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 MARCH 31, 1998

[ ]      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 May 13, 1998 was 4,714,104.

Transitional Small Business Disclosure Format (Check one):  Yes ___    No _X_

<PAGE>


                              SPECTRASCIENCE, INC.
                                   FORM 10-QSB

                                 MARCH 31, 1998
                                TABLE OF CONTENTS


                                                                            PAGE
                                                                             NO.

PART I -- FINANCIAL INFORMATION................................................3

    ITEM 1. Financial Statements (Unaudited)...................................3

        BALANCE SHEETS.........................................................3

        STATEMENTS OF OPERATIONS (Unaudited)...................................4

        STATEMENTS OF CASH FLOW (Unaudited)....................................5

        NOTES TO FINANCIAL STATEMENTS..........................................6

    ITEM 2. Management's Discussion and Analysis of Financial Condition
    and Results of Operations..................................................6

PART II -- OTHER INFORMATION...................................................8

    ITEM 1. Legal Proceedings..................................................8

    ITEM 2. Changes in Securities..............................................8

    ITEM 3. Defaults Upon Senior Securities....................................8

    ITEM 4. Submission of Matters to a Vote of Security Holders................8

    ITEM 5. Other Information..................................................8

    ITEM 6. Exhibits and Reports on Form 8-K...................................9

SIGNATURES....................................................................10

EXHIBIT 27:  FINANCIAL DATA SCHEDULE.......................................E27-1

EXHIBIT 99:  FORWARD-LOOKING STATEMENTS....................................E99-1

<PAGE>


                              SPECTRASCIENCE, INC.

                                   FORM 10-QSB
PART I -- FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                 March 31,          December 31,
                                                   1998                1997(1)
                                               ------------         ------------
                                               (Unaudited)            (Audited)
<S>                                            <C>                  <C>         
ASSETS
Current assets:
    Cash and cash equivalents                  $  1,357,221         $  1,638,173
    Inventory                                       406,905              180,474
    Other current assets                             71,601               98,419
                                               ------------         ------------
Total current assets                              1,835,727            1,917,066

Net fixed assets                                    146,973              155,046
                                               ------------         ------------

             TOTAL ASSETS                      $  1,982,700         $  2,072,112
                                               ============         ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable                           $    124,953         $    140,809
    Accrued compensation and taxes                   62,179              100,690
    Accrued expenses                                 61,161               61,019
    Accrued clinical research fees                   87,010              159,899
                                               ------------         ------------
Total current liabilities                           335,303              462,417

Commitments

SHAREHOLDERS' EQUITY
Common stock, $.25 par value:
    Authorized shares--10,000,000
    Issued and outstanding shares--
       4,624,338 on March 31, 1998 and
       4,506,559 on December 31, 1997             1,156,085            1,126,640
Additional paid-in capital                       45,166,399           44,620,283
Accumulated deficit                             (44,675,087)         (44,137,228)
                                               ------------         ------------
            TOTAL SHAREHOLDERS' EQUITY            1,647,397            1,609,695
                                               ------------         ------------
             TOTAL LIABILITIES AND
                   SHAREHOLDERS' EQUITY        $  1,982,700         $  2,072,112
                                               ============         ============
</TABLE>

(1)      THE BALANCE SHEET ON DECEMBER 31, 1997 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.

<PAGE>


                              SPECTRASCIENCE, INC.

                                   FORM 10-QSB

                      STATEMENTS OF OPERATIONS (UNAUDITED)


                                          THREE MONTHS ENDED
                                              MARCH 31
                                 ------------------------------------

                                       1998               1997
                                       ----               ----

Revenue                            $      --           $      --

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

Operating expenses
   Research and development            337,929             264,058
   Selling, general and
     administrative                    219,140             223,837
                                   -----------         -----------
Total operating expenses               557,069             487,895

Interest and other income               19,210              38,765
                                   -----------         -----------

Net loss                           $  (537,859)        $  (449,130)
                                   ===========         ===========

Net loss per common share          $     (0.12)        $     (0.10)

Weighted average common
shares outstanding                   4,521,843           4,408,972


SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>


                              SPECTRASCIENCE, INC.

                                   FORM 10-QSB

                       STATEMENTS OF CASH FLOW (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                       MARCH 31
                                                        ---------------------------------------
                                                                1998                1997
                                                                ----                ----
<S>                                                        <C>                 <C>         
OPERATING ACTIVITIES
  Net loss                                                 $  (537,859)        $  (449,130)
  Adjustments to reconcile net loss to cash
    used in operating activities:
    Depreciation                                                14,446              17,864
      Changes in operating assets
       and liabilities:
         Decrease in accounts receivable                          --                  --
         (Increase) decrease in inventories                   (226,431)              4,232
         Decrease in other current assets                       26,818               9,554
         (Decrease) increase in current liabilities           (127,114)             39,391
                                                           -----------         -----------

         Net cash used in operating activities                (850,140)           (378,089)

INVESTING ACTIVITIES
  Purchase of fixed assets                                      (6,373)             (2,936)
                                                           -----------         -----------

        Net cash used in investing activities                   (6,373)             (2,936)

FINANCING ACTIVITIES
  Proceeds from issuance of common stock                       575,561                --
                                                           -----------         -----------
        Net cash provided by financing activities              575,561                --

  Net decrease in cash and cash equivalents                   (280,952)           (381,025)

CASH AND CASH EQUIVALENTS
  AT BEGINNING OF PERIOD                                     1,638,173           3,047,182
                                                           -----------         -----------

CASH AND CASH EQUIVALENTS
  AT END OF PERIOD                                         $ 1,357,221         $ 2,666,157
                                                           ===========         ===========

SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS

Series A and B preferred stock converted into
  common stock                                             $      --           $   859,167

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

<PAGE>

                              SPECTRASCIENCE, INC.

                                   FORM 10-QSB

                                 MARCH 31, 1998


--------------------------------------------------------------------------------
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 MARCH 31, 1998,
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 month period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998. 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, 1997.


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" (the Statement). 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, 1998. For the quarter ended March 31, 1998,
there is no difference between basic earnings per share under Statement No. 128
and primary net loss per share as reported.


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 was
incorporated in the state of Minnesota on May 4, 1983 as GV Medical, Inc. The
Company changed its name to SPECTRASCIENCE, Inc. on October 16, 1992, and the
name change was approved by the Company's

<PAGE>


shareholders on May 13, 1993. The Company's common stock, par value $.25 per
share (the "Common Stock"), is traded on the Nasdaq SmallCap Market under the
symbol SPSI.

            The Company's corporate offices are located at 3650 Annapolis Lane,
Suite 101, Minneapolis, Minnesota 55447-5434. The Company's telephone number is
612/509-9999, its fax number is 612/509-9805, and its e-mail address is
SPSI@SPECTRASCIENCE.COM. The Company also has a web-site which can be accessed
at HTTP://WWW.SPECTRASCIENCE.COM.

            The Company's development effort is focused on the Optical
Biopsy(TM) System, which is currently targeted for use in the detection and
differentiation of cancerous, pre-cancerous and healthy tissues in the
gastrointestinal tract using minimally-invasive endoscopic techniques, and to a
lesser extent, the Spectroscopic Guidewire(TM) System, which is currently
targeted for the detection of intra-coronary thrombus and differentiation of
atherosclerotic plaque.


(b)         RESULTS OF OPERATIONS

            The Company recorded no revenue for the three months ended March 31,
1998 and March 31, 1997. As a result, the cost of products sold and gross profit
for the three months ended March 31, 1998 and March 31, 1997 were zero.

            Research and development expenses for the three months ended March
31, 1998 were $337,929 compared to $264,058 for the same period in 1997. The
increase of 28.0% for the three months ended March 31, 1998 was primarily due to
increases in expenses associated with the Company's multi-center clinical
studies for the early detection of colon cancer and esophageal cancer utilizing
its Optical Biopsy(TM) System, higher regulatory consulting expenses, and the
hiring of two additional individuals associated with research and development.
The Company also experienced increased legal expenses associated with patent
filing and protection. These increases were partially offset by the termination
of the clinical feasibility study contract with the Massachusetts General
Hospital, which cost approximately $50,000 per quarter, and was terminated in
March 1997. Massachusetts General Hospital remains one of the sites where the
Company is conducting on-going clinical trials on endoscopic techniques
utilizing the Company's Optical Biopsy(TM) System.

            Selling, general and administrative expenses for the three months
ended March 31, 1998 were $219,140 compared to $223,837 for the same period in
1997. The decrease of 2.1% for the three months ended March 31, 1998 was
primarily due to the elimination of a receptionist but was somewhat offset by an
increase in investor relations expenses and related expenses as a result of
hiring a consulting company. The consulting company assisted the Company to put
together "road-shows" in order to introduce the Company to brokers, analysts and
investors in various cities throughout the United States.

            Interest and other income for the three months ended March 31, 1998
was $19,210 compared to $38,765 for the same period in 1997. The decrease of
50.4% was primarily due to lower balances in cash and cash equivalents.

            As a result of the above, the net loss for the three months ended
March 31, 1998 was $537,859 compared to a net loss of $449,130 for the same
period in 1997. This represented an increase of 19.8% in net loss compared to
the same period in 1997. The net loss per share for the three months ended March
31, 1998 was $.12 compared to $.10 for the same period in 1997.


(c)         LIQUIDITY AND SOURCES OF CAPITAL

            Cash and cash equivalents on March 31, 1998 were $1,357,221 compared
to $1,638,173 on December 31, 1997. The decrease in the Company's cash position
from December 31, 1997 to March 31, 1998 was primarily the result of the net
loss during the three month period that ended March 31, 1998, an increase of
$226,431 in inventory, and a decrease in current liabilities primarily due to
the payment of fees associated with the Company's clinical studies on the
Optical Biopsy(TM) System.

<PAGE>


            The working capital of the Company on March 31, 1998 was $1,500,424
compared to $1,454,649 on December 31, 1997. This increase of 3.1% was primarily
due to a reduction in current liabilities associated with clinical research
studies fees.

            Net cash used in operating activities for the three months ended
March 31, 1998 was $850,140 compared to $378,089 for the same period in 1997.
This increase of 124.9% was primarily due to the higher expenses associated with
research and development, an increase in inventory, and a decrease in current
liabilities in 1998 compared to 1997.

            Net cash used in investing activities for the three months ended
March 31, 1998 was $6,373 compared to $2,936 for the same period in 1997. This
increase was due to higher purchases of computer equipment in 1998.

            Net cash provided by financing activities for the three months ended
March 31, 1998 was $575,561 compared to $0 for the same period in 1997. The
additional cash provided for the quarter ended March 31, 1998 was the result of
(a) an option exercise for 6,667 shares of the Common Stock at $3.00 per share,
and (b) warrant exercises for 111,112 shares of the Common Stock at $5.00 per
share by shareholders who invested in the Company's issuance of Series A
Convertible Preferred Stock in June 1995. In the first quarter of 1997, all the
outstanding shares of Series A and B Convertible Preferred Stock were converted
to Common Stock, but these were non-cash conversions. There was no preferred
stock of the Company outstanding on March 31, 1998.


PART II -- OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

            As of March 31, 1998, there were 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

            Not Applicable

ITEM 5.     OTHER INFORMATION

(a)         PATENT APPLICATIONS

            In the quarter ended March 31, 1998, the Company filed two patents
with the United States Patent and Trademark Office on its Optical Biopsy(TM)
System.

(b)         OPTION AND WARRANT EXERCISES

            In February 1998, an option holder exercised its option to purchase
6,667 shares of Common Stock at $3.00 per share. This resulted in net proceeds
to the Company of $20,001.

            In March 1998, various warrant holders exercised their warrants to
purchase 111,112 shares of Common Stock at $5.00 per share. This resulted in net
proceeds to the Company of $555,560. In April 

<PAGE>


1998, other warrant holders exercised their warrants to purchase 37,333 shares
of Common Stock at $5.00 per share. This resulted in additional proceeds to the
Company of $186,665.

            All remaining warrants that were issued to investors in the
Company's issuance of Series A Convertible Preferred Stock ("Preferred A") which
closed on June 29, 1995, will expire on or before June 29, 1998. As of May 13,
1998, the remaining warrants associated with Preferred A, exercisable at $5.00
per share, amounted to 41,111 shares. If exercised, these remaining $5.00
warrants would raise an additional $205,555 in net proceeds to the Company.
There can be no assurance that these warrants will be exercised.

(c)         NASDAQ SMALLCAP MARKET CONTINUED LISTING

            The Company's Common Stock was listed for trading on the Nasdaq
SmallCap Market on May 15, 1996 under the symbol SPSI. On August 22, 1997, the
Securities and Exchange Commission approved new listing standards for companies
listed on The Nasdaq SmallCap Market. These changes increased the quantitative
threshold criteria necessary to qualify for initial entry and continued listing
on Nasdaq. In addition, corporate governance requirements, formerly applicable
only to the Nasdaq National Market System, were extended to the Nasdaq SmallCap
Market. Even under these more stringent standards, the Company has complied with
all requirements for continued listing on the Nasdaq SmallCap Market, with the
exception of the requirement that the Company maintain a minimum of (i) $2
million in net tangible assets or (ii) $35 million market capitalization or
(iii) $500,000 of net income in the latest fiscal year or two of the last three
fiscal years.

            The Company was informed by Nasdaq on April 3, 1998 regarding this
exception, and responded to Nasdaq on April 17, 1998. As part of the agreement
with Nasdaq, the Company will submit a financing plan to Nasdaq in the second
quarter of fiscal 1998 that should enable the Company to meet all of the
requirements for continued listing on the Nasdaq SmallCap Market.

(d)         CLINICAL STUDIES

            During the three months ended March 31, 1998, the Company has
performed clinical studies on the Company's Optical Biopsy(TM) System at three
hospitals to test the clinical utility of the Optical Biopsy(TM) System to
detect colon cancer. The clinical trial utilizing the Optical Biopsy(TM) System
for the detection of esophageal cancer is continuing.

            The Company met with the Gastroenterology/Urology Branch ("Branch")
of the United States Food and Drug Administration ("FDA") in Washington DC on
April 27, 1998, to review data, clinical protocols and clinical results
collected during its recent multicenter clinical trials for spectrophotometric
identification of potentially cancerous lesions (polyps) in the colon. The
algorithm, methods of analysis and clinical study design were considered
"appropriate" by the Branch. Additional patient data is required to further
demonstrate the reproducibility of the algorithm's accuracy. The Company
believes that it will submit an application to the FDA for marketing clearance,
sometime in fiscal 1998.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT 27:  Financial Data Schedule pursuant to Article 5 of Regulation S-X.

EXHIBIT 99:  Forward-Looking Statements

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

<PAGE>


                              SPECTRASCIENCE, INC.

                                   FORM 10-QSB

                                 MARCH 31, 1998

                                   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)



   MAY 15, 1998                    /s/ BRIAN T. MCMAHON
       Date                        BRIAN T. MCMAHON
                                   Chairman of the Board and
                                   Chief Executive Officer
                                   (Principal Executive Officer)




   MAY 15, 1998                     /s/ CHING-MENG CHEW
       Date                         CHING-MENG CHEW
                                    Vice President of Finance and Administration
                                    Chief Financial Officer, Treasurer and
                                    Corporate Secretary
                                    (Principal Financial and Accounting Officer)