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 September 30, 1997

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

             For the transition period from ________ to ___________


                         Commission file number 0-13092

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

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

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

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


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

The number of shares of the Registrant's common stock, par value $.25 per share,
outstanding on November 12, 1997 was 4,496,559.

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


<PAGE>


                              SpectraSCIENCE, Inc.
                                   FORM 10-QSB

                               September 30, 1997

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

ITEM 1. Financial Statements (Unaudited)                                                    3

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

    Statements of Operations --  Three Months Ended September 30, 1997 and 1996
                                 Nine Months Ended September 30, 1997 and 1996              4

    Statements of Cash Flows --  Nine Months Ended September 30, 1997 and 1996              5

    Notes to Financial Statements -- September 30, 1997                                     6

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


PART II -- OTHER INFORMATION


ITEM 1.  Legal Proceedings                                                                  9

ITEM 2.  Changes in Securities                                                              9

ITEM 3.  Defaults Upon Senior Securities                                                    9

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

ITEM 5.  Other Information                                                                  9

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

Signatures                                                                                 10

Exhibit 27: Financial Data Schedule pursuant to Article 5 of Regulation S-X                11
</TABLE>

                                       2
<PAGE>


                         PART I -- FINANCIAL INFORMATION

                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                             September 30,   December 31,
                                                                 1997           1996
                                                             -------------   ------------
                                                              (Unaudited)       (Note)
<S>                                                         <C>             <C>         
ASSETS
Current assets:
   Cash and cash equivalents                                $  1,991,157    $  3,047,182
   Inventories                                                   172,917         192,151
   Other current assets                                           58,706         103,736
                                                            ------------    ------------
Total current assets                                           2,222,780       3,343,069

Net property and equipment                                       168,981         207,520
                                                            ------------    ------------

         TOTAL ASSETS                                       $  2,391,761    $  3,550,589
                                                            ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
   Accounts payable                                         $    109,253    $    107,866
   Accrued compensation and taxes                                 44,496          97,735
   Accrued expenses                                              221,010         187,016
                                                            ------------    ------------
Total current liabilities                                        374,759         392,617

Commitments

SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00 per share
   Authorized shares--20,000,000
       Convertible preferred stock, Series A:
         Authorized shares--5,000,000
         Issued and outstanding shares--66,667 in 1996                            66,667
       Convertible preferred stock, Series B:
         Authorized shares--1,000,000
         Issued and outstanding shares--792,500 in 1996                          792,500
Common stock, $.25 par value:
   Authorized shares--10,000,000
   Issued and outstanding shares--
     4,485,379 on September 30, 1997 and
     3,621,212 on December 31, 1996                            1,121,345         905,303
Additional paid-in capital                                    44,545,064      43,886,939
Accumulated deficit                                          (43,649,407)    (42,493,437)
                                                            ------------    ------------
         TOTAL SHAREHOLDERS' EQUITY                            2,017,002       3,157,972
                                                            ------------    ------------
         TOTAL LIABILITIES AND
              SHAREHOLDERS' EQUITY                          $  2,391,761    $  3,550,589
                                                            ============    ============
</TABLE>

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

See notes to financial statements.


                                       3
<PAGE>


                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                      STATEMENTS OF OPERATIONS (Unaudited)


<TABLE>
<CAPTION>
                                  Three Months Ended            Nine Months Ended
                                     September 30                  September 30
                              --------------------------    --------------------------

                                 1997            1996          1997            1996
                              -----------    -----------    -----------    -----------
<S>                             <C>            <C>            <C>            <C>      

Revenue                       $      --      $      --      $      --      $      --
                              -----------    -----------    -----------    -----------

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

Operating expenses
   Research and development       281,192        249,769        771,267        718,760
   Selling, general and
     administrative                77,353        167,428        489,498        519,357
                              -----------    -----------    -----------    -----------
Total operating expenses          358,545        417,197      1,260,765      1,238,117

Interest and other
   income (expense)                31,437         43,601        104,796        140,018
                              -----------    -----------    -----------    -----------

Net loss                      $  (327,108)   $  (373,596)   $(1,155,969)   $(1,098,099)
                              ===========    ===========    ===========    ===========

Net loss per share            $     (0.07)   $     (0.10)   $     (0.26)   $     (0.35)

Weighted average common
   shares outstanding           4,480,705      3,560,006      4,456,948      3,161,746
</TABLE>


See notes to financial statements.



                                       4
<PAGE>



                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                       STATEMENTS OF CASH FLOW (Unaudited)

<TABLE>
<CAPTION>
                                                           Nine Months Ended
                                                             September 30
                                                       --------------------------
                                                          1997           1996
                                                       -----------    -----------
<S>                                                    <C>            <C>         
OPERATING ACTIVITIES
  Net loss                                             $(1,155,969)   $(1,098,099)
  Adjustments to reconcile net loss to cash
    used in operating activities:
    Depreciation                                            50,230         53,818
      Changes in operating assets
       and liabilities:
         Decrease in accounts receivable                      --          100,639
         Decrease (increase) in inventories                 19,234        (17,106)
         Decrease (increase) in other current assets        45,030        (27,750)
         (Decrease) in current liabilities                 (17,858)       (39,814)
                                                       -----------    -----------

         Net cash used in operating activities          (1,059,333)    (1,028,312)

INVESTING ACTIVITIES
  Purchase of property and equipment                       (11,692)      (120,608)
                                                       -----------    -----------

        Net cash used in investing activities              (11,692)      (120,608)

FINANCING ACTIVITIES
  Proceeds from issuance of notes payable                     --           48,688
  Proceeds from issuance of common stock                    15,000        907,622
  Proceeds from issuance of preferred stock                   --         (608,331)
                                                       -----------    -----------
        Net cash provided by financing activities           15,000        347,979
                                                       -----------    -----------

  Net decrease in cash and cash equivalents             (1,056,025)      (800,941)

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

CASH AND CASH EQUIVALENTS
  AT END OF PERIOD                                     $ 1,991,157    $ 3,322,385
                                                       ===========    ===========

Supplemental schedule of non-cash transactions

Series A and B preferred stock converted into
  common stock                                         $   859,167    $   608,331
</TABLE>


See notes to financial statements.


                                       5
<PAGE>



                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                               September 30, 1997

--------------------------------------------------------------------------------
This  Quarterly  Report on Form  10-QSB  contains  "forward-looking  statements"
within the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.
Words or phrases such as "may,"  "expects," "will  continue," "is  anticipated,"
"management  believes,"  "estimates,"  "projects,"  "hopes" 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  September 30,
1996, for certain important cautionary factors,  risks and uncertainties related
to forward-looking statements.
--------------------------------------------------------------------------------



                          Notes to Financial Statements


NOTE A   Basis of Presentation

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


NOTE B   Net Loss Per Share

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


                                       6
<PAGE>


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

(a)  Business

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

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

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

(b)  Results of Operations

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

     Research  and  development  expenses  for the three and nine  months  ended
September 30, 1997 were $281,192 and $771,267  compared to $249,769 and $718,760
for the same  periods in 1996.  The increase of 12.6% for the three months ended
September 30, 1997 was primarily due to increase in salary  expenses  related to
the  hiring  of a Vice  President  of  Development  in  November  1996 and other
personnel in the product  development and regulatory affairs areas, and increase
in legal expenses  associated with intellectual  property.  The increase of 7.3%
for the nine months ended  September 30, 1997 was primarily due to personnel and
legal expenses mentioned above.

     Selling,  general and administrative expenses for the three and nine months
ended  September  30, 1997 were  $77,353 and  $489,498  compared to $167,428 and
$519,357 for the same periods in 1996.  The 53.8%  decrease for the three months
ended  September  30,  1997 was  primarily  due to a reduction  in  compensation
expense  and related  taxes.  The  decrease  of 5.7% for the nine  months  ended
September 30, 1996 was primarily due to decreases in expenses mentioned above.

     Interest and other income for the three and nine months ended September 30,
1997 were  $31,437 and  $104,796  compared to $43,601 and  $140,018 for the same
periods in 1996.  The decrease was primarily  due to lower  balances in cash and
cash equivalents.

     As a result of the above,  the net loss for the three and nine months ended
September  30,  1997 were  $327,108  and  $1,155,969  compared  to a net loss of
$373,596 and  $1,098,099  for the same periods in 1996. In spite of the increase
in losses,  the loss per share for the three and nine months ended September 30,
1997 were $0.07 and $0.26  compared  to $0.10 and $0.35 for the same  periods in
1996.  The reduction in the loss per share was due to a greater number of shares
of common stock outstanding as a result of the conversion of Series A and Series
B preferred stock into common stock.


                                       7
<PAGE>


(c)  Liquidity and Sources of Capital

     Cash and cash equivalents on September 30, 1997 were $1,991,157 compared to
$3,047,182 on December 31, 1996. The decrease in the cash position from December
31,  1996 to  September  30,  1997 was the  result  of the net loss for the nine
months ended September 30, 1997.

     The working  capital of the Company on  September  30, 1997 was  $1,848,021
compared to $2,950,452 on December 31, 1996.  This decrease was primarily due to
a reduction of the cash position.

     Net cash used in operating  activities for the nine months ended  September
30, 1997 was $1,059,333 compared to $1,028,312 for the same period in 1996. This
increase was primarily due to the higher net loss in 1997 compared to 1996.

     Net cash used in investing  activities for the nine months ended  September
30, 1997 was $11,692  compared  to  $120,608  for the same period in 1996.  This
decrease was due to lower purchases of property and equipment in 1997.

     Net  cash  provided  by  financing  activities  for the nine  months  ended
September 30, 1997 was $15,000 compared to $347,979 for the same period in 1996.
The higher number in 1996 was primarily due to warrant exercises.

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


                                       8
<PAGE>


                          PART II -- OTHER INFORMATION

ITEM 1.  Legal Proceedings

     There are no material on-going or pending legal  proceedings  involving 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)  Clinical Trials

     Clinical  trials  on  the  Optical  Biopsy  System(TM)   commenced  at  the
Massachusetts  General  Hospital,  Boston,  Massachusetts,  in October 1997. The
other  sites  where  clinical  studies  have  commenced  are  the  Mayo  Clinic,
Rochester,  Minnesota  and the  Hennepin  County  Medical  Center,  Minneapolis,
Minnesota.

(b)  Insider Trading

     On August 5, 1997,  Mr. Brian T.  McMahon,  Chairman,  President  and Chief
Executive Officer of the Company,  acquired 10,000 shares of common stock of the
Company on the open market at a price of $4.00 per share.  As of  September  30,
1997,  Mr.  McMahon  directly  owns  25,000  shares of the  common  stock of the
Company,  and stock options for 639,065 shares of common stock, 316,666 of which
are exercisable within 60 days of September 30, 1997.

(c)  Statement of Changes in Beneficial Ownership on Form 4

     With  the  exception  of one  monthly  Form 4 from Mr.  Brian  T.  McMahon,
Chairman,  President  and Chief  Executive  Officer  of the  Company,  which was
inadvertently  filed late,  all other Form 4's for officers and directors of the
Company were timely filed with the U.S. Securities and Exchange Commission.


ITEM 6. Exhibits and Reports on Form 8-K

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

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



                                       9
<PAGE>



                              SpectraSCIENCE, Inc.

                                   FORM 10-QSB

                               September 30, 1997

                                   SIGNATURES


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




                                SpectraSCIENCE, Inc.
                                --------------------------------------------
                                    (Registrant)



    November 13, 1997           /s/ Brian T. McMahon
        Date                    --------------------------------------------
                                BRIAN T. McMAHON
                                Chairman, President and Chief Executive Officer
                                (Principal Executive Officer)



    November 13, 1997           /s/ Ching-Meng Chew
        Date                    --------------------------------------------
                                CHING-MENG CHEW
                                Vice President Finance and Administration
                                Chief Financial Officer
                                Treasurer and Corporate Secretary
                                (Principal Financial and Accounting Officer)



                                       10