UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q





o QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the quarterly period ended June 30, 2009





o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For the
transition period from ______ to ______





Commission
file number 333-148883





SPECTRUMDNA,
INC.


(Exact
name of Registrant as Specified in its Charter)





Delaware
              20-4880377(State
      or other jurisdiction
              (IRS
      Employer Identification No.)of
      incorporation or organization)1700
      Park Avenue, Suite 2020P.O.
      Box 682798Park
      City, Utah
              84068(Address
      of principal executive offices)
              (Zip
      Code)





(435) 658-1349


(Registrant’s
Telephone Number, Including Area Code)





Not
applicable


(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes   x                      No    ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes    ̈                      No    ̈


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definition of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer
               ̈
              Accelerated
      filer
               ̈Non-accelerated
      filer
               ̈
              Smaller
      reporting company
              x





Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act).





Yes    ̈                      No   x





State the
number of shares outstanding of each of the Issuer’s classes of common stock, as
of the latest practicable date: $.001 par value per share: 48,747,237
outstanding as of August 14, 2009.








SPECTRUMDNA,
INC.





TABLE
OF CONTENTS





PagePART
      I - FINANCIAL INFORMATIONItem
      1.
                Financial
      Statements.
                2Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                11Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk.
                16Item
      4T.
                Controls
      and Procedures.
                16PART
      II - OTHER INFORMATIONItem
      1.
                Legal
      Proceedings.
                18Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds.
                18Item
      3.
                Default
      upon Senior Securities.
                18Item
      4.
                Submission
      of Matters to a Vote of Security Holders.
                18Item
      5.
                Other
      Information.
                18Item
      6.
                Exhibits.
                18SIGNATURES
                19


1





PART
I - FINANCIAL INFORMATION





Item 1.  Financial
Statements.





SPECTRUMDNA,
INC.





Index
to Consolidated Financial Statements


Period
Ended June 30, 2009





PageConsolidated
      Balance Sheets
                3Consolidated
      Statements of Operations
                4Consolidated
      Statements of Stockholders’ Equity
                5Consolidated
      Statements of Cash Flows
                6Notes
      to Financial Statements
                8


2





SpectrumDNA,
Inc.


(A
Development Stage Company)


Consolidated
Balance Sheets





June 30,
                      
                      
                      December 31,2009
                      
                      
                      2008(unaudited)ASSETSCURRENT
      ASSETSCash
                      
                      $
                      112,839
                      
                      
                      $
                      548,499Accounts
      receivable, net
                      
                      
                      42,750
                      
                      
                      
                      14,000Prepaid
      expenses
                      
                      
                      12,580
                      
                      
                      
                      59,204Total
      Current Assets
                      
                      
                      168,169
                      
                      
                      
                      621,703PROPERTY
      AND EQUIPMENT, NET
                      
                      
                      11,122
                      
                      
                      
                      11,629OTHER
      ASSETSDomain
      names, net
                      
                      
                      2,472
                      
                      
                      
                      3,428Product
      development, net
                      
                      
                      28,970
                      
                      
                      
                      69,273Security
      deposit
                      
                      
                      5,000
                      
                      
                      
                      5,000Total
      Other Assets
                      
                      
                      36,442
                      
                      
                      
                      77,701TOTAL
      ASSETS
                      
                      $
                      215,733
                      
                      
                      $
                      711,033LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIESAccounts
      payable
                      
                      $
                      43,326
                      
                      
                      $
                      34,386Accrued
      expenses
                      
                      
                      40,734
                      
                      
                      
                      11,933Total
      Current Liabilities
                      
                      
                      84,060
                      
                      
                      
                      46,319Total  Liabilities
                      
                      
                      84,060
                      
                      
                      
                      46,319COMMITMENTS
                      
                      
                      -
                      
                      
                      
                      -STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.001 par value, 10,000,000 shares authorized, -0- shares issued
      and outstanding
                      
                      
                      -
                      
                      
                      
                      -Common
      stock, $0.001 par value, 100,000,000 shares authorized, 48,747,237 and
      48,739,658 shares issued and outstanding
                      
                      
                      48,747
                      
                      
                      
                      48,740Additional
      paid-in capital
                      
                      
                      6,003,490
                      
                      
                      
                      5,309,232Deficit
      accumulated during the development stage
                      
                      
                      (5,920,564
                      )
                      
                      
                      (4,693,258
                      )Total
      Stockholders' Equity
                      
                      
                      131,673
                      
                      
                      
                      664,714TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                      
                      $
                      215,733
                      
                      
                      $
                      711,033





The
accompanying notes are an integral part of these consolidated financial
statements.


3




SpectrumDNA,
Inc.


(A
Development Stage Company)


Consolidated
Statements of Operations


(unaudited)





AccumulatedFrom InceptionFor the Three
                
                
                For the Three
                
                
                For the Six
                
                
                For the Six
                
                
                on May 15,Months Ended
                
                
                Months Ended
                
                
                Months Ended
                
                
                Months Ended
                
                
                2006 throughJune 30,
                
                
                June 30,
                
                
                June 30,
                
                
                June 30,
                
                
                June 30,2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2009REVENUES,
      net
                
                $
                50,750
                
                
                $
                13,826
                
                
                $
                72,780
                
                
                $
                21,326
                
                
                $
                194,479COST
      OF SALES, net
                
                
                18,233
                
                
                
                27,755
                
                
                
                41,259
                
                
                
                49,444
                
                
                
                182,877GROSS
      PROFIT (LOSS)
                
                
                32,517
                
                
                
                (13,929
                )
                
                
                31,521
                
                
                
                (28,118
                )
                
                
                11,602OPERATING
      EXPENSESGeneral
      and administrative
                
                
                118,767
                
                
                
                49,819
                
                
                
                221,293
                
                
                
                176,781
                
                
                
                1,508,750Salaries
      and wages
                
                
                515,372
                
                
                
                520,745
                
                
                
                1,008,079
                
                
                
                928,362
                
                
                
                4,099,084Product
      development expenses
                
                
                4,784
                
                
                
                76,147
                
                
                
                27,392
                
                
                
                141,707
                
                
                
                420,205Bad
      debt expense
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                90
                
                
                
                5,225Depreciation
      expense
                
                
                2,112
                
                
                
                3,845
                
                
                
                4,017
                
                
                
                5,336
                
                
                
                15,556Total
      Operating Expenses
                
                
                641,035
                
                
                
                650,556
                
                
                
                1,260,781
                
                
                
                1,252,276
                
                
                
                6,048,820OPERATING
      LOSS
                
                
                (608,518
                )
                
                
                (664,485
                )
                
                
                (1,229,260
                )
                
                
                (1,280,394
                )
                
                
                (6,037,218
                )OTHER
      INCOME (EXPENSES)Interest
      income
                
                
                285
                
                
                
                8,713
                
                
                
                1,954
                
                
                
                26,573
                
                
                
                103,886Other
      income
                
                
                -
                
                
                
                
                
                
                
                
                
                
                
                -
                
                
                
                12,768Total
      Other Income (Expenses)
                
                
                285
                
                
                
                8,713
                
                
                
                1,954
                
                
                
                26,573
                
                
                
                116,654NET
      LOSS BEFORE INCOME TAXES
                
                
                (608,233
                )
                
                
                (655,772
                )
                
                
                (1,227,306
                )
                
                
                (1,253,821
                )
                
                
                (5,920,564
                )INCOME  TAX
      EXPENSE
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -NET
      LOSS
                
                $
                (608,233
                )
                
                $
                (655,772
                )
                
                $
                (1,227,306
                )
                
                $
                (1,253,821
                )
                
                $
                (5,920,564
                )BASIC
      AND FULLY DILUTED LOSS PER SHARE
                
                $
                (0.01
                )
                
                $
                (0.01
                )
                
                $
                (0.03
                )
                
                $
                (0.03
                )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
                
                
                48,747,237
                
                
                
                48,647,267
                
                
                
                48,743,468
                
                
                
                48,638,947





The
accompanying notes are an integral part of these consolidated financial
statements.


4




SpectrumDNA,
Inc.


(A
Development Stage Company)


Consolidated
Statements of Stockholders' Equity


For the
period May 15, 2006 (inception) through June 30, 2009




DeficitAccumulatedAdditional
                  
                  
                  During the
                  
                  
                  TotalPreferred Stock
                  
                  
                  Common Stock
                  
                  
                  Paid-In
                  
                  
                  Development
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Stage
                  
                  
                  EquityBalance,
      May 15, 2006 (inception)
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Issuance
      of founder shares at inception
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  37,200,000
                  
                  
                  
                  37,200
                  
                  
                  
                  (37,200
                  )
                  
                  
                  -
                  
                  
                  
                  -Common
      shares issued for cash at $0.037 per share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,400,000
                  
                  
                  
                  5,400
                  
                  
                  
                  194,600
                  
                  
                  
                  -
                  
                  
                  
                  200,000Common
      shares issued for cash at $0.50 per share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,025,000
                  
                  
                  
                  2,025
                  
                  
                  
                  1,010,475
                  
                  
                  
                  -
                  
                  
                  
                  1,012,500Compensation
      expense associated with stock options and warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  103,938
                  
                  
                  
                  -
                  
                  
                  
                  103,938Net
      loss for the period from inception on May 15, 2006 throughDecember
      31, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (301,652
                  )
                  
                  
                  (301,652
                  )Balance,
      December 31, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  44,625,000
                  
                  
                  
                  44,625
                  
                  
                  
                  1,271,813
                  
                  
                  
                  (301,652
                  )
                  
                  
                  1,014,786Common
      shares issued for cash at $0.50 per share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,975,000
                  
                  
                  
                  3,975
                  
                  
                  
                  1,983,525
                  
                  
                  
                  -
                  
                  
                  
                  1,987,500Common
      shares issued for services at $0.50 per share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  26,667
                  
                  
                  
                  27
                  
                  
                  
                  13,309
                  
                  
                  
                  -
                  
                  
                  
                  13,336Compensation
      expense associated with stock options and warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  800,084
                  
                  
                  
                  -
                  
                  
                  
                  800,084Net
      loss for the year ended December 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,832,975
                  )
                  
                  
                  (1,832,975
                  )Balance,
      December 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  48,626,667
                  
                  
                  
                  48,627
                  
                  
                  
                  4,068,731
                  
                  
                  
                  (2,134,627
                  )
                  
                  
                  1,982,731Common
      shares issued for services at an average of $0.37 per
share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  112,991
                  
                  
                  
                  113
                  
                  
                  
                  42,095
                  
                  
                  
                  -
                  
                  
                  
                  42,208Compensation
      expense associated with stock options and warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,198,406
                  
                  
                  
                  -
                  
                  
                  
                  1,198,406Net
      loss for the year ended December 31, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,558,631
                  )
                  
                  
                  (2,558,631
                  )Balance,
      December 31, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  48,739,658
                  
                  
                  
                  48,740
                  
                  
                  
                  5,309,232
                  
                  
                  
                  (4,693,258
                  )
                  
                  
                  664,714Common
      shares issued for services at an average of $0.55 per
share
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,579
                  
                  
                  
                  7
                  
                  
                  
                  4,159
                  
                  
                  
                  -
                  
                  
                  
                  4,166Compensation
      expense associated with stock options and warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  690,099
                  
                  
                  
                  -
                  
                  
                  
                  690,099Net
      loss for the three months endedJune
      30, 2009 (unaudited)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,227,306
                  )
                  
                  
                  (1,227,306
                  )Balance
      June 30, 2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  48,747,237
                  
                  
                  
                  48,747
                  
                  
                  
                  6,003,490
                  
                  
                  
                  (5,920,564
                  )
                  
                  
                  131,673





The
accompanying notes are an integral part of these consolidated financial
statements.


5




SpectrumDNA,
Inc.


(A
Development Stage Company)


Statements
of Cash Flows


(unaudited)





AccumulatedFrom InceptionFor the Six
                
                
                For the Six
                
                
                on May 15,Months Ended
                
                
                Months Ended
                
                
                2006 throughJune 30,
                
                
                June 30,
                
                
                June 30,2009
                
                
                2008
                
                
                2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (1,227,306
                )
                
                $
                (1,253,821
                )
                
                $
                (5,920,564
                )Adjustments
      to reconcile net loss to net used by operating activities:Depreciation
      and amortization
                
                
                45,277
                
                
                
                49,780
                
                
                
                187,845Stock
      options and warrants granted for services rendered
                
                
                690,099
                
                
                
                554,138
                
                
                
                2,792,527Common
      stock issued for services rendered
                
                
                4,166
                
                
                
                19,842
                
                
                
                59,710Changes
      in operating assets and liabilities(Increase)
      decrease in accounts receivable
                
                
                (28,750
                )
                
                
                (16,000
                )
                
                
                (42,750
                )(Increase)
      decrease in employee advances
                
                
                -
                
                
                
                1,790
                
                
                
                -(Increase)
      decrease in prepaid expenses
                
                
                46,624
                
                
                
                38,686
                
                
                
                (12,580
                )(Increase)
      decrease in security deposits
                
                
                -
                
                
                
                -
                
                
                
                (5,000
                )Increase
      (decrease) in accounts payable and accrued expenses
                
                
                37,741
                
                
                
                (17,984
                )
                
                
                84,060Net
      Cash Used by Operating Activities
                
                
                (432,150
                )
                
                
                (623,569
                )
                
                
                (2,856,753
                )CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      paid for fixed assets
                
                
                (3,510
                )
                
                
                (11,492
                )
                
                
                (26,678
                )Cash
      paid for product development
                
                
                -
                
                
                
                (4,930
                )
                
                
                (194,322
                )Cash
      paid for intangible assets
                
                
                -
                
                
                
                (3,095
                )
                
                
                (9,408
                )Net
      Cash Used by Investing Activities
                
                
                (3,510
                )
                
                
                (19,517
                )
                
                
                (230,408
                )CASH
      FLOWS FROM FINANCING ACTIVITIESCash
      received from issuance of common stock
                
                
                -
                
                
                
                -
                
                
                
                3,100,000Cash
      received on exercise of warrants
                
                
                -
                
                
                
                -
                
                
                
                100,000Net
      Cash Provided by Financing Activities
                
                
                -
                
                
                
                -
                
                
                
                3,200,000NET
      DECREASE IN CASH
                
                
                (435,660
                )
                
                
                (643,086
                )
                
                
                112,839CASH
      AT BEGINNING OF PERIOD
                
                
                548,499
                
                
                
                1,833,552
                
                
                
                -CASH
      AT END OF PERIOD
                
                $
                112,839
                
                
                $
                1,190,466
                
                
                $
                112,839





The
accompanying notes are an integral part of these consolidated financial
statements.


6




SpectrumDNA,
Inc.


(A
Development Stage Company)


Statements
of Cash Flows (Continued)


(unaudited)





AccumulatedFrom InceptionFor the Six
                      
                      
                      For the Six
                      
                      
                      on May 15,Months Ended
                      
                      
                      Months Ended
                      
                      
                      2006 throughJune 30,
                      
                      
                      June 30,
                      
                      
                      June 30,2009
                      
                      
                      2008
                      
                      
                      2009SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:CASH
      PAID FOR:Interest
                      
                      $
                      
                      
                      
                      $
                      
                      
                      
                      $Income
      Taxes
                      
                      $
                      
                      
                      
                      $
                      
                      
                      
                      $NON-CASH
      TRANSACTIONS:Common
      stock issued for services
                      
                      $
                      4,166
                      
                      
                      $
                      19,842
                      
                      
                      $
                      59,711Valuation
      of Stock Options
                      
                      $
                      690,099
                      
                      
                      $
                      554,138
                      
                      
                      $
                      2,792,527





The
accompanying notes are an integral part of these consolidated financial
statements.


7





SPECTRUMDNA,
INC.


(A
Development Stage Company)


Notes to
the Condensed Financial Statements


June 30,
2009





NOTE 1 -
CONDENSED FINANCIAL STATEMENTS





The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows at June 30, 2009, and for all periods
presented herein, have been made.





Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company’s December 31, 2008 audited
financial statements. The results of operations for the periods ended June 30,
2009 and 2008 are not necessarily indicative of the operating results for the
full years.





NOTE 2-
NET INCOME (LOSS) PER SHARE OF COMMON STOCK





The
Company computes net income (loss) per share of common stock in accordance with
SFAS No. 128, Earnings per Share (“SFAS 128”). Under the provisions of SFAS
128, basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the period. Diluted net income per
share is computed using the weighted average number of common shares and, if
dilutive, potential common shares outstanding during the period. Potential
common shares consist of the incremental common shares issuable upon the
exercise of stock options. The dilutive effect of outstanding stock options, is
reflected in diluted earnings per share by application of the treasury stock
method. Potential common shares of 17,087,229 resulting from outstanding stock
options were considered but not included in the calculation of diluted income
(loss) per share as their effect would be antidilutive.





Three months ended
                      
                      
                      Six months endedJune 30,
                      
                      
                      June 30,
                      
                      
                      June 30,
                      
                      
                      June 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008(unaudited)
                      
                      
                      (unaudited)
                      
                      
                      (unaudited)
                      
                      
                      (unaudited)Basic
      and diluted earnings per share:Loss
      (numerator)
                      
                      $
                      (608,233
                      )
                      
                      $
                      (655,772
                      )
                      
                      $
                      (1,227,306
                      )
                      
                      $
                      (1,253,821
                      )Weighted
      average number of shares outstanding – basic (denominator)
                      
                      
                      48,747,237
                      
                      
                      
                      48,647,267
                      
                      
                      
                      48,743,468
                      
                      
                      
                      48,638,947Per
      share amount
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.03
                      )
                      
                      $
                      (0.03
                      )





NOTE 3-
SHARE BASED COMPENSATION





The
Company adopted SFAS 123R, which requires the grant-date fair value of all
share-based payment awards that are expected to vest, including employee share
options, to be recognized as employee compensation expense over the requisite
service period.


8





During
the six months ended June 30, 2009 and 2008, the Company recorded $690,099 and
$554,138, respectively, in compensation expense related to share-based payment
awards as a result of adopting SFAS 123R. The Company recognizes compensation
expense for share-based payment awards on the straight-line basis over the
requisite service period of the entire award, unless the awards are subject to
market conditions, in which case the Company recognizes compensation expense
over the requisite service period of each separate vesting installment.
Compensation expense related to share-based payment awards is recorded in
operating expenses. The fair value of each option or warrant award is estimated
on the date of the grant using the Black-Scholes -pricing model that uses the
assumptions noted in the following table. The expected term of the options or
warrants granted represents the period of time that options or warrants granted
are expected to be outstanding. Expected volatilities are based on historical
volatility of the stock of similar companies and other factors. The risk-free
interest rate for the period matching the expected term of the option or warrant
is based on the U.S. Treasury yield curve in effect at the time of the
grant.




The
following table sets forth information about the weighted-average fair value of
options granted during the periods ended June 30, 2009 and December 31, 2008 and
the weighted-average assumptions used for such grants:


June 30,
                  
                  
                  December 31,2009
                  
                  
                  2008Dividend
      yields
                  
                  
                  0.0
                  %
                  
                  
                  0.0
                  %Expected
      volatility
                  
                  
                  177.6
                  %
                  
                  
                  68.5
                  %Risk-free
      interest rate
                  
                  
                  3.15
                  %
                  
                  
                  4.0
                  %Option
      terms
                  
                  1 - 4 years
                  
                  
                  1-4 years





Common Stock
Options


Changes
in stock options issued to employees for the periods ended June 30, 2009 and
December 31, 2008 are as follows:


WeightedNumber
                            
                            
                            AverageOf
                            
                            
                            ExerciseOptions
                            
                            
                            PriceOutstanding,
      December 31, 2006
                            
                            
                            2,970,000
                            
                            
                            $
                            0.04Granted
                            
                            
                            6,890,180
                            
                            
                            
                            0.50Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled
                            
                            
                            (1,350,000
                            )
                            
                            
                            0.04Outstanding,
      December 31, 2007
                            
                            
                            8,510,180
                            
                            
                            $
                            0.41Exercisable,
      December 31, 2007
                            
                            
                            1,460,833
                            
                            
                            $
                            0.34Granted
                            
                            
                            5,260,000
                            
                            
                            
                            0.54Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled
                            
                            
                            (2,870,030
                            )
                            
                            
                            0.50Outstanding,
      December, 31, 2008
                            
                            
                            10,900,150
                            
                            
                            $
                            0.45Exercisable,
      December 31, 2008
                            
                            
                            4,694,465
                            
                            
                            $
                            0.39Granted
                            
                            
                            7,300,100
                            
                            
                            
                            0.13Exercised
                            
                            
                            -
                            
                            
                            
                            -Cancelled
                            
                            
                            (1,113,021
                            )
                            
                            
                            0.54Outstanding,
      June 30, 2009
                            
                            
                            17,087,229
                            
                            
                            $
                            0.31Exercisable,
      June 30, 2009
                            
                            
                            6,785,423
                            
                            
                            $
                            0.38




9


The
following table summarizes information about employee stock options outstanding
at June 30, 2009:
 
 Options
      Outstanding
                      
                      
                      Options
      ExercisableWeightedAverageRange
                      
                      
                      
                      
                      
                      Weighted
                      
                      
                      Remaining
                      
                      
                      
                      
                      
                      WeightedOf
                      
                      
                      
                      
                      
                      Average
                      
                      
                      Contractual
                      
                      
                      
                      
                      
                      AverageExercise
                      
                      
                      Number
                      
                      
                      Exercise
                      
                      
                      Life
                      
                      
                      Number of
                      
                      
                      ExercisePrices
                      
                      
                      Outstanding
                      
                      
                      Price
                      
                      
                      (in years)
                      
                      
                      Options
                      
                      
                      Price$
                      0.04
                      
                      
                      
                      1,620,000
                      
                      
                      $
                      0.04
                      
                      
                      
                      7.35
                      
                      
                      
                      1,440,000
                      
                      
                      $
                      0.040.50
                      
                      
                      
                      4,089,681
                      
                      
                      
                      0.50
                      
                      
                      
                      8.16
                      
                      
                      
                      2,674,425
                      
                      
                      
                      0.500.55
                      
                      
                      
                      2,637,448
                      
                      
                      
                      0.55
                      
                      
                      
                      8.97
                      
                      
                      
                      1,550,990
                      
                      
                      
                      0.550.56
                      
                      
                      
                      1,020,000
                      
                      
                      
                      0.56
                      
                      
                      
                      9.10
                      
                      
                      
                      245,333
                      
                      
                      
                      0.560.46
                      
                      
                      
                      400,000
                      
                      
                      
                      0.46
                      
                      
                      
                      9.26
                      
                      
                      
                      300,000
                      
                      
                      
                      0.460.21
                      
                      
                      
                      20,000
                      
                      
                      
                      0.21
                      
                      
                      
                      8.80
                      
                      
                      
                      20,000
                      
                      
                      
                      0.210.11
                      
                      
                      
                      5,850,100
                      
                      
                      
                      0.11
                      
                      
                      
                      9.68
                      
                      
                      
                      487,508
                      
                      
                      
                      0.110.17
                      
                      
                      
                      1,000,000
                      
                      
                      
                      0.17
                      
                      
                      
                      9.79
                      
                      
                      
                      52,083
                      
                      
                      
                      0.170.34
                      
                      
                      
                      250,000
                      
                      
                      
                      0.34
                      
                      
                      
                      9.94
                      
                      
                      
                      10,417
                      
                      
                      
                      0.340.33
                      
                      
                      
                      200,000
                      
                      
                      
                      0.33
                      
                      
                      
                      9.99
                      
                      
                      
                      4,167
                      
                      
                      
                      0.3317,087,229
                      
                      
                      $
                      0.31
                      
                      
                      
                      8.38
                      
                      
                      
                      6,785,423
                      
                      
                      $
                      0.38
 
 As of
June 30, 2009, the aggregate intrinsic value of the options outstanding and
exercisable was $820,569 and $278,596.  As of June 30, 2008, the
aggregate intrinsic value of the options outstanding and exercisable was
$750,060 and $354,195, respectively.  The weighted-average grant-date
fair value of options granted for the period ended June 30, 2009 was
$0.12.  The weighted-average grant-date fair value of options granted
for the period ended June 30, 2008 was $0.42.  The total fair value of
shares vested during the period ended June 30, 2009 and 2008 was $425,692 and
$619,386, respectively.
 
 NOTE 4 –
GOING CONCERN
 The
Company’s financial statements have been prepared using accounting principles
generally accepted in the United States of America generally applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.  Accordingly, the
consolidated financial statements do not include any adjustments related to the
recoverability of assets or classification of liabilities that might be
necessary should we be unable to continue as a going concern.  At June
30, 2009 while the Company’s current assets exceeded its current liabilities, it
has incurred substantial losses in this and prior fiscal years and has recorded
negative cash flows from operations in this and prior fiscal
years.  At June 30, 2009, the Company’s cash balance was
$112,839.
 
 The
Company implemented significant cost cutting measures in November of 2008 to
improve earnings potential as well as continuing to focus on increasing revenues
from the sales of its products.
 
 NOTE 5 –
SUBSEQUENT EVENTS
 On July
31, 2009, the Company entered into a Consulting Agreement (the “Agreement”) with
HFP Capital Markets LLC (“HFP”) pursuant to which HFP will provide certain
consulting services to the Company including but not limited to assistance in
securing future investment in the Company, assistance with certain corporate
finance and investment banking activities, assistance with new business
development, sales and marketing opportunities, and such other services as set
forth therein.  The term of the Agreement is three years, although the
Company may terminate upon thirty days written notice for any reason or no
reason at all, but no sooner than six months from the full execution of the
Agreement.  The Company will compensate HFP for these consulting
services by issuing to HFP or its designees 4,000,000 shares of the Company’s
restricted common stock which shall vest and become issuable to HFP or its
designees 120 days from the full execution of the Agreement.
  10
 
 Item
2.          Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
  The
following information should be read in conjunction with the consolidated
financial statements of SpectrumDNA, Inc. and the notes thereto appearing
elsewhere in this report. Statements in this Management’s Discussion and
Analysis of Financial Condition and Results of Operations and elsewhere in this
report that are not statements of historical or current fact constitute “forward
looking statements”.
 
 Our
business and results of operations are affected by a wide variety of factors
which could materially and adversely affect us and our actual results. As a
result of these factors, we may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect our business, financial condition, operating results and stock
price.
 
 Projections
and Forward-Looking Statements
 
 When used
in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,”
“estimate,” “intend,” “plans”, and similar expressions are intended to identify
forward-looking statements. Given the early stage of SpectrumDNA, Inc., most of
the statements made herein are forward-looking. Such statements are not
guarantees of future performance and are subject to risks and uncertainties and
actual results may differ materially from those included within the
forward-looking statements as a result of various factors. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date made. We undertake no obligation to publicly release the
result of any revision of these forward-looking statements to reflect events or
circumstances after the date they are made or to reflect the occurrence of
unanticipated events.
 
 Business.
 
 (a)  Organizational
History
 
 SpectrumDNA,
Inc. was incorporated under the laws of the State of Delaware on January 16,
2008 under the name SpectrumDNA Holdings, Inc. to enable its now wholly-owned
subsidiary, formerly known as SpectrumDNA, Inc. (now known as SpectrumDNA
Studios, Inc.) to implement a holding company organizational
structure.  Effective as of January 22, 2008, we reorganized into a
holding company structure whereby SpectrumDNA, Inc. became a wholly-owned
subsidiary of SpectrumDNA Holdings, Inc. pursuant to an Agreement and Plan of
Merger dated as of January 18, 2008 whereby SpectrumDNA, Inc. changed its name
to SpectrumDNA Studios, Inc. and SpectrumDNA Holdings, Inc. changed its name to
SpectrumDNA, Inc.
  SpectrumDNA
Studios, Inc. (formerly SpectrumDNA, Inc.) is a Delaware
corporation.  It was originally incorporated in the State of Utah in
May 2006, and on September 11, 2006 was reorganized as a Delaware corporation as
a result of a merger into a newly formed Delaware corporation incorporated on
September 7, 2006 which took the Utah corporation’s name and became the
surviving entity of the merger. The “DNA” in the corporate name stands for
“digital networked applications.”
  Cooshoo,
Inc. is a Delaware corporation (formerly a Utah corporation) which is a
wholly-owned subsidiary of SpectrumDNA Studios, Inc. and owns and operates the
Cooshoo engine which was rebranded and renamed PlanetTagger in
mid-2008.
  References
in this document to “us,” “we,” “SpectrumDNA” or “the Company” refer to
SpectrumDNA, Inc., and its direct and indirect wholly-owned
subsidiaries.
  Our
corporate address is 1700 Park Avenue, Suite 2020, P.O. Box 682798, Park City,
Utah 84068.  Our telephone number is (435) 658-1349.   The
Company’s website is http://www.spectrumdna.com.
 
 Organization
 
 Our
Company is presently comprised of SpectrumDNA, Inc., a Delaware corporation,
with two wholly-owned subsidiaries, Cooshoo, Inc. and SpectrumDNA Studios, also
Delaware corporations.  We use the trade names “SpectrumDNA, Inc.” or
“SpectrumDNA Studios, Inc.” in our commercial operations.
  11
 
 (b)  Business
Overview
 
 General
 
 SpectrumDNA,
Inc. is a social media studio that creates Digital Network Applications and
engines of engagement (or “Enginets”) for media outlets and advertisers looking
to cost-effectively capture specific audience behaviors and develop
advertiser-safe user-generated and user-marketed content.  Enginets
are branded web and wireless-based network experiences - Web 2.0 (and beyond)
software applications — that empower users to take active roles in their
community.
  Our
product development methodology is based on our Chief Executive Officer James A.
Banister’s book “Word of Mouse: The New Age of Networked Media” (Agate, 2004)
which we believe predicted what The Gartner Group has now measured in its study
measuring demographics of the online culture.  Banister distilled his
research into a methodology called “enginetworking,” a process for creating and
evolving software applications for the web and mobile wireless that address all
levels of engagement.
  Strong
evidence exists that the history of success in online and mobile web is a
history of “capturing behavior”—searching, dating, self-expression, shopping,
social networking, job-seeking, travel, with many more behaviors left to
capture-and-nurture.  Further the nature of social media is such that
software applications seeking to capture user behavior must be evolutionary
by-design.  Our team is trained in leading-edge agile-adaptive
techniques that enable us to quickly adapt our engines’ functionality, form and
content to actual user-behavior, partner requests and advertiser/sponsor
imperatives.
 
 Current
Products
 
 Engines
of engagement, or enginets, can create new ways to capture-and-nurture audiences
and help existing organizations and online networks improve key audience
metrics—drive more unique users, more frequency of usage by each user, and a
deeper, longer engagement in each user visit.  Our product development
strategy is to develop, incubate and produce enginets based on observed emergent
audience behavior.
  Currently,
ouractive enginets are
as follows:
  The
Addictionary (http://www.spectrumdna.com/?page_id=108)
  The
Addictionary is a social wordplay engine.  The original strategy for
The Addictionary was to build the product into a singular web destination for
creating, contributing, contesting and sharing lingo/language.  Market
feedback indicated there was a larger opportunity in evolving the engine into a
“software-as-a-service” (SaaS) that enabled us to instance the social wordplay
engine for multiple existing online communities, as each affinity group has its
own idiosyncratic lingo and social morays (e.g. golfers vs. pet
owners).  We undertook and completed that conversion in the first
quarter of 2008, effectively turning one product into dozens of products by
licensing the Addictionary to companies desiring social media applications to
increase their brands’ awareness and increase engagement of their existing user
base.
  This move
pre-dated, and we believe predicted a now rapidly emerging trend in social
media—social  nicheworking—which are
software applications for web and mobile wireless that target specific affinity
groups, either direct-to-consumer or in partnership with traditional media
entities or brand advertisers targeting those affinity groups.
  PlanetTagger
(http://www.spectrumdna.com/?page_id=122)
  PlanetTagger
is a location-based social networking engine.  The pre-cursor to
PlanetTagger, our now-discontinued cooshoo.com property, was originally intended
as a direct-to-consumer software application—a singular destination aimed at
capturing “missed connections” behavior that was naturally emerging on sites
like craigslist.org.  Similar to our repositioning of The
Addictionary, we re-engineered the cooshoo.com application into a generalized
location-based services application and re-branded it PlanetTagger—another
example of the software-as-a-service that can be offered to any niche community
looking to capture and nurture location-based behavior.  Like The
Addictionary, emergence of PlanetTagger as a software-as-a-service effectively
turned one product into dozens of products.
  12
  New
Products
 
 We
maintain a product development pipeline that is continually re-prioritized based
on commercial opportunity, market feedback and market conditions.  Our
development pipeline is based on our proprietary enginetworking
process.
 
 Sales,
Marketing and Performance
  Currently,
mainstream advertising is based primarily on the “impression” model, such as
thirty-second television commercials, print ads and radio spots; but the
emergence of social media enables a new methodology for engaging
audiences.  Advertisers spend billions of dollars every year to create
a “spark” with a target constituency.  Typically these expenditures
take the form of limited-run ad campaigns (e.g. 13-week television ad run), or
fixed-length events (e.g. the Superbowl).  However, when these events
end, the exposure to and engagement with the sponsor’s audience
concludes.  Such campaigns can be characterized as “planting dead
trees.”
  With very
little change in existing, and long-standing, advertising industry
methodologies, advertisers can augment their limited-run campaigns thatthey are already
doing  with an engine of engagement—an enginet.  This
way, the dollars they are already investing in reaching their desired
audience—the “spark”—can be used to prime an engine that has the potential to
create a long-term return on investment by offering the audience a more engaging
social media experience with potential to grow into a self-perpetuating
messaging engine.
  Conversely,
traditional media outlets (print, broadcast, online) are in the business of
building assets, and often the foundation of their business models rest on
support from brand advertisers.  But traditional media outlets aren’t
proficient at creating social media experiences (as they are rooted in linear
media— push media instead of conversational media).
  In our
sales and marketing strategy, SpectrumDNA has pioneered the business of social
nicheworking—providing white-label social media experiences that media entities
or brand advertisers (or both) can offer to their target affinity
groups.  Instead of launching “yet another web2.0 destination,”
SpectrumDNA partners with institutions already spending the time, money and
effort to engage their target affinity group, providing them with the social
media expertise they lack.  Our Addictionary property has over 4
million monthly unique users now (and growing) using this social nicheworking
partnership strategy.
  Our first
Addictionary transaction of this type was signed in June 2008 with Comedy
Central.  As a result, we are the provider of the Political
Addictionary (http://politicaladdictionary.com) to Comedy Central’s Indecision
2008 brand (http://indecision2008.com).  Our partnership with Comedy
Central on the Political Addictionary (http://politicaladdictionary.com) set two
significant milestones for our business:
  ·
              Licensing
      to Comedy Central validated our marketing strategy of providing social
      media software applications to media and brand partners bolstering their
      brand and the engagement of their existing audience.  Due to the
      significant increases Comedy Central experienced in its core audience
      metrics, they have effectively monetized our software via
      advertising.
  ·
              The
      Political Addictionary turned into a “brand asset”—a recognized brand
      within the world of political and social commentary across the
      internet.  It has become the de facto online destination where
      politicos and political bloggers communicate with each other around the
      lingo of politics.
  In the
fourth quarter of 2008, we continued this momentum by partnering with three
additional media companies.  In October 2008, NBC Universal licensed
and launched The Office Addictionary for their hit television show “The Office”
(http://officeaddictionary.com).  The following month, Universal Press
Syndicate’s digital group, UClick, licensed the Addictionary for syndication to
regional newspapers and websites.  And finally, in December of 2008,
E! Entertainment, a Comcast Networks property, licensed and launched The
Celebrity Addictionary  (http://celebrityaddictionary.com), which has
rapidly grown into the most popular Addictionary
implementation.
  13
  In the
first quarter of 2009, MarketingProfs.com, a Los Angeles-based media property
licensed The Marketing Addictionary, with the launch of the enginet occurring
during that quarter.  Further, in the first quarter of 2009, the
Company licensed The Horror Addictionary to Comcast’s FearNet Channel, marking
the second Comcast Networks property to launch a branded version of The
Addictionary enginet.  The Horror Addictionary launched in the second
quarter of 2009.
  In the
second quarter of 2009, the Company licensed its Addictionary enginet to The
Ellen DeGeneres show with the site launching later that quarter.  Also
in that quarter, the Company licensed the Addictionary to Dictionary.com, an
operating business unit of IAC, with the launch of scheduled for third quarter
of 2009.  Finally, the Company licensed the Addictionary to News
Corp’s daily newspaper The New
York Post, with the launch of the New York Addictionary scheduled for
third quarter of 2009, as well.
  The
Addictionary has proven itself very capable of moving the needle on our
Partners’ core audience metrics.  For example, the Political
Addictionary doubled average time-on-site for Comedy Central’s Indecision2008
efforts leading up to the election, and approximately 40% of visitors to E!
Online spend twice as much time-on-site because of the Celebrity Addictionary
feature.
  We
continue to evolve the Addictionary platform to build on successes to-date and
continue sales efforts targeting the 500+ potential “verticals” we’ve
identified—from IP-based communities like The Office, Harry Potter or Star Trek to subject-matter
communities like golf, gardening, celebrity, local geography (e.g. New York) or
pet ownership.
  Our
emerging sales focus is on licensing PlanetTagger.  During the second
quarter of 2009, “whisper sales meetings” held prior to the launch of the
deployable PlanetTagger product resulted in our first license sold—to UCLA
Anderson School of Management’s Entertainment and Media Management
Institute.  Launch of the site is anticipated in the third quarter of
2009.
  PlanetTagger
sales efforts will remain low-level until we are able to expand our sales
force.
  In
general, as we increase our sales and marketing efforts we anticipate that we
will continue to incur net losses for the foreseeable future.  The
extent of these losses will depend, in part, on the amount of growth in our
revenues from organization adoption, consumer acceptance and use of our
products; the number of relationships we are able to form with advertisers and
marketers to use our enginets; and our ability to garner direct investment into
our individual enginet enterprises.
  Employees
 
 As of the
date hereof, the Company has seven (7) full-time employees located in Park City,
UT, San Francisco, CA, and Helena, MT.  This includes one of the
founders, James A. Banister, serving as Chief Executive Officer. The
remaining employees manage operations, finance, engineering and product
management, market and sell our products and build software and implement
effective quality assurance standards. It is expected that in the next 12
months we will seek to employ one or two additional employees to augment the
marketing, business development and sales efforts.
 
 Results
of Operations
 
 For
the Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30,
2008
 
 Revenues
for the quarterly period ended June 30, 2009 were $50,750 resulting primarily
from E! Entertainment Addictionary license fees, UCLA PlanetTagger license fees,
and partial set-up fees from Dictionary.com and NY Post; compared to $13,826 for
the quarter ended June 30, 2008 resulting from license fees from Comedy Central
for the Political Addictionary and the advance for the publication of the book
Addictionary: Brave New
Words.  Cost of sales was $18,233 for the three months ended
June 30, 2009, compared to $27,755 for the comparable period of
2008.  Cost of sales was constituted primarily of the amortization of
product development expenses.  We have entered into several service
and sales contracts which are expected to provide increased revenues for the
remainder of 2009.
  14
 
 Total
operating expenses for the second quarter of the 2009 fiscal year were $641,035,
compared to $650,556 for the comparable period of 2008, a decrease of
1%.  The decreased operating expenses in 2009 resulted primarily from
related decreases in salaries and wages ($515,372 in 2009 compared to $520,745
in 2008) as well as a decrease in product development expenses ($4,784 in 2009
compared to $76,147 in 2008).  Included in salaries and wages were
expenses pertaining to common stock and stock options granted for services
rendered.  The Company recognized $354,505 in these expenses during
the second quarter of 2009 compared to $318,448 in 2008.  General and
administrative expenses increased primarily as a result of increases in deferred
salary expenses, public relations expenses, travel expenses related to the sales
and marketing process, insurance expenses, and site hosting offset by decreases
in fees related to the filing of the registration statement in the second
quarter of 2008.  ($118,767 in 2009 compared to $49,819 in
2008).
 
 We
recognized a net loss of $608,233 for the quarter ended June 30, 2009 compared
to a loss of $655,772 for the quarter ended June 30, 2008, a decrease of
7%.  Excluding the non cash expense recorded for common stock and
common stock options issued during the periods, the loss would have been
$253,728 and $337,324, respectively. Our basic and diluted net loss per share
was $0.01 for the three months ended June 30, 2009, compared to $0.01 for the
comparable period of 2008.
 
 For
the Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30,
2008
 
 Revenues
for the six month period ended June 30, 2009 were $72,780 resulting primarily
from E! Entertainment and NBC Universal Addictionary license fees, UCLA
PlanetTagger license fees, and partial set-up fees from Dictionary.com; compared
to $21,326 for six month period ended June 30, 2008 resulting from license fees
from Comedy Central for the Political Addictionary, the advance for the
publication of the book Addictionary: Brave New
Words, and the anomolous test application of the cooshoo enginet
performed for SAP Corporation.  Cost of sales was $41,259 for the six
months ended June 30, 2009, compared to $49,444 for the comparable period of
2008. Cost of sales was primarily constituted of the amortization of product
development expenses.  We have entered into several service and sales
contracts which are expected to provide increased revenues for the remainder of
2009.
 
 Total
operating expenses for the first half of the 2009 fiscal year were $1,260,781
compared to $1,252,276 for the comparable period of 2008, an increase of
1%.  The increased operating expenses in 2009 resulted primarily from
related increases in salaries and wages ($1,008,079 in 2009 compared to $928,362
in 2008) offset by a decrease in product development expenses ($27,392 in 2009
compared to $141,707 in 2008).  The large increase in salaries and
wages is constituted largely of stock-based compensation.  The Company
recognized $694,265 in expenses pertaining to common stock and stock options
granted for services rendered during the first half of 2009 compared to $573,980
in 2008.  General and administrative expenses increased primarily as a
result of increases in deferred salary expenses, travel expenses related to the
sales and marketing process, insurance expenses, and site hosting offset by
decreases in fees related to the filing of the registration statement in the
second quarter of 2008 ($221,293 in 2009 compared to $176,781 in
2008).
 
 We
recognized a net loss of $1,227,306 for the six month period ended June 30, 2009
compared to a loss of $1,253,821 for the six month period ended June 30, 2008, a
decrease of 2%.  Excluding the non cash expense recorded for common
stock and common stock options issued during the periods, the loss would have
been $533,041 and $679,841, respectively. Our basic and diluted net loss per
share was $0.03 for the six months ended June 30, 2009, compared to $0.03 for
the comparable period of 2008.
 
 Liquidity
and Capital Resources
 
 As of
June 30, 2009, we had $112,839 in cash and total liabilities of $84,060. While
our current assets exceeded our current liabilities, we have incurred
substantial losses in this and prior fiscal years and have recorded negative
cash flows from operations in this and prior fiscal years.  As a
result, management does not believe our current finances will enable us to
implement our plans and satisfy our estimated financial needs over the next 12
months.  We implemented significant cost cutting measures in November
of 2008 to improve earnings potential as well as continuing to focus on
increasing revenues from the sales of our products.  In addition, we
are actively seeking additional sources of financing to fund our operations for
the foreseeable future.  No assurance can be made, however, that we
will be able to obtain such additional funding on terms acceptable to us, if at
all.  Our need to obtain capital from outside investors is expected to
continue until the time, if ever, our cash flow from operations is sufficient to
fund our financial needs. Therefore, if sales or revenues do not meet
expectations, or cost estimates for development and expansion of business prove
to be inaccurate, we will require additional funding in the
future.  If additional capital cannot be obtained, we may have to
delay or postpone development or other expenditures which can be expected to
harm our competitive position, business operations and growth
potential.  Changes in capital markets and the cost of capital are
unpredictable.  Any failure to obtain such financing now or in the
future, or obtaining financing on unfavorable terms, can be expected to have a
material adverse effect on our business, financial condition, results of
operations and future business prospects.
  15
 
 For the
six months ended June 30, 2009, the Company’s Net Cash Used by Operating
Activities was $432,250 compared to $623,569 for the comparable period in
2008.  The decrease in Net Cash Used by Operating Activities between
the two periods resulted from decreases in cash-based salaries and wages,
decreases in product development expenses, and increases in accounts
payable.
 
 For the
six months ended June 30, 2009, the Company’s Net Cash Used for Investing
Activities was $3,510 compared to $19,517 for the comparable period in
2008.  The decrease in Net Cash Used by Investing Activities between
the two periods resulted from decreases in fixed asset purchases as well as the
Company’s decision to expense rather than capitalize certain intangible assets
and product development costs.
 
 Net Cash
Provided by Financing Activities was zero for the period ended June 30, 2009 and
June 30, 3008.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
 
 Critical
Accounting Policies and Estimates
 
 Our
consolidated financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United
States.  Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses.  These estimates and assumptions
are affected by management’s application of accounting policies.  Our
critical accounting policies are discussed in our annual report on Form 10-K for
the fiscal year ended December 31, 2008.
 
 Recently
Issued Accounting Pronouncements
 
 Please
refer to our annual report on Form 10-K for the fiscal year ended
December 31, 2008. There have been no changes to those accounting
pronouncements listed.
 
 Impact
of Inflation
 
 We do not
believe that price inflation had a material adverse effect on our financial
condition or results of operations during the periods presented.
  Item
3.           Quantitative and Qualitative
Disclosures About Market Risk.
 
 We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide the information under this
item.
 
 Item
4T.         Controls and
Procedures.
 
 Under the
supervision and with the participation of our management, including the
Principal Executive Officer and Principal Financial Officer, we have evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period
covered by this report.  Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of June 30, 2009,
these disclosure controls and procedures were effective to ensure that all
information required to  be disclosed by us in the reports that we
file or submit under the Exchange Act is: (i) recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rule and
forms; and (ii) accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
  16
  There
have been no material changes in internal control over financial reporting that
occurred during the fiscal quarter covered by this report that have materially
affected, or are reasonably likely to materially affect the Company’s internal
control over financial reporting.
  17
 
 PART
II - OTHER INFORMATION
 
 Item
1. Legal Proceedings.
 
 As of the
date of this document, we know of no legal proceedings pending or threatened or
judgments entered against the Company or any of our directors or officers in his
or her capacity as such.
 
 Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 During
the quarter ended June 30, 2009, the Company had neither any unregistered sales
of equity securities nor any exercise of options generating proceeds to the
Company.  However, during the second quarter of 2009, the Company
granted stock options to various employees, board members, and consultants to
purchase an aggregate of 1,450,000 shares of common stock with exercise prices
ranging from $0.17 to $0.34 per share and vesting schedules ranging from 12 to
48 months.  The term of each of the options is ten
years.  All of the foregoing securities were issued in reliance upon
the exemption from registration pursuant to Section 4(2) of the Securities Act
of 1933, as amended.
 
 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.
 
 31.1
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange
  Act)31.2
                Certification
      of Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange
      Act)32.1
                Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
      1350)
  18
 
 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.
 
 SPECTRUMDNA,
      INC.(Registrant)Dated:August 14,
      2009
                          By:
                          /s/ James A. BanisterJames
      A. Banister,President
      and Chief Executive Officer(Principal
      Executive Officer)Dated:
      August 14,
      2009
                          By:
                          /s/ Rebecca D.
HershingerRebecca
      D. Hershinger,Chief
      Financial Officer(Principal
      Financial Officer andPrincipal
      Accounting
Officer)
  19