SpectraScience Inc (OTCMKTS:SCIE) Digging a Hole in the Ground

SpectraScience Inc (OTCMKTS:SCIE) has been sinking at an alarmingly rapid rate over the last week or so. The first major drop occurred on November 17 when the ticker plummeted from just under $0.009 all the way to $0.0056 and, safe for a small bounce a couple of days later, everything since then has been pretty much downhill. Prior to Thanksgiving, SCIE smashed through several more 52-week lows and it stopped at $0.0015 per share.

At first glance, the sudden vertical drop appears quite perplexing. That, however, has never stopped us from trying to find a culprit, has it?

In fact, we have a prime suspect. It’s the Q3 10-Q which came out about forty-five minutes before the end of November 16’s session. It’s riddled with faults, but the most obvious problem is the financial statement. It looks like this:

• cash: $55 thousand
• current assets: $646 thousand
• current liabilities: $8.6 million
• NO quarterly revenues
• quarterly net loss: $209 thousand

The figures are pretty horrendous, but they alone can’t be enough to drag SCIE from $0.009 all the way to $0.0015 in a matter of just a few short sessions. There must be something else. Sure enough, there is. You just have to look more carefully.

If you do, you’ll see that on September 30, there was just under $6 million worth of convertible debentures and you’ll see that a rather large portion of that amount was in default. During the first three quarters of the year alone, SCIE issued debentures with a principal amount of over $1.5 million and these, unlike the older debt which is convertible at fixed prices, can be turned into stock at discounts ranging from 40% to 50%.

In October and the first half of November, when the market price was hovering between $0.013 and $0.007, SCIE turned $51 thousand worth of 2015 debentures into 11.8 million shares bringing the average conversion rate down to just $0.004 per share.

Suddenly, the drop experienced by SCIE over the last few days doesn’t seem as difficult to explain as it did a few minutes ago. Considering the rather huge volumes witnessed over the last few days, we won’t be surprised if we see even more discounted shares in the upcoming 10-Q’s and 10-K’s. That, of course, could lead to even more 52-week lows which is why treading carefully might not be a bad call.