U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   Form 10-QSB

(Mark One)

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

          For the quarterly period ended June 30, 1997

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

For the transition period from __________ to __________


                         Commission file number 0-13092

                              SpectraSCIENCE, Inc.
                      (Exact name of small business issuer
                          as specified in its charter)

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

                         3650 Annapolis Lane, Suite 101,
                          Minneapolis, Minnesota 55447
                    (Address of principal executive offices)

                                 (612) 509-9999
                           (Issuer's telephone number)


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


The number of shares of the Registrant's common stock, par value $.25 per share,
outstanding on August 11, 1997 was 4,480,379.

Transitional Small Business Disclosure Format (Check one): Yes _____   No __X__

<PAGE>

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                                  June 30, 1997


                                      Index
<TABLE>
<CAPTION>
                                                                             Page No.
<S>                                                                             <C>
PART I -- FINANCIAL INFORMATION

ITEM 1.   Financial Statements (Unaudited)

  Balance Sheets -- June 30, 1997 and December 31, 1996                          3

  Statements of Operations -- Three Months Ended June 30, 1997 and 1996          4
                              Six Months Ended June 30, 1997 and 1996

  Statements of Cash Flows -- Six Months Ended June 30, 1997 and 1996            5

  Notes to Financial Statements -- June 30, 1997                                 6

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                                  7


PART II -- OTHER INFORMATION                                                     9

ITEM 1.  Legal Proceedings                                                       9

ITEM 2.  Changes in Securities                                                   9

ITEM 3.  Defaults Upon Senior Securities                                         9

ITEM 4.  Submission of Matters to a Vote of Security Holders                     9

ITEM 5.  Other Information                                                      10

ITEM 6.  Exhibits and Reports on Form 8-K                                       10

Signatures                                                                      11

Exhibit 27: Financial Data Schedule pursuant to Article 5 of Regulation S-X     12
</TABLE>


                                       2
<PAGE>

                         PART I -- FINANCIAL INFORMATION

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 June 30,         December 31,
                                                                   1997               1996
                                                               ------------       ------------
                                                                (Unaudited)          (Note)
<S>                                                            <C>                <C>
ASSETS
Current assets:
   Cash and cash equivalents                                   $  2,327,247       $  3,047,182
   Inventories                                                      182,919            192,151
   Other current assets                                              71,630            103,736
                                                               ------------       ------------
Total current assets                                              2,581,796          3,343,069

Net property and equipment                                          179,315            207,520
                                                               ------------       ------------

         TOTAL ASSETS                                          $  2,761,111       $  3,550,589
                                                               ============       ============

LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
   Accounts payable                                            $     72,791       $    107,866
   Accrued compensation and taxes                                   100,328             97,735
   Accrued expenses                                                 258,882            187,016
                                                               ------------       ------------
Total current liabilities                                           432,001            392,617

Commitments

SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00 per share
   Authorized shares--20,000,000
       Convertible preferred stock, Series A:
         Authorized shares--5,000,000
         Issued and outstanding shares--66,667 in 1996                                  66,667
       Convertible preferred stock, Series B:
         Authorized shares--1,000,000
         Issued and outstanding shares--792,500 in 1996                                792,500
Common stock, $.25 par value:
   Authorized shares--10,000,000
   Issued and outstanding shares--
     4,480,379 on June 30, 1997 and
     3,621,212 on December 31, 1996                               1,120,095            905,303
Additional paid-in capital                                       44,531,314         43,886,939
Accumulated deficit                                             (43,322,299)       (42,493,437)
                                                               ------------       ------------
         TOTAL SHAREHOLDERS' EQUITY                               2,329,110          3,157,972
                                                               ------------       ------------
         TOTAL LIABILITIES AND
              SHAREHOLDERS' EQUITY                             $  2,761,111       $  3,550,589
                                                               ============       ============
</TABLE>

Note:    The  balance  sheet on  December  31,  1996 has been  derived  from the
         audited  financial  statements at that date but does not include all of
         the information and footnotes required by generally accepted accounting
         principles for complete financial statements.

See notes to financial statements.


                                       3
<PAGE>

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                      STATEMENTS OF OPERATIONS (Unaudited)


<TABLE>
<CAPTION>
                                     Three Months Ended              Six Months Ended
                                          June 30                         June 30
                               ---------------------------     ---------------------------
                                   1997            1996            1997            1996
                               -----------     -----------     -----------     -----------
<S>                            <C>             <C>             <C>             <C>
Revenue                        $      --       $      --       $      --       $      --

Cost of products sold                 --              --              --              --
                               -----------     -----------     -----------     -----------
   Gross profit                       --              --              --              --

Operating expenses
   Research and development        226,017         233,096         490,075         468,991
   Selling, general and
     administrative                188,309         152,792         412,146         351,929
                               -----------     -----------     -----------     -----------
Total operating expenses           414,326         385,888         902,221         820,920

Interest and other
   income (expense)                 34,594          45,749          73,359          96,417
                               -----------     -----------     -----------     -----------
Net loss                       $  (379,732)    $  (340,139)    $  (828,862)    $  (724,503)
                               ===========     ===========     ===========     ===========

Net loss per share             $     (0.08)    $     (0.11)    $     (0.19)    $     (0.24)

Weighted average common
   shares outstanding            4,480,379       2,976,548       4,444,873       2,960,428
</TABLE>

See notes to financial statements.


                                       4
<PAGE>

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                       STATEMENTS OF CASH FLOW (Unaudited)

<TABLE>
<CAPTION>
                                                              Six Months Ended
                                                                   June 30
                                                        ----------------------------
                                                            1997             1996
                                                        -----------      -----------
<S>                                                     <C>              <C>
OPERATING ACTIVITIES
  Net loss                                              $  (828,862)     $  (724,503)
  Adjustments to reconcile net loss to cash
    used in operating activities:
    Depreciation                                             34,900           35,120
      Changes in operating assets
       and liabilities:
         Decrease in accounts receivable                       --            100,319
         Decrease (increase) in inventories                   9,232          (23,438)
         Decrease in other current assets                    32,106           34,112
         Increase (decrease) in current liabilities          39,384          (50,548)
                                                        -----------      -----------

         Net cash used in operating activities             (713,240)        (628,938)

INVESTING ACTIVITIES
  Purchase of property and equipment                         (6,695)        (119,843)
                                                        -----------      -----------

        Net cash used in investing activities                (6,695)        (119,843)

FINANCING ACTIVITIES
  Proceeds from issuance of common stock                       --            132,625
                                                        -----------      -----------
        Net cash provided by financing activities              --            132,625
                                                        -----------      -----------

  Net decrease in cash and cash equivalents                (719,935)        (616,156)

CASH AND CASH EQUIVALENTS
  AT BEGINNING OF PERIOD                                  3,047,182        4,123,326
                                                        -----------      -----------

CASH AND CASH EQUIVALENTS
  AT END OF PERIOD                                      $ 2,327,247      $ 3,507,170
                                                        ===========      ===========

Supplemental schedule of non-cash transactions

Series A and B preferred stock converted into
  common stock                                          $   859,167
</TABLE>

See notes to financial statements.


                                       5
<PAGE>

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                                  June 30, 1997


--------------------------------------------------------------------------------

This  Quarterly  Report on Form  10-QSB  contains  "forward-looking  statements"
within the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.
Words or phrases such as "may,"  "expects," "will  continue," "is  anticipated,"
"management  believes,"  "estimate,"  "projects,"  "hope"  or  expressions  of a
similar nature are intended to identify  forward-looking  statements  within the
meaning of the Act.  The  Company  wishes to caution  readers not to place undue
reliance  on  forward-looking  statements.  Please  refer to  Exhibit  99 of the
Company's  Quarterly  Report on Form 10-QSB for the quarter ended June 30, 1996,
for certain important  cautionary  factors,  risks and uncertainties  related to
forward-looking statements.

--------------------------------------------------------------------------------


                          Notes to Financial Statements


NOTE A   Basis of Presentation

     The accompanying  unaudited  financial  statements of SpectraSCIENCE,  Inc.
(the  "Company")  have been  prepared  in  accordance  with  generally  accepted
accounting   principles  for  interim   financial   information   and  with  the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly,  they
do not include  all of the  information  and  footnotes  required  by  generally
accepted accounting principles for complete financial statements. In the opinion
of  management,  all  adjustments  (consisting  of  normal  recurring  accruals)
considered  necessary  for a fair  presentation  have been  included.  Operating
results  for the  three-  and  six-month  periods  ended  June 30,  1997 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31,  1997.  These  statements  should be read in  conjunction  with the
financial  statements and related notes which are  incorporated  by reference in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996.


NOTE B   Net Loss Per Share

     Net loss per share is computed using the weighted  average number of common
shares  outstanding  during the  period.  Common  equivalent  shares  from stock
options and  warrants  are  excluded  from the  computation  as their  effect is
anti-dilutive. In February 1997, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 128, "Earnings Per Share." This Statement replaces the
presentation  of  primary  earnings  per  share  (EPS)  with  basic EPS and also
requires  dual  presentation  of basic and diluted EPS for entities with complex
capital  structures.  This  Statement  is  effective  for the fiscal year ending
December 31, 1997.  For the three- and  six-month  periods  ended June 30, 1997,
there is no difference  between basic loss per share under Statement No. 128 and
net loss per share as reported by the Company.


                                       6
<PAGE>

ITEM 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

(a)  Business

     SpectraSCIENCE,   Inc.  (the   "Company"  or   "SpectraSCIENCE")   develops
innovative,  minimally-invasive  medical  delivery  systems  to  facilitate  the
diagnosis and treatment of a broad range of human diseases by utilizing advanced
spectroscopy, fiber optics, computer hardware and software.

     The  Company  currently  has  two  products  that  are in the  testing  and
development  stages: the Optical  Biopsy(TM)  System,  which is targeted for the
detection and  differentiation of cancerous,  pre-cancerous and healthy tissues;
and the Spectroscopic  Guidewire(TM) System, which is targeted for the detection
of intracoronary thrombus and differentiation of atherosclerotic plaque.

     The Company was incorporated in the State of Minnesota on May 4, 1983 as GV
Medical,  Inc. In 1992,  the Company  was  re-organized  and adopted a new name,
SpectraSCIENCE,  Inc. The Company's  common stock, par value $.25 per share (the
"Common  Stock"),  is currently  traded on the NASDAQ Small-Cap Market under the
symbol SPSI.


(b)  Results of Operations

     The Company recorded no revenue for the three and six months ended June 30,
1997 and June 30, 1996.

     Research and  development  expenses for the three and six months ended June
30, 1997 were  $226,017 and  $490,075  compared to $233,096 and $468,991 for the
same  periods in 1996.  The slight  decrease of 3.0% for the three  months ended
June 30, 1997 was  primarily  due to the fact that the first  clinical  research
agreement with the Wellman Laboratories of Photomedicine,  Massachusetts General
Hospital,  ended in the first quarter of 1997. As such,  the expense  related to
this  agreement  during the quarter  ended June 30, 1996 was not incurred in the
quarter  ended June 30, 1997.  This decrease was offset by an increase in salary
expenses  related to the hiring of a Vice  President of  Development in November
1996,  a  Director  of  Regulatory  Affairs  in  September  1996  and a  product
development  engineer  in March  1997.  The slight  increase of 4.5% for the six
months ended June 30, 1997 was  primarily  due to personnel  expenses  mentioned
above.

     Selling,  general and administrative  expenses for the three and six months
ended June 30, 1997 were $188,309 and $412,146 compared to $152,792 and $351,929
for the same periods in 1996. The 23.2% increase for the three months ended June
30,  1997 was  primarily  due to  increases  in expenses  for general  corporate
insurance, rent, legal, benefits and wages. In addition, expenses related to the
1997 annual meeting of shareholders were incurred in the second quarter of 1997,
but were  incurred in the first  quarter of 1996.  The increase of 17.1% for the
six months  ended June 30,  1996 was  primarily  due to  increases  in  expenses
mentioned above.

     Interest  and other income for the three and six months ended June 30, 1997
were $34,594 and $73,359 compared to $45,749 and $96,417 for the same periods in
1996.  The  decrease  was  primarily  due to  lower  balances  in cash  and cash
equivalents.

     As a result of the above,  the net loss for the three and six months  ended
June 30, 1997 was $379,732  and $828,862  compared to a net loss of $340,139 and
$724,503 for the same periods in 1996.  In spite of the increase in losses,  the
loss per share for the three and six months


                                       7
<PAGE>

ended  June 30,  1997 were $0.08 and $0.19  compared  to $0.11 and $0.24 for the
same periods in 1996.  The  reduction in the loss per share was due to a greater
number of shares of common stock  outstanding which resulted from the conversion
of the remaining 859,167 shares of series A and series B preferred stock into an
equivalent number of shares of common stock in the first quarter of 1997.


(c)  Liquidity and Sources of Capital

     Cash and cash  equivalents  on June 30,  1997 were  $2,327,247  compared to
$3,047,182 on December 31, 1996. The decrease in the cash position from December
31, 1996 to June 30,  1997 was the result of the net loss  during the  six-month
period that ended June 30, 1997.

     The working capital of the Company on June 30, 1997 was $2,149,795 compared
to  $2,950,452  on December  31, 1996.  This  decrease  was  primarily  due to a
reduction of the cash position.

     Net cash used in  operating  activities  for the six months  ended June 30,
1997 was  $713,240  compared  to  $628,938  for the same  period  in 1996.  This
increase was primarily due to the higher net loss in 1997 compared to 1996.

     Net cash used in  investing  activities  for the six months  ended June 30,
1997 was $6,695  compared to $119,843 for the same period in 1996. This decrease
was due to lower purchases of property and equipment in 1997.

     Net cash provided by financing activities for the six months ended June 30,
1997 was $0 compared to $132,625 for the same period in 1996.  The conversion of
all the  remaining  shares of series A and  series B  preferred  stock to common
stock in the first quarter of 1997 were non-cash conversions.

     Management  believes  that  the  amount  of cash and  cash  equivalents  is
adequate to fund operations at least through December 1997.


                                       8
<PAGE>

                          PART II -- OTHER INFORMATION

ITEM 1.  Legal Proceedings

     There are no material  on-going or pending legal  proceedings which involve
the Company.


ITEM 2.  Changes in Securities

     Not Applicable


ITEM 3.  Defaults Upon Senior Securities
         Not Applicable


ITEM 4.  Submission of Matters to a Vote of Security Holders

     Reference is made hereby to the Company's  definitive proxy statement (Form
DEF 14A) for the Annual Meeting of  Shareholders  held on May 21, 1997, as filed
with the Securities and Exchange Commission on April 8, 1997, File No. 0-13092.

(a)  The Annual Meeting of Shareholders of SpectraSCIENCE,  Inc. (the "Meeting")
     was held on May 21, 1997

     Shareholders  of record at the close of  business on March 26,  1997,  (the
     "Record  Date")  were  entitled  to  receive  notice  of and to vote at the
     Meeting and any adjournment  thereof. On the Record Date,  4,480,379 shares
     of the  Company's  common stock,  par value $.25 per share (the  "Shares"),
     were entitled to vote at the Meeting, of which a total of 3,834,820 Shares,
     or 85.6% of the total Shares outstanding, were represented at the Meeting.

(b)  The  following  individuals  were  re-elected  to serve as directors of the
     Company:

          Brian T. McMahon
          Henry M. Holterman
          Nathaniel S. Thayer

     Item One was the  proposal to elect three (3) persons to serve as directors
until the next  meeting of  shareholders  or until their  respective  successors
shall be elected and  qualified.  All of the nominees for directors were elected
by the shareholders. The final votes for each of the nominees were as follows:

<TABLE>
<CAPTION>
Name                      No. of Votes     As % of Total         No. of Votes     As % of Total
                          FOR              Shares Outstanding    WITHHELD         Shares Outstanding
----------------------------------------------------------------------------------------------------
<S>                       <C>              <C>                   <C>              <C>
Brian T. McMahon          3,786,401        84.5%                 48,419           1.1%
Henry M. Holterman        3,785,543        84.5%                 49,277           1.1%
Nathaniel S. Thayer       3,785,673        84.5%                 49,147           1.1%
</TABLE>

     There were no broker non-votes for this item.


                                       9
<PAGE>

     Item Two was the proposal to ratify the appointment of Ernst & Young LLP as
the Company's auditors for 1997. This proposal was approved by the shareholders.
The final vote for this item was as follows:

<TABLE>
<CAPTION>
No. of Votes FOR                      No. of Votes AGAINST                 No. of Votes ABSTAIN
(As % of Total Shares Outstanding)    (As % of Total Shares Outstanding)   (As % of Total Shares Outstanding)
---------------------------------------------------------------------------------------------------------------
<S>                                   <C>                                  <C>
3,800,203 (84.8%)                     7,688 (0.2%)                         26,929 (0.6%)
</TABLE>

There were no broker non-votes for this item.

ITEM 5.  Other Information

(a)  Clinical Trials

     The Company received  approval from the Food and Drug  Administration  (the
"FDA") to commence human  clinical  trials on the Optical  Biopsy(TM)  System at
three clinical research centers on 300 patients.  Clinical trials have commenced
at the Mayo Clinic, Rochester, Minnesota and the Hennepin County Medical Center,
Minneapolis,  Minnesota.  Clinical  trials  at the third  center,  Massachusetts
General  Hospital,  Boston,  Massachusetts,  are  expected to commence in August
1997.


ITEM 6.  Exhibits and Reports on Form 8-K

(a)  Exhibit 27:    Financial Data Schedule  pursuant to Article 5 of Regulation
                    S-X.

(b)  Form 8-K:  No  reports  on Form 8-K were  filed by the  Company  during the
     quarter covered by this report.


                                       10
<PAGE>

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                                  June 30, 1997

                                   SIGNATURES


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




                                        SpectraSCIENCE, Inc.
                                             (Registrant)



    August 12, 1997             /s/ Brian T. McMahon
----------------------              --------------------
         Date                       BRIAN T. McMAHON
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)



    August 12, 1997             /s/ Ching-Meng Chew
----------------------              --------------------
         Date                       CHING-MENG CHEW
                                    Vice President Finance and Administration
                                    Chief Financial Officer
                                    Treasurer and Corporate Secretary
                                    (Principal Financial and Accounting Officer)


                                       11