**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**Form
      10-QSB**


(Mark
      One)





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




For
      the
      quarterly period ended **June
      30, 2006**




[ 
      ]  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.**


(Development
      Stage Enterprise)


(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)




**11568
      Sorrento Valley Rd., Suite 11**


**San
      Diego, California 92121**


(Address
      of principal executive offices)


**(858)
      847-0200**


(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 __





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes __ No X












**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN**


**BANKRUPTCY
      PROCEEDINGS DURING THE**


**PRECEDING
      FIVE YEARS**


Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court.




YES X NO__





The
      number of shares of the Registrant’s common stock, par value $.01 per share,
      outstanding on


August
      14, 2006 was 38,350,087.





Transitional
      Small Business Disclosure Format (Check one):
      Yes __ No X








Page
          2





**SpectraScience,
      Inc.**


(Development
      Stage Enterprise)





**Index**





**Page****No.**PART
                I
            FINANCIAL
                INFORMATION:
            4Item
                1.
            Financial
                Statements (Unaudited)
            4Item
                2.
            Management’s
                Discussion and Analysis or Plan of Operation
            11PART
                II
            OTHER
                INFORMATION
            14Item
                1.
            Legal
                Proceedings
            14Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            14Item
                3.
            Defaults
                Upon Senior Securities
            14Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            14Item
                5.
            Other
                Information
            14Item
                6.
            Exhibits
            14SIGNATURES
            15








Page
          3


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




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


**SpectraScience,
      Inc.**


(Development
      Stage Enterprise)





**CONDENSED
      BALANCE SHEETS**





**June
                30,**
              **2006**
            
            
            **December
                31,**
              **2005**(Unaudited)
            
            
            (Audited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            537,512
            
            $
            441,025Inventories
            
            
            127,925
            
            
            140,072Prepaid
                expenses and other current assets
            
            
            16,964
            
            
            42,310Total
                current assets
            
            
            682,401
            
            
            623,407Fixed
                assets, net
            
            
            1,599
            
            
            6,397Patents,
                net
            
            
            252,773
            
            
            262,626TOTAL
                ASSETS
            
            $
            936,773
            
            $
            892,430LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            16,801
            
            $
            17,498Accrued
                compensation and taxes
            
            
            15,090
            
            
            15,205Accrued
                expenses
            
            
            1,052
            
            
            -Total
                liabilities
            
            
            32,943
            
            
            32,703STOCKHOLDERS’
                EQUITYUndesignated
                capital stock, undesignated par value, 25,000,000 shares authorized,
                none
                issued
            
            
            -
            
            
            -Common
                stock, $.01 par value:Authorized--100,000,000
                sharesIssued
                and outstanding—38,350,087 shares at June 30, 2006 (37,572,262 shares at
                December 31, 2005)
            
            
            383,501
            
            
            375,723Additional
                paid-in capital
            
            
            2,388,703
            
            
            1,822,123Deferred
                compensation
            
            
            -
            
            
            (48,140
            )Deficit
                accumulated during the development stage
            
            
            (1,868,374
            )
            
            (1,289,979
            )TOTAL
                STOCKHOLDERS’ EQUITY
            
            
            903,830
            
            
            859,727TOTAL
                LIABILITIES AND
              STOCKHOLDERS’
                EQUITY
            
            $
            936,773
            
            $
            892,430





Note:
      The
      balance sheet at December 31, 2005 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.*


Page
          4





**SpectraScience,
      Inc.**


(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,****2006**
            
            
            **2005**
            
            
            **2006**
            
            
            **2005**
            
            
            **2006**Gross
                revenue
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Operating
                expenses:Research
                and development
            
            
            67,690
            
            
            9,106
            
            
            104,590
            
            
            18,857
            
            
            157,712General
                andadministrative
            
            
            189,431
            
            
            309,156
            
            
            479,027
            
            
            500,953
            
            
            1,742,870Total
                operating expenses
            
            
            257,121
            
            
            318,262
            
            
            583,617
            
            
            519,810
            
            
            1,900,582Operating
                loss
            
            
            (257,121
            )
            
            (318,262
            )
            
            (583,617
            )
            
            (519,810
            )
            
            (1,900,582
            )Other
                income, net
            
            
            2,002
            
            
            10,522
            
            
            5,222
            
            
            11,550
            
            
            32,208Net
                loss
            
            $
            (255,119
            )
            $
            (307,740
            )
            $
            (578,395
            )
            $
            (508,260
            )
            $
            (1,868,374
            )Basic
                and diluted net loss per share
            
            $
            (0.01
            )
            $
            (0.01
            )
            $
            (0.02
            )
            $
            (0.01
            )Weighted
                average common shares outstanding
            
            
            37,725,650
            
            
            37,550,762
            
            
            37,660,831
            
            
            37,550,762













*See
      accompanying notes to unaudited condensed financial
      statements.*


*.*


Page
          5


**SpectraScience,
      Inc.**


(Development
      Stage Enterprise)


**CONDENSED
      STATEMENTS OF CASH FLOWS**


**(Unaudited)**






**Six
                Month Ended**
              **June
                30,**
            
            
            August
                2, 2004
              (Inception
                of
              Successor
              Company)
                to**2006**
            
            
            **2005**
            
            
            **June
                30, 2006**OPERATING
                ACTIVITIES:Net
                loss
            
            $
            (578,395
            )
            $
            (508,260
            )
            $
            (1,868,374
            )Adjustments
                to reconcile net loss to cashused
                in operating activities:Depreciation
                and amortization
            
            
            14,651
            
            
            14,459
            
            
            54,818Amortization
                of options issued to employees
            
            
            39,558
            
            
            76,127
            
            
            227,999Amortization
                of options issued to consultants
            
            
            76,617
            
            
            45,217
            
            
            178,301Gain
                on disposal of fixed assets
            
            
            
            
            
            (4,961
            )
            
            (9,139
            )Write-off
                of obsolete inventories
            
            
            
            
            
            4,513
            
            
            9,097Changes
                in operating assetsand
                liabilities:Inventories
            
            
            12,147
            
            
            (203
            )
            
            12,148Prepaid
                expenses and other current assets
            
            
            25,346
            
            
            34,976
            
            
            6,786Accounts
                payable
            
            
            (697
            )
            
            4,660
            
            
            (42,901
            )Accrued
                compensation, taxes and expenses
            
            
            937
            
            
            3,809
            
            
            (15,951
            )Net
                cash used in operating activities
            
            
            (409,836
            )
            
            (329,663
            )
            
            (1,447,216
            )INVESTING
                ACTIVITIES -proceeds
                from the sale of fixed assets
            
            
            
            
            
            
            
            
            13,190FINANCING
                ACTIVITIES:
              Proceeds
                from issuance of common stock
            
            
            502,048
            
            
            
            
            
            522,048Proceeds
                from exercise of stock options
            
            
            4,275
            
            
            
            
            
            7,500Net
                cash provided by financing activities
            
            
            506,323
            
            
            -
            
            
            529,548Net
                increase (decrease) in cash and cash equivalents
            
            
            96,487
            
            
            (329,663
            )
            
            (904,478
            )CASH
                AND CASH EQUIVALENTSAT
                BEGINNING OF PERIOD
            
            
            441,025
            
            
            1,132,505
            
            
            1,441,990CASH
                AND CASH EQUIVALENTSAT
                END OF PERIOD
            
            $
            537,512
            
            $
            802,842
            
            $
            537,512Supplemental
                disclosure of non-cash investing and financing activities:Conversion
                of notes payable and accruedinterest
                to common stock
            
            
            
            
            
            
            
            $
            565,000Issuance
                of common stock in settlementof
                bankruptcy debt
            
            
            
            
            
            
            
            $
            60,000Fresh
                start adjustment to fixed assets andpatents
            
            
            
            
            
            
            
            $
            255,379






*See
      accompanying notes to unaudited condensed financial
      statements.*


Page
          6


**SpectraScience,
      Inc.**


(Development
      Stage Enterprise)





**Notes
      to Unaudited Condensed Financial Statements**


**June
      30****, 2006**





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





**Description
      of Business**





SpectraScience,
      Inc. (the “Company”) filed for bankruptcy protection on September 13, 2002 (U.S.
      Bankruptcy Court, District of Minnesota, Case No. 02-42904). The case was
      converted from liquidation under Chapter 7 to Chapter 11 reorganization in
      early
      2003. The Company’s Plan of Reorganization was confirmed on July 7, 2004 and
      became effective on August 23, 2004. The Company received funding and commenced
      operations effective August 2, 2004. As of August 2, 2004 (for purposes of
      this
      Report, the “Effective Date”), the Company became the “Successor Company” and
      the Company as it existed prior to August 2, 2004 is referred to as the
“Predecessor Company.” During the bankruptcy, the Company was under the control
      of a court appointed trustee and had no management (all officers and directors
      had resigned), no legal counsel, no outside auditors, no transfer agent, and
      no
      operations.





The
      Company 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. From 1996
      until
      filing for bankruptcy reorganization in 2002, the Company primarily focused
      on
      developing the WavSTATTM Optical Biopsy System (“WavSTATTM System”). The WavSTATTM
System is a proprietary, minimally invasive technology that optically scans
      tissue in real-time to distinguish between normal and pre-cancerous or cancerous
      tissue, without the need to remove tissue from the body. We are currently in
      a
      clinical study at three institutions to determine if we can expand our
      indications for use to include detection of pre-esophageal cancer. We are
      currently FDA approved for colon cancer detection.





**Basis
      of Presentation**





The
      accompanying unaudited condensed financial statements of SpectraScience, Inc.
      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-QSB and Item 310 of Regulation S-B. 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, 2006 are not necessarily indicative of the results
      that may be expected for the year ending December 31, 2006. 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, 2005.





**Liquidity
      and Development Stage Enterprise**





The
      Company is a development stage enterprise. Since August 2, 2004, it has not
      generated any revenue from the sale of its products and, through June 30, 2006,
      its efforts have been principally devoted to restarting the Company as it
      emerged from bankruptcy. During the second quarter of 2006, the Company
      expected, but did not receive, the proceeds of an earlier Regulation S placement
      of its shares. As a result, the Company made a Regulation D offering of 749,325
      common shares netting $502,048. No commissions or fees were paid. This resulted
      in the Company having working capital of $649,458 and cash and cash equivalents
      of $537,512 at June 30, 2006. The Company expects to complete its Regulation
      S
      restricted placement of common stock in the third quarter of 2006. However,
      if
      we do not receive these funds in a timely manner, the Company could be in
      jeopardy as a going concern. We may not be able to find alternative capital
      or
      raise capital or debt on terms that are acceptable. The Company believes that
      if
      the proceeds from the 2006 private placement arrive in the third quarter of
      2006, such proceeds will be sufficient to allow the Company to sustain
      operations until it attains profitability and positive cash flows from
      operations. Management has a plan for alternative funding, but there is no
      guarantee that this plan can be successfully executed. In either case, we may
      incur unknown expenses, or we may not be able to meet our revenue forecast
      that
      will require us to seek additional capital. In such an event, the Company may
      not be able to find such capital or raise capital or debt on terms that are
      acceptable.





Page
            7


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





The
      Company adopted fresh-start reporting as of August 2, 2004 in accordance with
      the American Institute of Certified Public Accountants Statement of Position
      90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy
      Code” (“SOP 90-7”). Under fresh-start reporting, a new entity has been deemed
      created for financial reporting purposes.





Use
      of
      Estimates





The
      Company prepares its financial statements in conformity with accounting
      principles generally accepted in the United States of America, which require
      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. Actual results could differ from
      those
      estimates.





Stock-Based
      Compensation





In
      December 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards (“SFAS”), 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 using
      the modified prospective method. The Company’s 2006 results of operations
      reflects a portion of share-based awards earned during the six months ended
      June
      30, 2006 for previously granted stock options. 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 of 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 date 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.





Page
            8


For
      the
      six months ended June 30, 2006, stock-based compensation approximated $116,000.
      Stock-based compensation expense was included in general and administrative
      expenses in the statement of operations for the first six months of fiscal
      2006.
      We previously adopted the fair value recognition provisions of SFAS 123
      prospectively for all employee and consultant awards granted, modified, or
      settled by the Successor Company on August 2, 2004. Accordingly, we believe
      SFAS
      123(R) has not had a material impact on our financial statements.





As
      of
      June 30, 2006, 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 our 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 5,752,513 reserved at June 30, 2006. At June 30, 2006,
      the
      Company had outstanding 2,350,000 options under the Option Plan representing
      approximately 6.1% of the outstanding shares (1,350,001 of which were
      exercisable), with 3,352,513 available for future issuance. Awards under the
      Company’s Option Plan vest over 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. These models and assumptions are emerging and may change
      future expenses by increasing or decreasing stock-based compensation expense.
      Management used the following assumptions in each of the past two
      years:







2006
            
            2005Expected
                life
            5
                years
            
            5
                yearsRisk-free
                interest rate
            5.13%
            
            4.25%Expected
                volatility
            220%
            
            219%Expected
                dividend yield
            0%
            
            0%





In
      addition to the above, we estimated the forfeitures 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 calculation was selected 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.





The
      risk-free interest rate is 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 the beginning of the
      Successor Company. If the volatility calculation had been higher, the expense
      for stock-based compensation would not have changed materially. A much lower
      volatility calculation would materially affect the expenses for stock-based
      compensation. Management 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 stage of the Company considering it has only
      recently emerged from bankruptcy and management’s estimate of the net present
      value of forward looking profits that has been compiled (for which there is
      no
      assurance).





Page
            9


A
      summary
      of option activity under the Option Plan as of June 30, 2006 and changes during
      the six months ended June 30, 2006 is presented below:




Options
            
            
            Shares
            
            
            Weighted-Average
                Exercise Price
            
            
            Weighted-Average
                Remaining Contractual Term (years)
            
            
            Aggregate
                Intrinsic Value ($000)Outstanding
                at January 1, 2006
            
            
            1,978,500
            
            $
            0.27Granted
            
            
            400,000
            
            
            1.09Exercised
            
            
            (28,500
            )
            
            0.15Forfeited
                or expired
            
            
            -
            
            
            -Outstanding
                at June 30, 2006
            
            
            2,350,000
            
            $
            0.41
            
            
            8.73
            
            $
            1,864Exercisable
                at June 30, 2006
            
            
            1,350,001
            
            $
            0.33
            
            
            8.73
            
            $
            1,181





On
      June
      15, 2006, the Company elected Stanley J. Pappelbaum, M.D. to its Board of
      Directors. Upon election, Dr. Pappelbaum was granted a ten year option to
      purchase 400,000 shares of the Company’s common stock at $1.09 per share, which
      was the closing price on the day of grant. The estimated value of these options
      is approximately $474,000.





The
      total
      intrinsic value of options exercised during the six months ended June 30, 2006
      and 2005 was $48,175 and $0, respectively . At
      June
      30, 2006, total unrecognized estimated employee compensation cost related to
      non-vested stock options granted prior to that date was $476,433, which is
      expected to be recognized over the next three years.





Inventories





Inventories
      are valued at the lower of cost, determined on the first-in, first-out (FIFO)
      basis, or market value. Cost includes direct material, labor and overhead.
      Inventories consist of the following:




June
                30, 2006
            
            
            December
                31, 2005Raw
                materials
            
            $
            48,770
            
            $
            60,917Work
                in process
            
            
            -
            
            
            -Finished
                goods
            
            
            79,155
            
            
            79,155Totals
            
            $
            127,925
            
            $
            140,072








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
      similar 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
      three and six months ended June 30, 2006 and 2005, 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,
      2006 are options to purchase 2,350,000 shares of common stock. For the three
      and
      six months ended June 30, 2005, potentially dilutive shares of common stock
      that
      have been excluded from the calculation of weighted average number of dilutive
      common shares are options to purchase 2,250,000 shares of common
      stock.




Stockholders’
      Equity





In
      June
      2006, the Company issued 749,325 common shares in a Regulation D offering adding
      $502,048 to stockholders’ equity. During the first quarter of 2006, an employee
      exercised options for 28,500 shares with an exercise price aggregating $4,275.
      Additional paid-in capital has also increased by recording the compensation
      arising from the amortization of the value of options issued to employees and
      consultants over the term of the respective contracts.


Page
              10
 
 **Item
          2.**  **Management’s Discussion and Analysis or Plan of
          Operation**





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





This
      Report on Form 10-QSB 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, 2005.





**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 three 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**





We
      are a
      development stage medical device company that has not yet engaged in significant
      commercial activities. During 2006 we intend to complete a Phase II clinical
      trial with our WavSTATTM system for the detection of Barrett’s syndrome, thought
      to be a pre-cancerous condition of the esophagus. The progression toward
      esophageal cancer begins with several pre-cancerous stages. It is critical
      for
      the physician to be able to identify these various stages of the disease in
      order to deliver the most appropriate treatment. As with colorectal cancer,
      early and accurate detection of esophageal cancer results in less invasive,
      more
      cost effective treatments with a greater chance for long term patient
      survival.


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              11


Barrett’s
      esophagus is a condition of the lining of the lower esophagus thought to be
      caused primarily by Gastro Esophageal Reflux Disease (“GERD”), more commonly
      known as chronic heartburn. Physicians typically recommend that persons with
      chronic heartburn should have an endoscopy to look for Barrett’s esophagus. Some
      Barrett’s patients will advance further to a stage where additional abnormal
      tissue called dysplasia is present. Dysplasia is known to be the next
      progressive step toward esophageal cancer and is categorized in stages of low
      grade and high grade. Barrett’s esophagus, dysplasia and esophageal cancer
      patients are currently diagnosed by an endoscopy of the esophagus with multiple
      physical biopsies of the inner lining.





High-grade
      dysplasia is a critical stage to correctly diagnose because physicians
      frequently recommend surgical resection or removal of the esophagus if Barrett's
      esophagus with high-grade dysplasia is present. Unfortunately for the patient,
      dysplasia is not easily visible to the physician during standard endoscopy.
      Because early diagnosis is critical, multiple biopsies may be performed either
      randomly or in a geometric pattern in the esophagus in the hope of finding
      the
      most appropriate tissue to biopsy.





If
      the
      results of our Phase II clinical trial are successful, we will apply for FDA
      approval (by supplement to our existing approval for colon cancer detection)
      for
      use of the WavSTATTM system in pre-esophageal cancer detection.





In
      addition, we may (if funding permits) seek to heighten market acceptance of
      our
      colon cancer detection technology by demonstrating to managed care organizations
      that using our optical biopsy technique is faster, more accurate and less
      expensive than the current technique of removing all suspicious
      polyps.





During
      the second quarter of 2006, the Company expected, but did not receive, the
      proceeds of an earlier Regulation S placement of its shares but did complete
      a
      Regulation D offering of 749,325 common shares with net proceeds of $502,048.
      As
      a result, the Company had working capital of $649,458 and cash and cash
      equivalents of $537,512 at June 30, 2006. Subsequently, the Company completed
      the Regulation S restricted placement of common stock with a consortium of
      European banks in the third quarter of 2006. This resulted in gross proceeds
      of
      $5,963,832 in exchange for 8,901,242 shares of common stock. The Company paid
      a
      fee of $536,744 to a third party for advice in raising these funds resulting
      in
      net proceeds to the Company of $5,427,088. The Company believes that these
      proceeds will be sufficient to allow the Company to sustain operations until
      it
      attains profitability and positive cash flows from operations. However, we
      may
      incur unknown expenses, or we may not be able to meet our revenue forecast
      that
      will require us to seek additional capital. In such an event, the Company may
      not be able to find such capital or raise capital or debt on terms that are
      acceptable.





**Results
      of Operations**





The
      Company adopted fresh-start reporting as of August 2, 2004 in accordance with
      the American Institute of Certified Public Accountants Statement of Position
      90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy
      Code” (“SOP 90-7”). Under fresh-start reporting, a new entity has been deemed
      created for financial reporting purposes.





***For
      the Three Months ended June 30, 2006 and 2005***





The
      Company had no revenue for the three months ended June 30, 2006 and 2005.


Page
              12


Overall
      research and development expenses for the three months ended June 30, 2006
      and
      2005 were $67,690 and $9,106, respectively. Research and development expenses
      related specifically to new product and application development while conducting
      a clinical trial.





General
      and administrative expenses for the three months ended June 30, 2006 and 2005
      were $189,431 and $309,156, respectively. The decrease for the three months
      ended June 30, 2006 compared to the three months ended June 30, 2005 was
      primarily due to a decrease in stock option expense and audit fees.





Other
      income, net for the three months ended June 30, 2006 and 2005 was $2,002 and
      $10,522, respectively. The decrease was primarily from decreasing interest
      income due to lower cash balances during the quarter ended June 30,
      2006.





As
      a
      result of the above, the net loss for the three months ended June 30, 2006
      and
      2005 was $255,119 and $307,740, respectively. The decrease in losses was
      primarily due to a decrease in general and administrative expenses relating
      to
      stock option expense. The net loss per share for the three months ended June
      30,
      2006 and 2005 was $0.01 in each period.





***For
      the Six Months ended June 30, 2006 and 2005***





The
      Company had no revenue for the six months ended June 30, 2006 and
      2005.





Overall
      research and development expenses for the six months ended June 30, 2006 and
      2005 were $104,590 and $18,857, respectively. Increased research and development
      expenses related specifically to new product and application development in
      a
      clinical trial.





General
      and administrative expenses for the six months ended June 30, 2006 and 2005
      were
      $479,027 and $500,953, respectively. The decrease for the six months ended
      June
      30, 2006 compared to June 30, 2005 was primarily due to higher professional
      fees
      in 2005.





Other
      income, net for the six months ended June 30, 2006 and 2005 was $5,222 and
      $11,550, respectively. The decrease was primarily from decreasing interest
      income due to lower cash balances during the six months ended June 30,
      2006.




As
      a
      result of the above, the net loss for the six months ended June 30, 2006 and
      2005 was $578,395 and $508,260, respectively. The increase in losses was
      primarily due to an increase in research and development expense related
      specifically to new product and application development in a clinical trial.
      The
      net loss per share for the six months ended June 30, 2006 and 2005 was $0.02
      and
      $0.01, respectively.





**Liquidity
      and Capital Resources**





In
      October 2005, the Company accepted a proposal from a consortium of European
      banks to sell them approximately 9,000,000 shares of the Company’s common stock
      discounted 33% from the listed quoted price on the acceptance date
      (approximately $6,000,000), in reliance upon Regulation S under the Securities
      Act of 1933. On October 20, 2005, shares of the Company’s common stock were
      transferred to an escrow account awaiting completion of the transaction. As
      of
      the date this report was filed, the funds for these shares had not been
      received. The Company believes that these proceeds will arrive in the third
      quarter of 2006 and will be sufficient to allow the Company to sustain
      operations until it attains profitability and positive cash flows from
      operations. However, if these funds are not received in a timely manner, there
      could be a question of the Company remaining as a going concern. Management
      has
      a plan for alternative funding, but there is no guarantee that this plan can
      be
      successfully executed. In either case, we may incur unknown expenses, or we
      may
      not be able to meet our revenue forecast that will require us to seek additional
      capital. In such an event, the Company may not be able to find such capital
      or
      raise capital or debt on terms that are acceptable.


Page
              13


On
      June
      30, 2006, the Company had cash of $537,512 compared to $266,271 at March 31,
      2006 representing an increase of $271,241. The cash increased principally due
      to
      the Regulation D private placement in the second quarter of 2006. There have
      been no capital equipment expenditures and none are foreseen.





**Item
      3.**   **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 three months ended June 30, 2006, which have materially affected
      or
      are reasonably likely to materially affect such controls.




**PART
      II**  **OTHER
      INFORMATION**




**Item
      1.** **Legal
      Proceedings**


None




**Item
      2.** **Unregistered
      Sales of Equity Securities and Use of Proceeds**


The
      Company made a Rule 506 Regulation D offering of 749,325 common shares at $0.67
      per share to accredited investors, netting $502,048. No commissions or fees
      were
      paid.




**Item
      3.** **Defaults
      Upon Senior Securities**


None




**Item
      4.** **Submission
      of Matters to a Vote of Security Holders**


None




**Item
      5.** **Other
      Information**


None




**Item
      6.** **Exhibits**




Exhibit
      31 Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      302
      of the Sarbanes-Oxley Act of 2002.


Exhibit
      32 Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906
      of the Sarbanes-Oxley Act of 2002.


Page
          14





**SpectraScience,
      Inc.**


**FORM
      10-QSB**





**June
      30, 2006**





**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)/s/
                James
                Hitchin**August
                11, 2006**
            **JAMES
                HITCHIN**Date
            President,
                Chief Executive Officer and Chief Financial Officer(Principal
                executive officer, principal financial officer, and principal accounting
                officer)








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          15