**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON
      D.C. 20549**





**Form
      10-Q**


(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,
                  2008


or


**o**
              **TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**For
                  the transition period fromto




Commission
      file number 0-13092





**SPECTRASCIENCE,
      Inc.**





(A
      Development Stage Enterprise)


(Exact
      name of small business issuer


as
      specified in its charter)





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





11568
      Sorrento Valley Rd., Suite 11


San
      Diego, California 92121


(Address
      of principal executive offices)


(858)
      847-0200


(Issuer's
      telephone number)





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.





Large
                accelerated filero
            Accelerated
                fileroNon-accelerated
                filero
            Smaller
                reporting companyx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES  ̈ NO þ







APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS:




Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court. YES þ NO  ̈





The
      number of shares of the Registrant’s common stock, par value $0.01 per share,
      outstanding on August 14, 2008 was 68,365,617. As of this date the Registrant
      also had outstanding warrants to purchase 71,250 shares of Series A Convertible
      Preferred Stock and 787,966 shares of common stock.





**SPECTRASCIENCE,
      INC.**


(A
      Development Stage Enterprise)





**FORM
      10-Q**


**For
      the Quarterly Period Ending June 30, 2008**




**TABLE
      OF CONTENTS**





PART
                I
            FINANCIAL
                INFORMATION:
            4Item
                1.
            Financial
                Statements (Unaudited)
            4Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            15Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            18Item
                4.
            Controls
                and Procedures
            18Item
                4T.
            Controls
                and Procedures
            18PART
                II
            OTHER
                INFORMATION
            19Item
                1.
            Legal
                Proceedings
            19Item
                1A.
            Risk
                Factors
            19Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            19Item
                3.
            Defaults
                Upon Senior Securities
            19Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            19Item
                5.
            Other
                Information
            19Item
                6.
            Exhibits
            20SIGNATURES
            21





-
          3
          -





**PART
      I**  **FINANCIAL
      INFORMATION**  **:**





**Item
      1.**  **Financial
      Statements (Unaudited)**




**SpectraScience,
      Inc. and Subsidiary**


(A
      Development Stage Enterprise)


Consolidated
      Balance Sheets





**June
                30,**
              **2008**
            
            **December****31,**
              **2007**(Unaudited)
            
            (Audited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            2,466,028
            
            $
            5,188,177Certificates
                of deposit
            
            
            1,000,000
            
            
            -Inventories
            
            
            1,198,855
            
            
            1,044,856Prepaid
                expenses and other current assets
            
            
            39,452
            
            
            41,437Total
                current assets
            
            
            4,704,335
            
            
            6,274,470Fixed
                assets, net
            
            
            965,937
            
            
            943,482Patents,
                net
            
            
            3,290,334
            
            
            3,415,117TOTAL
                ASSETS
            
            $
            8,960,606
            
            $
            10,633,069LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            70,483
            
            $
            155,051Accrued
                liabilities
            
            
            78,087
            
            
            12,463Total
                current liabilities
            
            
            148,570
            
            
            167,514STOCKHOLDERS’
                EQUITYUndesignated
                capital stock, undesignated par value, 24,928,750 shares authorized,
                none
                issued
            
            
            -
            
            
            -Series
                A Convertible Preferred Stock, $.01 par value:Authorized
                - 2,250,000 shares issued and outstanding - 0 shares at June 30,
                2008
                (2,000,000 shares at December 31, 2007)
            
            
            -
            
            
            20,000Common
                stock, $.01 par value:Authorized—100,000,000
                sharesIssued
                and outstanding 68,365,617 shares at June 30, 2008 (58,992,944 shares
                at
                December 31, 2007)
            
            
            683,656
            
            
            589,929Additional
                paid-in capital
            
            
            17,413,970
            
            
            16,430,997Deficit
                accumulated during the development stage
            
            
            (9,285,590
            )
            
            (6,575,371
            )TOTAL
                STOCKHOLDERS’ EQUITY
            
            
            8,812,036
            
            
            10,465,555TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            8,960,606
            
            $
            10,633,069





Note:
      The
      balance sheet at December 31, 2007 has been derived from the audited financial
      statements at that date but does not include all of the information required
      by
      accounting principles generally accepted in the United States of America for
      complete financial statements.




*See
      accompanying notes to unaudited condensed financial
      statements.*


-
          4
          -




**SpectraScience,
      Inc. and Subsidiary**


(A
      Development Stage Enterprise)


CONDENSED
      STATEMENTS OF OPERATIONS


(Unaudited)




**Three Months Ended**
              **June
                30,**
            
            **Six Months Ended**
              **June
                30,**
            
            **August 2, 2004**
              **(Inception of**
              **Successor**
              **Company) to**
              **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **2008**Revenue
            
            $
            4,750
            
            $
            -
            
            $
            8,550
            
            $
            -
            
            $
            8,550Cost
                of revenue
            
            
            2,336
            
            
            -
            
            
            5,052
            
            
            -
            
            
            5,052Gross
                profit
            
            
            2,414
            
            
            -
            
            
            3,498
            
            
            -
            
            
            3,498Operating
                expenses:Research
                and development
            
            
            578,818
            
            
            119,856
            
            
            1,069,266
            
            
            194,298
            
            
            2,603,285General
                and administrative
            
            
            619,923
            
            
            278,707
            
            
            1,307,706
            
            
            444,622
            
            
            4,858,580Sales
                and marketing
            
            
            223,629
            
            
            273,081
            
            
            425,835
            
            
            296,195
            
            
            1,015,370Total
                operating expenses
            
            
            1,422,370
            
            
            671,644
            
            
            2,802,807
            
            
            935,115
            
            
            8,477,235Operating
                loss
            
            
            (1,419,956
            )
            
            (671,644
            )
            
            (2,799,309
            )
            
            (935,115
            )
            
            (8,473,737
            )Other
                income, net
            
            
            53,577
            
            
            8,795
            
            
            89,090
            
            
            9,706
            
            
            188,147Net
                Loss
            
            
            (1,366,379
            )
            
            (662,849
            )
            
            (2,710,219
            )
            
            (925,409
            )
            
            (8,285,589
            )Deemed
                dividend on preferred stock
            
            
            
            
            
            (1,000,000
            )
            
            -
            
            
            (1,000,000
            )
            
            (1,000,000
            )Net
                loss applicable to common stockholders
            
            $
            (1,366,379
            )
            
            (1,662,849
            )
            $
            (2,710,219
            )
            $
            (1,925,409
            )
            $
            (9,285,589
            )Basic
                and diluted net loss per share
            
            $
            (0.02
            )
            $
            (0.04
            )
            $
            (0.04
            )
            $
            (0.05
            )Weighted
                average common shares outstanding
            
            
            67,971,390
            
            
            40,179,254
            
            
            64,302,705
            
            
            39,354,254




*See
      accompanying notes to unaudited condensed financial
      statements.*


-
          5
          -


**SpectraScience,
      Inc. and Subsidiary**


(A
      Development Stage Enterprise)


CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY


For
      the
      six months ended June 30, 2008


(Unaudited)




**Preferred Stock**
                **Shares Amount**
              
              
              **Common Stock**
                **Shares Amount**
              
              
              **Additional**
                **Paid-In**
                **Capital**
              
              
              **Deficit**
                **Accumulated**
                **During The**
                **Development**
                **Stage**
              
              
              **Total**
                **Stockholders’**
                **Equity****Balance, December 31,
                  2007**
              
              
              2,000,000
              
              $
              20,000
              
              
              58,992,944
              
              $
              589,929
              
              $
              16,430,997
              
              $
              (6,575,371
              )
              $
              10,465,555Stock
                  based compensation - consultants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              53,177
              
              
              -
              
              
              53,177Stock
                  based compensation - employees
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              547,672
              
              
              -
              
              
              547,672Exercise
                  of stock options
              
              
              
              
              
              
              
              
              20,000
              
              
              200
              
              
              2,800
              
              
              
              
              
              3,000Sale
                  of common stock @ $0.70 per share
              
              
              -
              
              
              -
              
              
              736,856
              
              
              7,369
              
              
              437,982
              
              
              -
              
              
              445,351Conversion
                  of Series A Preferred Stock
              
              
              (2,000,000
              )
              
              (20,000
              )
              
              8,000,000
              
              
              80,000
              
              
              (60,000
              )
              
              -
              
              
              -Conversion
                  of preferred stock warrants
              
              
              -
              
              
              -
              
              
              605,817
              
              
              6,058
              
              
              (6,058
              )
              
              -
              
              
              -Common
                  stock issued for services
              
              
              
              
              
              
              
              
              10,000
              
              
              100
              
              
              7,400
              
              
              -
              
              
              7,500Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,710,219
              )
              
              (2,710,219
              )**Balance,
                  June 30, 2008**
              
              
              -
              
              $
              -
              
              
              68,365,617
              
              $
              683,656
              
              $
              17,413,970
              
              $
              (9,285,590
              )
              $
              8,812,036





*See
      accompanying notes to unaudited condensed financial
      statements.*


-
          6
          -





**SpectraScience,
      Inc. and Subsidiary**


(A
      Development Stage Enterprise)


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


(Unaudited)


**Six Months Ended**
                  **June
                    30,**
                
                **August 2, 2004(Inception of 
                    Successor  Company) to**
                  **June
                    30,****2008**
                
                **2007**
                
                **2008**OPERATING
                    ACTIVITIES:Net
                    loss
                
                $
                (2,710,219
                )
                $
                (925,409
                )
                $
                (8,285,590
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:Depreciation
                    and amortization
                
                
                137,362
                
                
                10,292
                
                
                260,689Stock-based
                    compensation-employees
                
                
                547,672
                
                
                343,855
                
                
                1,850,756Stock-based
                    compensation-consultants
                
                
                53,177
                
                
                20,816
                
                
                908,873Gain
                    on disposal of fixed assets
                
                
                -
                
                
                -
                
                
                (28,839
                )Write-off
                    of obsolete inventories
                
                
                -
                
                
                -
                
                
                25,188Fair
                    market value of common, warrants and options issued for
                    services
                
                
                7,500
                
                
                -
                
                
                7,500Changes
                    in operating assets and liabilities:Prepaid
                    expenses and other current assets
                
                
                (152,014
                )
                
                10,185
                
                
                (216,106
                )Accounts
                    payable
                
                
                (84,568
                )
                
                (5,915
                )
                
                10,781Accrued
                    liabilities
                
                
                65,624
                
                
                7,781
                
                
                45,995Net
                    cash used in operating activities
                
                
                (2,135,466
                )
                
                (538,395
                )
                
                (5,420,753
                )INVESTING
                    ACTIVITIES:Purchase
                    of certificate of deposit
                
                
                (1,000,000
                )
                
                -
                
                
                (1,000,000
                )Purchases
                    of fixed assets
                
                
                (35,034
                )
                
                (10,928
                )
                
                (57,456
                )Proceeds
                    from the sale of assets
                
                
                -
                
                
                -
                
                
                32,891Net
                    cash provided by (used in) investing activities
                
                
                (1,035,034
                )
                
                (10,928
                )
                
                (1,024,565
                )FINANCING
                    ACTIVITIESProceeds
                    from issuance of common stock
                
                
                445,351
                
                
                1,135,000
                
                
                6,481,335Net
                    proceeds from issuance of preferred stock
                
                
                -
                
                
                973,021
                
                
                973,021Proceeds
                    from exercise of stock options
                
                
                3,000
                
                
                1,500
                
                
                15,000Net
                    cash provided by financing activities
                
                
                448,351
                
                
                2,109,521
                
                
                7,469,356Net
                    increase (decrease) in cash and cash equivalents
                
                
                (2,722,149
                )
                
                1,560,198
                
                
                1,024,038CASH
                    AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                
                
                5,188,177
                
                
                174,802
                
                
                1,441,990CASH
                    AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                2,466,028
                
                $
                1,735,000
                
                $
                2,466,028Supplemental
                    disclosure of non-cash investing and financing activities:Issuance
                    of common stock for assets of LUMA Imaging Corporation
                
                $
                -
                
                $
                -
                
                $
                5,024,783Conversion
                    of notes payable and accrued interest to common stock
                
                $
                -
                
                $
                -
                
                $
                565,000Issuance
                    of common stock in settlement of bankruptcy debt
                
                $
                -
                
                $
                -
                
                $
                60,000Fresh
                    start adjustment to fixed assets and patents
                
                $
                -
                
                $
                -
                
                $
                255,379
 *See
          accompanying notes to unaudited condensed financial
          statements.*




-
          7
          -


**SpectraScience,
      Inc.**


(A
      Development Stage Enterprise)


**Notes
      to Unaudited Condensed Financial Statements**


**June
      30, 2008**





**1.**  **Nature
      of Business and Basis of Presentation**





*Description
      of Business*





SpectraScience,
      Inc. was incorporated in the State of Minnesota on May 4, 1983 as GV Medical,
      Inc. In October 1992, GV Medical discontinued its prior business, refocused
      its
      development efforts and changed its name to SpectraScience, Inc. The “Company”
refers to SpectraScience, Inc. and its wholly owned subsidiary Luma Imaging
      Corporation. From 1996, the Company primarily focused on developing the WavSTAT
      ® Optical Biopsy System (“WavSTAT System”).





The
      Company has developed and received FDA approval to market a proprietary,
      minimally invasive technology that optically scans tissue in real-time to
      distinguish between normal, pre-cancerous or cancerous cells without the need
      to
      remove the subject cell tissue from the body to make such determination. The
      WavSTAT System operates by using cool, safe UV laser light to optically scan
      and
      analyze tissue, enabling the physician to make an instant diagnosis during
      endoscopy when screening for cancers and, if warranted, to begin immediate
      treatment during the same procedure. The WavSTAT is FDA approved for colon
      cancer detection.





On
      November 6, 2007, the Company acquired the assets of Luma Imaging Corporation
      (“LUMA ® ”)
      in an
      equity transaction accounted for as an acquisition of assets and now operates
      LUMA as a wholly owned subsidiary of the Company. LUMA had acquired the assets
      from a predecessor company that had developed and received FDA approval for,
      a
      non-invasive diagnostic imaging system that can detect cervical cancer
      precursors and which utilizes an underlying technology that is similar to that
      of the WavSTAT System. The addition of the LUMA technology to the Company’s
      existing WavSTAT System technology provides the Company with a broad suite
      of
      fluorescence-based intellectual property and know-how. LUMA received FDA
      approval as an adjunct to colposcopy in March 2006.





*Basis
      of Presentation*





The
      accompanying unaudited condensed financial statements of the Company have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and with the
      instructions to Form 10-Q as they are prescribed for smaller reporting
      companies. Accordingly, they do not include all of the information and footnotes
      required by accounting principles generally accepted in the United States of
      America for complete financial statements. In the opinion of management, all
      adjustments (consisting of normal recurring accruals) considered necessary
      to
      make the financial statements not misleading have been included. Operating
      results for the six month period ended June 30, 2008 are not necessarily
      indicative of the results that may be expected for the year ending December
      31,
      2008. These statements should be read in conjunction with the financial
      statements and related notes, which are included in the Company’s Annual Report
      on Form 10-KSB for the year ended December 31, 2007.





*Liquidity
      and Development Stage Enterprise*





The
      Company is a development stage enterprise since it has not yet generated
      significant revenue from the sale of products. Through June 30, 2008, its
      efforts have been principally devoted to moving the Company forward and
      preparing our products for domestic and international market introduction.
      Activities beginning on August 2, 2004 are deemed to be development stage
      operations. Accordingly, Company activities on the accompanying financial
      statements reflect both period to date and inception to date development stage
      activities. As of June 30, 2008, the Company had working capital of
      approximately $4,556,000 and cash and cash equivalents of approximately
      $2,466,000 and short-term certificates of deposit of $1,000,000 for a total
      of
      approximately $3,466,000. The Company believes that existing working capital
      balances will be sufficient to provide for operations and execution of its
      present business plans. However, the Company may incur unknown expenses, or
      the
      Company may not be able to meet its revenue forecasts, and this may require
      the
      Company to seek additional capital. In such an event, the Company may not be
      able to find such capital or be able to raise capital or debt on terms that
      are
      acceptable.


-
          8
          -





**2.**  **Summary
      of Significant Accounting Policies**





*Revenue
      recognition*





We
      recognize revenue, net of discounts, from sales of our medical devices and
      from
      sales of disposable supplies related to our medical devices, when a purchase
      order has been received, when title transfers, when the selling price is fixed
      or determinable, and when collection of the resulting receivable is reasonably
      assured. Terms of sale for sales are FOB origin, reflecting that title and
      risk
      of loss are assumed by the purchaser at the shipping point.





*Consolidation*





The
      accompanying consolidated financial statements include the accounts of
      SpectraScience, Inc. and its wholly-owned subsidiary Luma Imaging Corporation.
      All significant intercompany balances and transactions have been eliminated
      in
      consolidation.





*Risks
      and Uncertainties*





The
      Company operates in an industry that is subject to intense competition,
      government regulation and rapid technological change. The Company's operations
      are subject to significant risk and uncertainties including financial,
      operational, technological, regulatory and other risks associated with a
      development stage company, including the potential risk of business
      failure.





*Use
      of Estimates*





The
      Company prepares its consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America, which
      requires management to make estimates and assumptions that affect the amounts
      reported in the financial statements and disclosures made in the accompanying
      notes to the financial statements. Significant estimates made by management
      include, among others, realization of long-lived assets, assumptions used to
      value stock options, assumptions used to value the common stock issued and
      the
      assets acquired in the Luma acquisition and the realization of intangible
      assets. Actual results could differ from those estimates.





*Cash
      Equivalents*





Highly
      liquid investments with original maturities of three months or less when
      purchased are considered to be cash equivalents. Financial instruments which
      potentially subject the Company to concentrations of credit risk consist
      primarily of cash and cash equivalents. The Company maintains its cash and
      cash
      equivalents with high-credit quality financial institutions. At times, such
      amounts may exceed insured limits. The Company has not experienced any losses
      in
      such accounts and believes it is not exposed to any significant credit risk
      on
      its cash equivalent accounts.





*Stock-Based
      Compensation*





In
      December 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards, (“SFAS”) No. 123(R), “Share-Based Payment”,
      (“SFAS 123(R)”) which establishes standards for transactions in which an entity
      exchanges its equity instruments for goods or services. SFAS 123(R) requires
      an
      issuer to measure the cost of employee services received in exchange for an
      award of equity instruments based on the grant-date fair value of the award.
      SFAS 123(R) became effective for the Company commencing January 1, 2006. In
      accordance with the provisions of SFAS No. 123 “Accounting for Stock-Based
      Compensation”, (“SFAS 123”) and Emerging Issues Task Force (“EITF”) No. 96-18,
“Accounting for Equity Instruments That are Issued to Other Than Employees for
      Acquiring or in Conjunction with Selling Goods or Services,” all other issuances
      of common stock, stock options or other equity instruments to non-employees
      as
      the consideration for goods or services received by the Company are accounted
      for based on the fair value of the equity instruments issued (unless the fair
      value of the consideration received can be more reliably measured). Any options
      issued to non-employees are recorded in expense and additional paid-in capital
      in stockholders’ equity over the applicable service periods using variable
      accounting through the vesting dates based on the fair value of the options
      at
      the end of each period. The intrinsic value of the options granted are assumed
      to be zero because the exercise price of options granted equaled the fair market
      value of the underlying stock at the date of grant.


-
          9
          -





For
      the
      six months ended June 30, 2008 and 2007, stock-based compensation was
      approximately $601,000 and $365,000, respectively. Stock-based compensation
      expense of approximately $288,000 and $0 was recognized in research and
      development expenses for the six months ended June 30, 2008 and 2007,
      respectively. Stock-based compensation expense of approximately $294,000 and
      $184,000 was recognized in general and administrative expenses for the six
      months ended June 30, 2008 and 2007, respectively. Stock based compensation
      expense of approximately $19,000 and $181,000 was recognized in sales and
      marketing expense for the six months ended June 30, 2008 and 2007, respectively.
      The Company previously adopted the fair value recognition provisions of SFAS
      123
      prospectively for all employee and consultant awards granted, modified, or
      settled by the Company on August 2, 2004. Accordingly, SFAS 123(R) has not
      had a
      material impact on the comparability of Company’s financial
      statements.





As
      of
      June 30, 2008, the Company has one stock-based employee compensation plan (the
      “Option Plan"). The Option Plan provides for the grant of incentive stock
      options (“ISOs") to full-time employees (who may also be Directors) and
      nonqualified stock options ("NSOs") to non-employee directors, consultants,
      customers, vendors or providers of services and expires on January 30, 2011.
      The
      exercise price of any ISO may not be less than the fair market value of the
      common stock on the date of grant and the term shall not exceed ten years.
      The
      amount reserved under the Option Plan equals 15% of the outstanding shares
      of
      the Company, totaling 10,254,843 reserved at June 30, 2008. At June 30, 2008
      the
      Company had outstanding 6,325,000 options under the Option Plan representing
      approximately 9.25% of the outstanding shares (3,675,000 of which were
      exercisable), with 3,929,843 available for future issuance. Awards under the
      Company’s Option Plan generally vest over two to three years.





The
      fair
      value of options granted were estimated at the date of grant using a
      Black-Scholes option-pricing model which includes several variables including
      expected life, risk free interest rate, expected stock price volatility, stock
      option exercise patterns and expected dividend yield. The Company also must
      estimate forfeitures for employee stock options. These models and assumptions
      are emerging and may change future expenses by increasing or decreasing
      stock-based compensation expense. Management used the following weighted average
      assumptions to value all stock options for the six months ending June 30, 2008
      and 2007:





2008
            
            2007Expected
                life
            
            
            5
                years
            
            
            5 yearsRisk-free
                interest rate
            
            
            3.85
                %
            
            
            4.92%Expected
                volatility
            
            
            161%
            
            
            140%Expected
                dividend yield
            
            
            0%
            
            
            0%




In
      addition to the above, management estimated the forfeitures on employee options
      under the Option Plan would have negligible effects because such forfeitures
      would be a very small percentage. Management believes that options granted
      have
      been to a group of individuals that have a high desire to see the Company
      succeed and have aligned themselves to that end.





The
      expected life used in the calculations was determined by management based on
      past experience, forward looking profit forecasts and estimates of what the
      trading price of the Company’s stock might be at different future
      dates.


-
          10
          -





The
      risk-free interest rates are the 5-year U.S. Treasury rate as published at
      the
      time of making the calculations. Volatility is a calculation based on the
      Company’s stock price since August 2, 2004. Management computed and tested this
      volatility calculation for reasonableness and found it to be acceptable based
      on
      a number of factors including the Company’s current market capitalization,
      comparables to other companies in our area of interest, the current development
      stage of the Company and management’s estimate of the net present value of
      forward looking profits that has been compiled (for which there is no
      assurance).


Weighted-AverageOptions
              
              
              
              
              
              RemainingAvailable
              
              Plan Options
              
              Weighted Average
              
              Contractual Term
              
              AggregateFor Grant
              
              Outstanding
              
              Exercise
                  Price Share
              
              (years)
              
              Intrinsic ValueOutstanding
                  December 31, 2007
              
              
              3,053,942
              
              
              5,795,000
              
              $
              0.70Options
                  granted
              
              
              (550,000
              )
              
              550,000Options
                  exercised
              
              
              20,000
              
              
              (20,000
              )Additional
                  options available
              
              
              1,405,901Forfeited
                  or expiredOutstanding
                  at June 30, 2008
              
              
              3,929,843
              
              
              6,325,000
              
              $
              0.72
              
              
              8.29
              
              $
              (703,450
              )Exercisable
                  at June 30, 2008
              
              
              
              
              
              3,675,000
              
              $
              0.59
              
              
              6.50
              
              $
              56,667





The
      total
      intrinsic value of options exercised during the six months ended June 30, 2008
      and 2007 was $13,000 and $9,500, respectively. At June 30, 2008, total
      unrecognized estimated employee compensation cost related to non-vested stock
      options granted prior to that date is approximately $1,115,000, which is
      expected to be recognized over the next three years.





*Impairment
      or Disposal of Long-Lived Assets*





SFAS
      No.
      144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”), addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets (such as our patents). SFAS 144 requires that
      long-lived assets be reviewed for impairment whenever events or changes in
      circumstances indicate that their carrying amounts may not be recoverable.
      If
      the cost basis of a long-lived asset is greater than the projected future
      undiscounted net cash flows from such asset (excluding interest), an impairment
      loss is recognized. Impairment losses are calculated as the difference between
      the cost basis of an asset and its estimated fair value. SFAS 144 also requires
      companies to separately report discontinued operations and extends that
      reporting requirement to a component of an entity that either has been disposed
      of (by sale, abandonment or in a distribution to owners) or is classified as
      held for sale. Assets to be disposed of are reported at the lower of the
      carrying amount or the estimated fair value less costs to sell. The Company
      adopted SFAS 144 on August 2, 2004. The provisions of this pronouncement
      relating to assets held for sale or other disposal generally are required to
      be
      applied prospectively after the adoption date to newly initiated commitments
      to
      plan to sell or dispose of such asset, as defined, by management. As a result,
      management cannot determine the potential effects that adoption of SFAS 144
      will
      have on the Company's consolidated financial statements with respect to future
      disposal decisions, if any. Management believes no impairment exists at June
      30,
      2008.


*Inventories*





Inventories
      consisted of the following at June 30, 2008 and December 31, 2007:


June
                    30, 2008
              
              December 31, 2007Raw
                  materials
              
              $
              1,140,740
              
              $
              986,740Finished
                  goods
              
              
              58,116
              
              
              58,116Totals
              
              $
              1,198,856
              
              $
              1,044,856
 -
              11
              -


*Income
      Taxes*





In
      July
      2006, the Financial Accounting Standards Board issued Financial Interpretation
      No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, which clarifies
      the accounting for uncertainty in income taxes recognized in an entity's
      financial statements in accordance with SFAS No. 109. FIN 48 prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. In addition, FIN 48 provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition.





The
      Company adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have
      a
      material impact on the Company's financial position or results of operations.
      Upon adoption and as of June 30, 2008, the Company had no unrecognized tax
      benefits recorded.





The
      Company files federal and state tax returns. The Company has accumulated
      significant losses since its inception. Since the net operating losses may
      potentially be utilized in future years to reduce taxable income, all of the
      Company's tax years remain open to examination by the major taxing jurisdictions
      to which the Company is subject.





The
      Company recognizes estimated interest and penalties for uncertain tax positions
      in income tax expense. Upon adoption and as of June 30, 2008, the Company had
      no
      interest and penalty accrual or expense.





*Earnings
      (Loss) Per Share*





Basic
      earnings (loss) per share is computed by dividing net income (loss) available
      to
      common stockholders by the weighted average number of common shares outstanding
      during the period of computation. Diluted earnings (loss) per share is computed
      similarly to basic earnings per share except that the denominator is increased
      to include the number of additional common shares that would have been
      outstanding if the potential common shares had been issued and only if the
      additional common shares would be dilutive. Basic and diluted loss per share
      are
      the same for the six months ended June 30, 2008 and 2007, since any additional
      common stock equivalents would be antidilutive. Potentially dilutive shares
      of
      common stock that have been excluded from the calculation of the weighted
      average number of dilutive common shares for the three and six months ended
      June
      30, 2008 include exercisable stock options and warrants to purchase shares
      of
      common stock. For the three and six months ended June 30, 2008, if converted
      under the treasury method, these instruments would have resulted in an
      additional approximate 1,377,000 equivalent common shares
      outstanding.





*Recent
      Accounting Pronouncements*





In
      September 2006, the Financial Accounting Standards Board, or FASB, issued SFAS,
      No. 157, “Fair Value Measurement.” SFAS No. 157 established a framework for
      measuring fair value in accordance with GAAP, clarifies the definition of fair
      value within that framework, and expands disclosures about the use of fair
      value
      measurements. It also responds to investors’ requests for expanded information
      about the extent to which companies measure assets and liabilities at fair
      value, the information used to measure fair value and the effect of fair value
      measurements on earnings. SFAS No. 157 applies whenever other standards require
      (or permit) assets or liabilities to be measured at fair value, and does not
      expand the use of fair value in any new circumstances. SFAS No. 157 is effective
      for financial statements issued for fiscal years beginning after November 15,
      2007. The Company has adopted SFAS No. 157 and such adoption has no effect
      on
      the Company's financial position or results of operations.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities — Including an amendment of FASB
      Statement No. 115,” (“SFAS 159”). This statement permits, but does not require,
      entities to measure many financial instruments at fair value. The objective
      is
      to provide entities with an opportunity to mitigate volatility in reported
      earnings caused by measuring related assets and liabilities differently without
      having to apply complex hedge accounting provisions. Entities electing this
      option will apply it when the entity first recognizes an eligible instrument
      and
      will report unrealized gains and losses on such instruments in current earnings.
      This statement (1) applies to all entities, (2) specifies certain election
      dates, (3) can be applied on an instrument-by-instrument basis with some
      exceptions, (4) is irrevocable, and (5) applies only to entire instruments.
      One
      exception is demand deposit liabilities which are explicitly excluded as
      qualifying for fair value. With respect to SFAS 115, available-for-sale and
      held-to-maturity securities at the effective date are eligible for the fair
      value option at that date. If the fair value option is elected for those
      securities at the effective date, cumulative unrealized gains and losses at
      that
      date shall be included in the cumulative-effect adjustment and thereafter,
      such
      securities will be accounted for as trading securities. SFAS 159 became
      effective for the Company on January 1, 2008. The Company has adopted SFAS
      No.
      159 and determined that such adoption has no effect on the Company's financial
      position or results of operations.


-
          12
          -





In
      December 2007, the FASB issued No. 141(R), “Business Combinations” (“SFAS
      141(R)”). SFAS 141(R) replaces SFAS 141 and provides greater consistency in the
      accounting and financial reporting of business combinations. SFAS 141(R)
      requires the acquiring entity in a business combination to recognize all assets
      acquired and liabilities assumed in the transaction and any non-controlling
      interest in the acquiree at the acquisition date and be measured at the fair
      value as of that date. This includes the measurement of the acquirer’s shares
      issued in consideration for a business combination, the recognition of
      contingent consideration, the accounting for pre-acquisition gain and loss
      contingencies, the recognition of capitalized in-process research and
      development, the accounting for acquisition related restructuring cost accruals,
      the treatment of acquisition related transaction costs and the recognition
      of
      changes in the acquirer’s income tax valuation allowance and deferred taxes.
      SFAS 141(R) will be effective for the Company on January 1, 2009 and is to
      be
      applied prospectively. Early adoption is not permitted. Management is currently
      assessing the impact, if any, that SFAS 141(R) may have on the
      Company.





In
      November 2007, the Emerging Issues Task Force (EITF) ratified a consensus on
      EITF Issue No. 07-1, “Accounting for Collaborative Arrangements” (“EITF 07-1”)
      which requires participants in a collaboration to make separate disclosures
      regarding the nature and purpose of an arrangement, their rights and obligations
      under the arrangement, the accounting policy for the arrangement and the income
      statement classification and amounts arising from the arrangement between
      participants for each period an income statement is presented. EITF 07-1 is
      effective for us beginning in the first quarter of fiscal year 2009. We are
      currently evaluating the impact of the provisions of EITF 07-1 on our financial
      position, results of operations and cash flows and therefore, the impact of
      the
      adoption is unknown at this time.





In
      June
      2007, the EITF ratified a consensus on EITF Issue No. 07-3 (“EITF 07-3”),
“Accounting for Non-Refundable Advance Payments for Goods or Services to Be
      Used
      in Future Research and Development Activities,” which concluded that
      non-refundable advance payments for goods or services for use in research and
      development activities should be deferred and capitalized. EITF 07-3 is
      effective for us beginning in the first quarter of fiscal year 2008. We are
      currently evaluating the impact of the provisions of EITF 07-3 on our financial
      position, results of operations and cash flows and therefore, the impact of
      the
      adoption is unknown at this time.





Other
      accounting standards that may have been issued or proposed by the FASB or other
      standards-setting bodies are not expected to have a material impact on the
      Company’s consolidated financial statements.





**3.
      Stockholders Equity**





*Common
      Stock*





In
      February 2008, the Company issued 615,386 shares of common stock to accredited
      investors at a price of $0.70 per share for an aggregate consideration of
      $430,770 in a second closing which is a part of a private equity financing
      (the
“Financing”). The Company received net cash proceeds of approximately $377,000
      after placement agent commissions and expenses of $42,770. In May 2008, the
      Company issued 121,470 shares of common stock to accredited investors at a
      price
      of $0.70 per share for an aggregate consideration of $85,000 in the final
      closing tranche of the Financing. The Company received net cash proceeds of
      approximately $68,000 after placement agent commissions and expenses of
      approximately $17,000. The Company is obligated to file a registration statement
      with the SEC for these common shares within 60 days of the Closing and to use
      its best efforts to have such registration statement effective 180 days from
      the
      Closing unless the shares are saleable without volume restrictions under Rule
      144. In the event that the Company does not have an effective registration
      statement in place within 180 days from the Closing or that the shares are
      not
      otherwise saleable under Rule 144, the Company is required to pay liquidated
      damages in an amount equal to 1% of the aggregate purchase price paid by the
      subscribers for each 30-day period in which the Company remains in default
      under
      this provision. In no event, however, can the aggregate liquidated damage amount
      exceed 6% of the aggregate purchase price paid by the investors. These
      transactions were exempt from registration pursuant to Regulation D promulgated
      under the Securities Act of 1933.





In
      June
      2008, the Company issued 10,000 common shares to a vendor for services. The
      Company recognized $7,500 in expense related to the issuance of these
      shares.


-
          13
          -





*Preferred
      Stock and Warrants*





On
      June
      12, 2007, the Company’s Articles of Incorporation were amended to designate
      2,250,000 of the Company’s undesignated capital stock as Series A Convertible
      Preferred Stock (the “Preferred”) with par value $0.01 per share. At issuance,
      the Preferred is convertible into an equal number of shares of the Company’s
      common stock based upon an initial conversion price of $.50 per share and
      carries a liquidation preference of like amount. In addition, the Preferred
      has
      rights which provide for (i) dividend payments senior to those with respect
      to
      common shares, (ii) voting rights equal to the number of common shares into
      which the Preferred is convertible, (iii) automatic conversion in the event
      either of an underwritten public offering exceeding $30 million in gross
      proceeds to the Company at an offering price in excess of $2.00 per share or
      approval of 67% of the Preferred holders and (iv) adjustments to the conversion
      price in the event of stock dividends, stock splits or other effective stock
      subdivisions. If the Company declares a dividend or a distribution on any common
      stock of the Company, the Company shall pay a dividend or make a distribution
      on
      all outstanding shares of Preferred in an amount per share equal to the maximum
      amount paid or set aside for all shares of common stock into which each such
      share of Preferred could then be converted. On June 15, 2007, the Company sold
      2,000,000 shares of its Preferred to three accredited investors for gross
      proceeds of $1,000,000 in cash. As additional consideration for the purchase
      of
      the Preferred, the Company issued five-year warrants to purchase 250,000
      additional shares of Preferred at an initial exercise price of $0.50 per share.
      The Company is also required to reserve 250,000 shares of Preferred for issuance
      in relation to the warrants.





The
      convertible feature of the Preferred and the terms of the warrants provide
      for a
      rate of conversion or exercise that was below market value at issuance. Such
      feature, as it specifically relates to the convertible feature of the Preferred,
      is characterized as a "Beneficial Conversion Feature" ("BCF"). Pursuant to
      EITF
      Issue No. 98-5, "Accounting for Convertible Securities with Beneficial
      Conversion Features or Contingently Adjustable Conversion Ratios" (“EITF 98-5”)
      and EITF No. 00-27, "Application of EITF Issue No. 98-5 to Certain Convertible
      Instruments," the estimated relative fair values of the Preferred and the
      warrants, in approximate amounts of $782,000 and $218,000, respectively, were
      calculated assuming the most favorable conversion price determinable to the
      Preferred shareholders. The value of the BCF was determined by the intrinsic
      value method and the fair value of the warrants was determined by the
      Black-Scholes option-pricing model at the date of issuance. The warrant fair
      value was determined assuming a five-year term, stock volatility of 140%, and
      a
      risk-free interest rate of 5.10%. The stand-alone fair value of the BCF was
      determined to be substantially higher than the proceeds received and,
      accordingly, the value assigned to the BCF was limited to the gross proceeds
      received from the offering. Per the guidance of EITF 98-5, the value of the
      BCF
      and warrants are treated as a deemed dividend to the Preferred stockholders
      and,
      due to the potential immediate convertibility of the Preferred stock at
      issuance, is recorded as an increase to both additional paid-in-capital and
      deficit accumulated during the development stage at the time of
      issuance.





On
      March
      27, 2008 the Preferred was converted into 8,000,000 shares of common stock
      and
      no Preferred Stock remained outstanding on June 30, 2008.





In
      May
      2008, the holders of 178,750 Preferred warrants effected a cashless exercise
      to
      acquire, and the Company issued, 605,817 shares of common stock to the warrant
      holders. The Company received no proceeds from the exercise of the warrants
      and
      issuance of the common stock.





*Stock
      Options*





In
      May
      2008, 20,000 stock options held by an employee were exercised. The Company
      received net proceeds of $3,000 as a result of the exercise.


-
          14
          -


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





*Safe
      Harbor Statement Under the Private Securities Litigation Reform Act of
      1995*





This
      Report on Form 10-Q contains forward-looking statements within the meaning
      of
      Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
      Securities Exchange Act of 1934, as amended. When used in this Report, or in
      our
      future filings with the SEC, in our press releases and in oral statements made
      with the approval of an authorized executive officer, the words or phrases
      “anticipates,” “estimates,” “expects,” “will likely result,” “projects,”
“believes,” “intends,” or similar expressions are intended to identify such
      forward-looking statements, but are not the exclusive means of identifying
      such
      statements. These forward-looking statements involve risks and uncertainties
      that may cause our actual results to differ materially from the results
      discussed in the forward-looking statements.





We
      caution you not to place undue reliance on these forward-looking statements,
      which speak only as of the date made. We undertake no obligation to revise
      any
      forward-looking statements in order to reflect events or circumstances after
      the
      date of such statements. Readers are urged to carefully review and consider
      the
      various disclosures made by us in this Report and other reports we file with
      the
      SEC that attempt to advise interested parties of the risks and factors that
      may
      affect our business. Such forward-looking statements are qualified in their
      entirety by the cautions and risk factors set forth in our Annual Report on
      Form
      10-KSB covering the year ended December 31, 2007.





*Business*





SpectraScience,
      Inc. develops and manufactures innovative Laser Induced Fluorescence
      spectrophotometry systems capable of determining whether tissue is normal,
      pre-cancerous or cancerous without removing tissue from the body. The Wav STAT
®
Optical Biopsy System (“Wav STAT”) is SpectraScience's first fully developed
      product to incorporate its proprietary Laser Induced Fluorescence technology
      for
      worldwide clinical use. It is approved by the FDA for use during endoscopy
      of
      the colon when screening for colon cancer. The Company’s second application of
      this technology for detecting pre-esophageal cancer is undergoing a clinical
      trial at four institutions. Upon completion of the trial, the Company plans
      to
      file with the FDA a supplement to its existing PMA seeking permission to begin
      marketing for that indication for use. SpectraScience believes its core
      technology is a platform technology that can be developed for use in many areas
      of the human body.





Our
      principal executive offices are located at 11568 Sorrento Valley Rd., Suite
      11,
      San Diego, CA 92121. We can be reached by telephone at (858) 847-0200; by fax
      at
      (858) 847-0880; or by email at info@spectrascience.com. We have a web-site
      at
      http://www.spectrascience.com. The information contained on our web site shall
      not be deemed to be a part of this Report.





*Plan
      of Operation*





The
      Company currently has FDA approval to market the WavSTAT System for detecting
      pre-cancerous and cancerous tissue in the colon and to market the LUMA System
      for use as an adjunct to colposcopy in the detection of early stage cancer
      and
      pre-cancer of the cervix. Our plan is to add another indication for use in
      detecting pre-cancer and cancer in the esophagus. With the acquisition of the
      LUMA product in November 2007, we are, and will be continuing to develop
      targeted sales plans during the remainder of 2008. Over the next twelve months
      SpectraScience intends to:





·
            Begin
                selling the WavSTAT System in the US and international markets for
                the
                detection and treatment of colon cancer and
                pre-cancer.





·
            Complete
                WavSTAT System clinical trials related to the diagnosis of esophageal
                cancers.





·
            Begin
                marketing and selling the WavSTAT System in US and international
                markets
                for the detection of esophageal cancer and
                pre-cancer.




-
          15
          -




·
            Position
                and begin selling the LUMA System in the US to specialized OB/GYN
                clinics,
                managed care organizations (early detection and future cost avoidance),
                teaching hospitals and medical environments where nurse practitioners
                and/or medical clinicians can leverage our technology for effective
                early
                diagnosis.





·
            Enhance
                our San Diego facility and grow our organization to allow for the
                initial
                manufacture of both WavSTAT and LUMA Systems in-house and also to
                begin
                the design and planning for the next generation of fluorescence-based
                systems.





*Results
      of Operations*





*For
      the Three Months ended June 30, 2008 and 2007*





The
      Company recognized revenue of $4,750 and $0 for the three months ended June
      30,
      2008 and 2007, respectively.





Overall
      research and development expenses for the three months ended June 30, 2008
      and
      2007 were approximately $579,000 and $120,000, respectively. The approximate
      $459,000 increase was comprised of increases of approximately $219,000 in
      personnel expense, $105,000 in non-cash stock option expense, $59,000 in
      clinical study expense, $45,000 in engineering development expense, $15,000
      in
      outside consulting expense and $16,000 in all other expense. The increase in
      overall research and development expenses related to increases in personnel
      and
      activity related to the final development work and commercialization of the
      WavSTAT and LUMA product platforms.





General
      and administrative expenses for the three months ended June 30, 2008 and 2007
      were approximately $620,000 and $279,000, respectively. The approximate increase
      of $341,000 was comprised of approximate increases of $74,000 in accounting
      and
      legal expense, $64,000 in recruiting expense, $57,000 in amortization expense,
      $44,000 in consulting expense, $22,000 in travel expense, $21,000 in investor
      relations expense, $11,000 in insurance expense and a $48,000 increase in all
      other expenses. The increase over this period was due to the increased activity
      related to the commercialization of our WavSTAT and LUMA product platforms.





Sales
      and
      marketing expenses for the three months ended June 30, 2008 and 2007 were
      approximately $224,000 and $273,000, respectively. This decrease of
      approximately $49,000 was primarily a result of a decline in stock option
      compensation expense of approximately $146,000 combined with a decline in sales
      consulting expense of approximately $18,000, offset by approximate increases
      in
      personnel expense of $68,000, trade show expense of $20,000, advertising expense
      of $15,000 and all other expense of $12,000. The decline in stock option
      compensation expense is a result of changes in the vesting rate of underlying
      stock options while the decline in sales consulting expense reflects a move
      away
      from a reliance on outside sales consultants. All other sales and marketing
      expenses have increased as a result of increases in sales and marketing
      activities.





Other
      income, net for the three months ended June 30, 2008 and 2007 was approximately
      $54,000 and $8,800, respectively. The increase was primarily due to an increase
      in interest income due to higher interest bearing cash balances during the
      three
      months ended June 30, 2008 when compared to the prior quarter one year
      ago.





As
      a
      result of the above, the net loss for the three months ended June 30, 2008
      and
      2007 was approximately ($1,366,000) and ($1,663,000), respectively. The decrease
      in net loss was due to increases overall operating expense as a result of
      preparation for the production and commercialization of the WavSTAT and LUMA
      systems offset by a non-cash deemed dividend of ($1,000,000) recognized in
      the
      prior quarter one year ago. Of the net loss for the quarter ended June 30,
      2008
      approximately ($223,000) was comprised of non-cash stock-option
      expense.





*For
      the Six Months ended June 30, 2008 and 2007*





The
      Company recognized revenue of $8,550 and $0 for the six months ended June 30,
      2008 and 2007, respectively.





Overall
      research and development expenses for the six months ended June 30, 2008 and
      2007 were approximately $1,069,000 and $194,000, respectively. The approximate
      $875,000 increase was comprised of increases of approximately $386,000 in
      personnel expense, $288,000 in non-cash stock option expense, $83,000 in
      clinical study expense, $51,000 in engineering development expense, $33,000
      in
      outside consulting expense, $28,000 in production expense and $6,000 in all
      other expense. The increase in overall research and development expenses related
      to increases in personnel and activity related to the final development work
      and
      commercialization of the WavSTAT and LUMA product platforms.





General
      and administrative expenses for the six months ended June 30, 2008 and 2007
      were
      approximately $1,308,000 and $445,000, respectively. The approximate increase
      of
      $863,000 was comprised of approximate increases of $191,000 in personnel
      expense, $145,000 in financial and consulting expense, $115,000 in amortization
      expense, $110,000 in non-cash stock option expense, $64,000 in recruiting
      expense, $52,000 in travel expense, $50,000 in legal expense, $25,000 in
      investor relations expense, $22,000 in rent expense, $15,000 in insurance
      expense, $12,000 in information technology expense, $11,000 in depreciation
      expense and a $51,000 increase in all other expenses. The increase over this
      period was due to the increased activity related to the commercialization of
      our
      WavSTAT and LUMA product platforms.





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          16
          -


Sales
      and
      marketing expenses for the six months ended June 30, 2008 and 2007 were
      approximately $426,000 and $296,000, respectively. This increase of
      approximately $130,000 was a result of approximate decreases in stock option
      compensation expense of approximately $140,000 combined with a decline in sales
      consulting expense of approximately $11,000, offset by approximate increases
      in
      personnel expense of $186,000, trade show expense of $48,000, travel expense
      of
      $19,000, advertising expense of $15,000 and all other expense of $13,000. The
      decline in stock option compensation expense is a result of changes in the
      vesting rate of underlying stock options while the decline in sales consulting
      expense reflects a move away from a reliance on outside sales consultants.
      All
      other sales and marketing expenses have increased as a result of overall
      increases in sales and marketing activities.





Other
      income, net for the six months ended June 30, 2008 and 2007 was approximately
      $89,000 and $10,000, respectively. The increase was primarily due to an increase
      in interest income due to higher interest bearing cash balances on hand during
      the six months ended June 30, 2008 when compared to the prior period one year
      ago.





As
      a
      result of the above, and as a result of a non-cash deemed dividend of
      ($1,000,000) related to the issuance of Preferred Stock in the prior period,
      the
      net loss for the six months ended June 30, 2008 and 2007 was approximately
      ($2,710,000) and ($1,925,000), respectively. The increased net loss was due
      to
      increases overall operating expense as a result of preparation for the
      production and commercialization of the WavSTAT and LUMA systems offset by
      a
      non-cash deemed dividend of $1,000,000 recognized in the prior quarter one
      year
      ago. Of the net loss for the quarter ended June 30, 2008 approximately
      ($601,000) was comprised of non-cash stock-option expense.





*Liquidity
      and Capital Resources*





On
      June
      30, 2008, the Company had cash balances of $2,466,028 and short-term
      certificates of deposit of $1,000,000 for a total of $3,466,028 as compared
      to
      $5,188,177 in cash at December 31, 2007, representing a decrease of ($1,722,149)
      in liquid assets for the period. The cash and liquid asset balances decreased
      primarily due to working capital used in operations offset by funds raised
      through Regulation D private placements of common stock. During the six months
      ending June 30, 2008, the Company raised $445,351, net of issuance costs, from
      the sale of 736,856 shares of common stock at $0.70 per share, in each case
      sold
      to accredited investors. There have been minimal capital equipment expenditures
      incurred and no significant capital expenditures are foreseen.


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          17
          -





SpectraScience
      expects to incur significant additional operating losses through at least 2008,
      as we complete a clinical trial, begin outcome-based clinical studies, continue
      research and development activities, and increase sales and marketing efforts
      to
      commercialize the WavSTAT and LUMA systems. If we do not receive additional
      funding in a timely manner, the Company may be unable to continue as a going
      concern. We may not be able to find alternative capital or raise capital or
      debt
      on terms that are acceptable. Even if the Company receives additional funding,
      such proceeds may not be sufficient to allow the Company to sustain operations
      until it attains profitability and positive cash flows from operations; we
      may
      incur unknown expenses; or we may not be able to meet our revenue forecast,
      and
      one or more of these circumstances would require us to seek additional
      capital.





**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**





Not
      required





**Item
      4.**  **Controls
      and Procedures**





Not
      Required




**Item
      4T.**  **Controls
      and Procedures**




*Evaluation
      of Disclosure Controls*




As
      required by Rule 13a-15 under the Exchange Act, as of the end of the period
      covered by this Report, the Company’s Chief Executive Officer and Chief
      Financial Officer carried out an evaluation of the effectiveness of the
      Company's disclosure controls and procedures (as defined in Exchange Act Rule
      13a-15c). Based upon that evaluation, the Company's Chief Executive Officer
      and
      Chief Financial Officer concluded that the Company's disclosure controls and
      procedures are effective.




*Changes
      in Internal Controls over Financial Reporting*




There
      were no changes in the Company's internal controls over financial reporting
      during the six months ended June 30, 2008, which have materially affected or
      are
      reasonably likely to materially affect such controls.





*Evaluation
      of Internal Control Over Financial Reporting*





Under
      the
      supervision of and with the participation of our management, including our
      Chief
      Executive Officer, and Chief Financial Officer, we performed an evaluation
      of
      the Company’s internal controls over financial reporting as per the requirements
      of Section 404 of the Sarbanes-Oxley Act (“SOX”) for non-accelerated filers.
      Management understands that it is its responsibility to establish and maintain
      adequate internal control over financial reporting for the Company. Management
      assessed the processes related to and the systems of internal control over
      financial reporting and determined that, in combination with mitigating
      corporate controls, the Company’s internal control over financial reporting is
      effective at June 30, 2008.





Management
      identified and analyzed material financial statement accounts and their
      associated relevant business processes in first performing a financial risk
      assessment, then an entity-level risk assessment and, finally, an information
      technology risk assessment. The Financial Risk assessment segmented the
      different financial control processes (for example, the financial reporting,
      inventory management and purchasing processes) against material real and nominal
      financial accounts to determine which processes might imply the highest risk
      of
      financial statement misstatement. Management then reviewed and vetted these
      high-risk processes. Management conducted an Entity-Level risk assessment and
      reviewed such controls utilizing the COSO (Committee of Sponsoring Organizations
      of the Treadway Commission) control framework. In addition, Management performed
      an Information Technology risk assessment and reviewed the primary computer
      systems which effect the reporting of financial information. Management reviewed
      application, database, operating system and network software. We also reviewed
      our server, storage, network and desktop hardware
      environment.


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          18
          -





As
      a
      result of these assessments, Management found no evidence of any material
      weaknesses in the Company’s internal controls over financial reporting.
      Management has concluded that, at June 30, 2008, internal controls over
      financial reporting were effective.





This
      interim report does not include an attestation report of the Company’s
      registered public accounting firm regarding internal control over its financial
      reporting.




*Cautionary
      Statement*





A
      control
      system, no matter how well-designed and operated, cannot provide absolute
      assurance that the


objectives
      of the control system are met, and no evaluation of internal controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within a company have been detected.





**PART
                II**
            **OTHER
                INFORMATION****Item
                1.**
            **Legal
                Proceedings**None**Item
                1A.**
            **Risk
                Factors**None**Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**In
                February 2008, the Company sold 615,386 shares of common stock to
                accredited investors at a price of $0.70 per share for an aggregate
                consideration of $430,770. The Company received net cash proceeds
                of
                approximately $388,000 after placement agent commissions and expenses
                of
                $42,770.
              
              In
                May 2008, the Company issued 121,470 shares of common stock to accredited
                investors at a price of $0.70 per share for an aggregate consideration
                of
                $85,000 in the final closing tranche of the Financing. The Company
                received net cash proceeds of approximately $68,000 after placement
                agent
                commissions and expenses of approximately $17,000.
              
              These
                transactions were exempt from registration pursuant to Regulation
                D
                promulgated under the Securities Act of 1933.**Item
                3.**
            **Defaults
                Upon Senior Securities**None**Item
                4.**
            **Submission
                of Matters to a Vote of Security Holders**Our
                annual meeting of shareholders was held on May 5, 2008. At the annual
                meeting, Jim Hitchin, Mark McWilliams, Rand Mulford, John Pappajohn,
                Stanley Pappelbaum, M.D., Chester Sievert, Jr., and the Honorable
                Tommy
                Thompson were elected as directors for terms expiring at the annual
                meeting of our shareowners in 2009. The following table shows the
                vote
                totals with respect to the election of these
                directors:




For
            
            WithheldJim
                Hitchin
            56,962,273
            
            85,065Mark
                McWilliams
            55,734,240
            
            1,313,098Rand
                Mulford
            56,962,243
            
            85,095John
                Pappajohn
            57,033,033
            
            14,305Stanley
                Pappelbaum, M.D.
            57,032,033
            
            15,305Chester
                Sievert, Jr.
            55,724,360
            
            1,322,978Honorable
                Tommy Thompson
            57,006,773
            
            40,565




At
                the annual meeting our shareholders also approved an amendment to
                our
                bylaws to permit uncertificated shares. The following table shows
                the vote
                totals with respect to the Bylaws Amendment:Votes
                For
            
            Votes
                Against
            
            Abstentions55,202,830
            
            599,199
            
            1,245,309




**Item
                5.**
            **Other
                Information**None




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          19
          -


**Item
                6.**
            **Exhibits****Exhibit
                31.1**
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.**Exhibit
                31.2**
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.**Exhibit
                32.1**
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.**Exhibit
                32.2**
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.




-
          20
          -





**SpectraScience,
      Inc.**




**FORM
      10-Q**





**June
      30, 2008**





**SIGNATURES**





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





**SpectraScience,
                Inc.**(Registrant)Date:
                August 14, 2008
            /s/
                James Hitchin**James
                Hitchin**President,
                Chief Executive Officer(Principal
                executive officer)Date:
                August 14, 2008
            /s/
                James Dorst**James
                Dorst**Chief
                Financial Officer(Principal
                Financial and Accounting Officer)




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