expenses and other liabilities                                                                                |   |                                     | 20,350  |                                     |   | 6,687                                   |   |                                     | (93       | )                                        |   | (32,092                                 | )      |                                     | 27,037  |   |   | 26,944 |   |   | (32,092 | ) |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Net                        cash used in operating activities                                                                                       |   |                                     | (19,040 | )                                        |   | (23,717                                 | )      |                                     | (30,255   | )                                        |   | (197,876                                | )      |                                     | (42,756 | ) |   | (73,011 | ) |   | (197,876 | ) |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Cash                        flows from investing activities - proceeds from the sale                        of fixed                        assets |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   | 1,000                                   |   |                                     |    |   |   |   |   |   | 1,000 |   |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Cash                        flows from financing activities:                                                                                       |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Proceeds                        from exchange of common stock                                                                                      |   |                                     |    |                                     |   |                                    |   |                                     | 886,116   |                                     |   |                                    |   |                                     |    |   |   | 886,116 |   |   |   |   |
| Proceeds                        from issuance of stock in reorganization                                                                           |   |                                     |    |                                     |   |                                    |   |                                     | 50,000    |                                     |   |                                    |   |                                     |    |   |   | 50,000 |   |   |   |   |
| Proceeds                        from the issuance of common stock                                                                                  |   |                                     |    |                                     |   | 353,000                                 |   |                                     | 152,400   |                                     |   | 20,000                                  |   |                                     | 353,000 |   |   | 505,400 |   |   | 20,000 |   |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Net                        cash provided by financing activities                                                                                   |   |                                     |    |                                     |   | 353,000                                 |   |                                     | 1,088,516 |                                     |   | 20,000                                  |   |                                     | 353,000 |   |   | 1,441,516 |   |   | 20,000 |   |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Net                        (decrease) increase in cash and cash equivalents                                                                        |   |                                     | (19,040 | )                                        |   | 329,283                                 |   |                                     | 1,058,261 |                                     |   | (176,876                                | )      |                                     | 310,244 |   |   | 1,368,505 |   |   | (176,876 | ) |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Cash                        and cash equivalents at beginning of period                                                                            |   |                                     | 73,487  |                                     |   | 54,447                                  |   |                                     | 383,731   |                                     |   | 1,441,990                               |   |                                     | 73,487  |   |   | 73,487 |   |   | 1,441,990 |   |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Cash                        and cash equivalents at end of period                                                                                  |   | $                                        | 54,447  |                                     | $      | 383,730                                 |   | $                                        | 1,441,992 |                                     | $      | 1,265,114                               |   | $                                        | 383,731 |   | $ | 1,441,992 |   | $ | 1,265,114 |   |
|                                                                                                                                               |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Supplemental                        disclosure of non-cash investing and financing activities                                                      |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     |   |                                    |   |                                     |    |   |   |   |   |   |   |   |
| Conversion                        of notes payable and accrued interest to common stock                                                            |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     | $      | 565,000                                 |   |                                     |    |   |   |   |   | $ | 565,000 |   |
| Issuance                        of common stock in settlement of bankruptcy debt                                                                   |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     | $      | 60,000                                  |   |                                     |    |   |   |   |   | $ | 60,000 |   |
| Fresh                        start adjustment to fixed assets and patents                                                                          |   |                                     |    |                                     |   |                                    |   |                                     |      |                                     | $      | 255,379                                 |   |                                     |    |   |   |   |   | $ | 255,379 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                                                                                                                                                   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SpectraScience,                          Inc.**                                                                                                                      |
| **Statements                          of Cash Flows**                                                                                                                  |
| **For                          the 3 months ended March 31, 2003, June 30, 2003, September                          30,                          2003**                |
| **and                          for the 6 months ended June 30, 2003, and for the 9 months                          ended September                          30, 2003** |
| **(unaudited)**                                                                                                                                                        |

|                                                                                         |   | **3                          months**      |    | **3                          months**      |   | **3                          months**      |   | **6                          months**      |    | **9                          months**      |   |
|----------------------------------------------------------------------------------------------|--------|--------------------------------------------|---------|--------------------------------------------|--------|--------------------------------------------|--------|--------------------------------------------|---------|--------------------------------------------|--------|
|                                                                                         |   | **ended                          3/31/03** |    | **ended                          6/30/03** |   | **ended                          9/30/03** |   | **ended                          6/30/03** |    | **ended                          9/30/03** |   |
|                                                                                         |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |
| Cash                          flows from operating activities:                               |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |
| Net                          loss                                                            |   | $                                          | (61,375 | )                                          | $      | (49,962                                    | )      | $                                          | (63,386 | )                                          | $      | (111,337 | ) | $ | (174,724 | ) |
| Adjustments                          to reconcile net loss to net cash provided by (used in) |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
| operating                          activities:                                               |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
| Changes                          in operating assets and liabilities:                   |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
|  Prepaid                          expenses                                              |   |                                       | 7,437   |                                       |   | 15,766                                     |   |                                       |    |                                       |   | 23,203 |   |   | 23,203 |   |
|  Accrued                          expenses and other liabilities                        |   |                                       | (4,076  | )                                          |   | 40,593                                     |   |                                       | 28,784  |                                       |   | 36,517 |   |   | 65,302 |   |
|                                                                                         |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
| Net                          cash provided by (used in) operating activities                 |   |                                       | (58,014 | )                                          |   | 6,397                                      |   |                                       | (34,602 | )                                          |   | (51,617 | ) |   | (86,219 | ) |
|                                                                                         |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
|                                                                                         |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
| Net                          increase (decrease) in cash and cash equivalents                |   |                                       | (58,014 | )                                          |   | 6,397                                      |   |                                       | (34,602 | )                                          |   | (51,617 | ) |   | (86,219 | ) |
|                                                                                         |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
| Cash                          and cash equivalents at beginning of period                    |   |                                       | 227,367 |                                       |   | 169,353                                    |   |                                       | 175,750 |                                       |   | 227,367 |   |   | 227,367 |   |
|                                                                                         |   |                                       |    |                                       |   |                                       |   |                                       |    |                                       |   |   |   |   |   |   |
| Cash                          and cash equivalents at end of period                          |   | $                                          | 169,353 |                                       | $      | 175,750                                    |   | $                                          | 141,148 |                                       | $      | 175,750 |   | $ | 141,148 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

|                                                                       |
|----------------------------------------------------------------------------|
| **SpectraScience,                        Inc.**                            |
| **Statements                        of Cash Flows**                        |
| **for                        the 3 and 9 months ended September 30, 2002** |
| **(unaudited)**                                                            |

|                                                                         |   | **3                        months**  |       | **9                        months**  |   |
|------------------------------------------------------------------------------|--------|--------------------------------------|------------|--------------------------------------|--------|
|                                                                         |   | ended                        9/30/02 |       | ended                        9/30/02 |   |
|                                                                         |   |                                 |       |                                 |   |
| Cash                        flows from operating activities:                 |   |                                 |       |                                 |   |
| Net                        loss                                              |   | $                                    | (1,380,295 | )                                    | $      | (2,283,998 | ) |
| Adjustments                        to reconcile net loss to net cash used in |   |                                 |       |                                 |   |   |   |
| operating                        activities:                                 |   |                                 |       |                                 |   |   |   |
| Amortization                        of debt discount                    |   |                                 | 214,000    |                                 |   | 214,000 |   |
| Depreciation                        and amortization                    |   |                                 | 14,359     |                                 |   | 57,832 |   |
| Loss                        on disposal of fixed assets                 |   |                                 | 82,035     |                                 |   | 82,035 |   |
| Write                        off of obsolete inventory                  |   |                                 | 335,916    |                                 |   | 335,916 |   |
| Changes                        in operating assets and liabilities:     |   |                                 |       |                                 |   |   |   |
|  Inventories                                                            |   |                                 | (417       | )                                    |   | 12,639 |   |
|  Prepaid                        and other current assets                |   |                                 | 39,064     |                                 |   | 55,843 |   |
|  Other                        assets                                    |   |                                 | 85,922     |                                 |   | 70,935 |   |
|  Accounts                        payable                                |   |                                 | (15,934    | )                                    |   | (111,864 | ) |
|  Accrued                        expenses and other liabilities          |   |                                 | 247,680    |                                 |   | 347,737 |   |
|                                                                         |   |                                 |       |                                 |   |   |   |
| Net                        cash used in operating activities                 |   |                                 | (377,670   | )                                    |   | (1,218,925 | ) |
|                                                                         |   |                                 |       |                                 |   |   |   |
| Cash                        flows from financing activities:                 |   |                                 |       |                                 |   |   |   |
| Principal                        payments on long term debt                  |   |                                 |       |                                 |   | (41,695 | ) |
| Proceeds                        from long term debt                          |   |                                 | 535,000    |                                 |   | 535,000 |   |
| Net                        cash provided by financing activities             |   |                                 | 535,000    |                                 |   | 493,305 |   |
|                                                                         |   |                                 |       |                                 |   |   |   |
|                                                                         |   |                                 |       |                                 |   |   |   |
| Net                        increase (decrease) in cash and cash equivalents  |   |                                 | 157,330    |                                 |   | (725,620 | ) |
|                                                                         |   |                                 |       |                                 |   |   |   |
| Cash                        and cash equivalents at beginning of period      |   |                                 | 86,911     |                                 |   | 969,861 |   |
|                                                                         |   |                                 |       |                                 |   |   |   |
| Cash                        and cash equivalents at end of period            |   | $                                    | 244,241    |                                 | $      | 244,241 |   |

----

*See            Report of Independent Registered Public Accounting Firm and Notes to            the            Financial Statements*

----

----

**PART        III**

**Jim        Hitchin, Chairman, President, Chief Financial Officer, Secretary and CEO,        Director since 2004, Age 62,**

**Mark        D. McWilliams, Director since 2004, Age 48,**

**Rand        P. Mulford, Director since 2004, Age 61,**

----

**Chester        E. Sievert, Jr., Director since 2004, Age 53,**

----

| Name                  and Principal Position                                                                          |   |   | Year   |   |   | Salary  |   |   | Bonus  |   |   | Other                  Annual Compensation |   |   | Long                  Term Compensation Securities Underlying Option/s SARs |   |   | All                  OtherCompensation |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------------------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------|--------|
|                                                                                                                  |   |   |   |   |   |    |   |   |   |   |   |                                       |   |   |                                                                        |   |   |                                   |   |
| SCOTT                  G. ANDERSON                                                                                    |   |   | 2002*  |   | $      | 122,160 | (2)    | $      | 0      |   | $      | 4,000                                      | (1)    |   | N/A                                                                         |   |   | N/A                                    |   |
| President,                  Chief Executive Officer and Corporate Secretary                                           |   |   |   |   |   |    |   |   |   |   |   |                                       |   |   |                                                                        |   |   |                                   |   |
|                                                                                                                  |   |   |   |   |   |    |   |   |   |   |   |                                       |   |   |                                                                        |   |   |                                   |   |
| CHESTER                  E. SIEVERT, JR                                                                               |   |   | 2002*  |   | $      | 101,136 | (2)    | $      | 0      |   | $      | 4,000                                      | (1)    |   | N/A                                                                         |   |   | N/A                                    |   |
| Chairman                  of the Board of Directors                                                                   |   |   |   |   |   |    |   |   |   |   |   |                                       |   |   |                                                                        |   |   |                                   |   |
|                                                                                                                  |   |   |   |   |   |    |   |   |   |   |   |                                       |   |   |                                                                        |   |   |                                   |   |
| JIM                  HITCHIN                                                                                          |   |   | 2004*  |   | $      | 19,385  |   | $      | 0      |   | $      | 0                                          |   |   | N/A                                                                         |   |   | None                                   |   |
| President,                  Chief Executive Officer, Chief Financial Officer and Corporate                  Secretary |   |   |   |   |   |    |   |   |   |   |   |                                       |   |   |                                                                        |   |   |                                   |   |

| 1.   | Other                  Annual Compensation consists of a car allowance of $500 per                  month. |
|----------------|------------------------------------------------------------------------------------------------------------|

| 2.   | Estimate                  based on 2001 compensation prorated to Bankruptcy in September                  2002. |
|----------------|-----------------------------------------------------------------------------------------------------------------|

----

|                                         |   | Private                  Placement                                             |   | Chapter                  11 Plan                                             |
|----------------------------------------------|--------|--------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| No.                  of Shares               |   | 4,378,333                                                                      |   | 29,710,765(2)                                                                |
| Type                  of purchasers          |   | Accredited                  Investors(1)                                       |   | Participants                  in Rights Offering, Claimants, Plan Sponsor(2) |
| Price/Share                                  |   | $0.12                                                                          |   | See                  Note (2), below                                         |
| Aggregate                  Cash Proceeds     |   | $525,400                                                                       |   | $936,116                                                                     |
| Exemption                  from Registration |   | Sections                  4(2) and 4(6) of the Securities Act and Regulation D |   | §1145                  of the Bankruptcy Act                            |

| 1.   | As                  defined in Regulation D under the Securities                  Act. |
|----------------|----------------------------------------------------------------------------------------|

| 2.   | In                  the rights offering a holder of common stock was required to exchange                  one                  share and $0.24 for three new shares. The trading price of the                  common                  stock during the rights offering ranged from approximately $0.12                  to $0.45.                  11,076,447 shares were issued in the rights offering. Creditors                  consisted                  of the former CEO (600,000 shares) and Noteholders and warrant                  holders                  (5,650,020 shares). The price paid by them was extinguishment of                  all                  claims (roughly $0.10 per share). During 2004, the Company issued                  12,384,298 shares to Spectra Acquisition LLC, the sponsor of the                  Plan, in                  satisfaction of a $50,000 investment and as an incentive to carrying                  out                  the Plan. Spectra Acquisition LLC is 51% owned by Mr. Hitchin,                  the                  president/chief executive officer and a director of the Company,                  48% by an                  unrelated third party and 1% by Spectra Acquisition Inc. (SAI).                  SAI is                  owned by Mr. Hitchin and the third party. SA LLC distributed the                  shares                  based on an agreed formula whereby Mr. Hitchin would receive 7,000,000                  shares and the balance would be split between him and the third                  party                  based on their beneficial interests in SA                  LLC. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                             |   |   | (a)                                                                                                                                                |   |   | (b)                                                                                          |   |   | (c)                                                                                                                                                                           |   |
|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                        |   |   |                                                                                                                                               |   |   |                                                                                         |   |   |                                                                                                                                                                          |   |
| Plan                  category                                              |   |   | Number                  of securities to be issued upon exercise of outstanding options,                  warrants                  and rights (1) |   |   | Weighted-average                  exercise price of outstanding options, warrants and rights |   |   | Number                  of securities remaining available for future issuance under equity                  compensation plans (excluding securities reflected in column (a)) |   |
| Equity                  compensation plans approved by security holders     |   |   | 1,775,000                                                                                                                                          |   | $      | 0.19                                                                                         |   |   | 3,857,614                                                                                                                                                                     |   |
|                                                                        |   |   |                                                                                                                                               |   |   |                                                                                         |   |   |                                                                                                                                                                          |   |
| Equity                  compensation plans not approved by security holders |   |   | 0                                                                                                                                                  |   |   | 0                                                                                            |   |   | N/A                                                                                                                                                                           |   |
| Totals                                                                      |   |   | 1,775,000                                                                                                                                          |   | $      | 0.19                                                                                         |   |   | 3,857,614                                                                                                                                                                     |   |

----

| Name                  and Address11568-11                  Sorrento Valley Rd., San Diego, CA 92014 for all parties |   |   | Amount                  of Beneficial Ownership |   |   | Percent                  Ownership |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------|--------|--------|------------------------------------|--------|
| Jim                  Hitchin                                                                                        |   |   | 9,192,149                                       |   |   | 24.5                               | %      |
| Mark                  D. McWilliams                                                                                 |   |   | 341,666                                         | (1)    |   | 0.9                                | %      |
| Rand                  P, Mulford                                                                                    |   |   | 473,333                                         | (2)    |   | 1.3                                | %      |
| Tom                  Charbonneau                                                                                    |   |   | 2,692,149                                       |   |   | 7.2                                | %      |
| Chester                  E. Sievert                                                                                 |   |   | 700,000                                         | (3)    |   | 1.9                                | %      |
| All                  Officers & Directors                                                                       |   |   | 10,707,148                                      |   |   | 28.5                               | %      |

| 1.   | Includes                  133,333 shares which may be acquired upon exercise of warrants/options                  which are currently exercisable or which become exercisable within                  60 days                  following the date of this report. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Includes                  133,333 shares which may be acquired upon exercise of warrants/options                  which are currently exercisable or which become exercisable within                  60 days                  following the date of this report. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Includes                  100,000 shares which may be acquired upon exercise of warrants/options                  which are currently exercisable or which become exercisable within                  60 days                  following the date of this report. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit                  No. |   | Description                                                                                                                                                                                        |
|------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                          |   | Amended                  and Restated Articles of Incorporation (1)                                                                                                                                |
| 10.27                        |   | Amended                  SpectraScience Inc, 2001 Stock Plan (1)                                                                                                                                   |
| 10.28                        |   | Form                  of Directors’ Option Agreement                                                                                                                                         |
| 23                           |   | Consent                  of Independent Registered Public Accounting Firm                                                                                                                          |
| 31                           |   | Certification                  of Chief Executive Officer and Chief Financial Officer pursuant                  to Section                  302 of the Sarbanes-Oxley Act of 2002                  |
| 32                           |   | Certification                  of Chief Executive Officer and Chief Financial Officer pursuant                  to Section                  906 of the Sarbanes-Oxley Act of                  2002 |

----

|                                   |                                                                                                                  |                                                    |
|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------|
|                                   | **SpectraScience,                  Inc.****(Registrant)**                                                             |
|                              |                                                                                                             |                                               |
| Date: July                6, 2005 | By:                                                                                                         | /s/ James                Hitchin    |
|                                   |                                                                                                                       |
|                                   | James                Hitchin-President, Secretary, Chief Financial Officer and Chief Executive                Officer |

|                                                                                                                                         |   | Date         |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|
|   /s/                  James Hitchin                                                                           |        |         |
| James                  Hitchin(Principal                  Executive Officer and Principal Financial and Accounting                  Officer) |   |         |
|   /s/                  Chester E. Sievert                                                                           |   |    |
| Chester                  E. Sievert, Jr.Director                                                                                             |   |         |
|   /s/                  Rand P. Mulford                                                                              |   |    |
| Rand                  P. MulfordDirector                                                                                                     |   |         |
|   /s/                  Mark D. McWilliams                                                                           |   |         |
| Mark                D. McWilliamsDirector                                                                                                    |   |         |

----