Tableof Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 

**(Mark One)**

 

| **x**      | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**  |
|------------|----------------------------------------------------------------------------------------------------|
|       |                                                                                               |
| ** ** | **For the  quarterly period ended March 31, 2009**                                            |
|       |                                                                                               |
| ** ** | **OR**                                                                                             |
|       |                                                                                               |
| **o**      | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |

 

**For the transition period from          to           **

 

**COMMISSION****FILENUMBER 333-142076**

 

**IRIS BIOTECHNOLOGIES INC.**

(Exact Name of small business issuer asspecified in its charter)

 

| **California**                   | ** ** | **77-0506396**      |
|----------------------------------|------------|---------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer    |
| incorporation or  organization)  |       | Identification No.) |

 

**5201 GreatAmerica Parkway, Suite 320, Santa Clara, California 95054**

(Address of principal executive offices) (ZipCode)

 

Issuer’s telephone Number:**(408) 867-2885**

 

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x  No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes  o   No o

 

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

 

| Large accelerated filer o                      |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer o                        |   | Smaller reporting  company x |
| (Do not check if a smaller  reporting company) |   |                              |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

 

As of May 15, 2009 the issuer had 11,169,832outstanding shares of Common Stock.

 

 

 

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Tableof Contents

 

TABLE OF CONTENTS

 
| ** ** | ** **                                                                                 | **Page** |
|------------|--------------------------------------------------------------------------------------------|----------|
|       |                                                                                       |     |
|       | PART I                                                                                     |     |
| Item 1.    | Financial Statements                                                                       | 3        |
| Item 2.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operation | 26       |
| Item 3.    | Quantitative  and Qualitative Disclosures About Market Risk                                | 29       |
| Item 4T    | Controls and  Procedures                                                                   | 30       |
|       |                                                                                       |     |
|       | PART II                                                                                    |     |
|       |                                                                                       |     |
| Item 1.    | Legal Proceedings                                                                          | 30       |
| Item 1A.   | Risk Factors                                                                               | 30       |
| Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                               | 30       |
| Item 3.    | Defaults  Upon Senior Securities                                                           | 30       |
| Item 4.    | Submission  of Matters to a Vote of Security Holders                                       | 30       |
| Item 5.    | Other Information                                                                          | 30       |
| Item 6.    | Exhibits                                                                                   | 31       |
|       |                                                                                       |     |
| SIGNATURES | 32                                                                                         |

 

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Table of Contents

 

**PART I**

 

**ITEM 1. FINANCIAL STATEMENTS.**

 

**INDEX TOFINANCIAL STATEMENTS**

 
| ** **                                                                                                                                                               | ** ** | **Page** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| Unaudited  Condensed Balance Sheets as of March 31, 2009 and December 31, 2008                                                                                           |       | 4        |
|                                                                                                                                                                     |       |     |
| Unaudited Condensed Statements of Losses  for the three months ended March 31, 2009 and 2008 and the period February  16, 1999 (date of inception) to March 31, 2009     |       | 5        |
|                                                                                                                                                                     |       |     |
| Unaudited  Condensed Statement of Stockholders’ (deficit) Equity for the period February  16, 1999 (date of inception) to March 31, 2009                            |       | 6        |
|                                                                                                                                                                     |       |     |
| Unaudited Condensed  Statements of Cash Flows for the three months ended March 31, 2009 and 2008  and the period February 16, 1999 (date of inception) to March 31, 2009 |       | 13       |
|                                                                                                                                                                     |       |     |
| Notes to the Unaudited Condensed Financial Statements                                                                                                                    |       | 14       |

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSEDBALANCE SHEETS**

 
| ** **                                                                                                                                                                                        | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                        | ** ** | **2009**           | ** ** | **2008**              | ** ** |
| ** **                                                                                                                                                                                        | ** ** | **(unaudited)**    | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                            |       |               |       |                  |       |
| Current assets:                                                                                                                                                                                   |       |               |       |                  |       |
| Cash                                                                                                                                                                                              |       | $                  | 30,921     |                  | $          | 990 |   |
| Total current assets                                                                                                                                                                              |       | 30,921             |       | 990                   |       |
|                                                                                                                                                                                              |       |               |       |                  |       |
| Property, plant and equipment, net of  accumulated depreciation of $169,401 and $165,334 as of March 31, 2009  and December 31, 2008, respectively                                      |       | 55,315             |       | 59,382                |       |
|                                                                                                                                                                                              |       |               |       |                  |       |
| Total assets                                                                                                                                                                                      |       | $                  | 86,236     |                  | $          | 60,372 |   |
|                                                                                                                                                                                              |       |               |       |                  |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                         |       |               |       |                  |       |
| Current liabilities:                                                                                                                                                                              |       |               |       |                  |       |
| Accounts payable and accrued liabilities                                                                                                                                                          |       | $                  | 62,401     |                  | $          | 10,131 |   |
| Notes payable, related party                                                                                                                                                                      |       | 53,500             |       | 26,000                |       |
| Total current liabilities                                                                                                                                                                         |       | 115,901            |       | 36,131                |       |
|                                                                                                                                                                                              |       |               |       |                  |       |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                         |       |               |       |                  |       |
| Preferred stock, no par or stated value;  5,000,000 shares authorized; no shares issued and outstanding as of  March 31, 2009 and December 31, 2008                                     |       | —             |       | —                |       |
| Common stock, no par or stated value;  20,000,000 shares authorized; 10,961,274 and 10,932,541 shares issued and  outstanding as of March 31, 2009 and December 31, 2008,  respectively |       | 4,863,969          |       | 4,822,092             |       |
| Additional paid in capital                                                                                                                                                                        |       | 1,181,578          |       | 1,277,363             |       |
| Deferred compensation                                                                                                                                                                             |       | —             |       | (119,364              | )          |
| Deficit accumulated during development  stage                                                                                                                                                     |       | (6,075,212         | )          | (5,955,850            | )          |
| Total stockholders’ (deficit) equity                                                                                                                                                         |       | (29,665            | )          | 24,241                |       |
|                                                                                                                                                                                              |       |               |       |                  |       |
| Total liabilities and stockholders’ equity                                                                                                                                                   |       | $                  | 86,236     |                  | $          | 60,372 |   |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENTSOF LOSSES**

**(unaudited)**

 
| ** **                                                                    | ** ** | ** **                                    | ** ** | ** **                   | ** ** | **For the period from**             | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|------------------------------|------------|-------------------------------------|------------|
| ** **                                                                    | ** ** | ** **                                    | ** ** | ** **                   | ** ** | **February 16, 1999 (date of** | ** ** |
| ** **                                                                    | ** ** | **For the three months ended March 31,** | ** ** | **inception) through March** | ** ** |
| ** **                                                                    | ** ** | **2009**                                      | ** ** | **2008**                     | ** ** | **31, 2009**                        | ** ** |
| Operating expenses:                                                           |       |                                          |       |                         |       |                                |       |
| Selling, general and administrative                                           |       | $                                             | 112,491    |                         | $          | 233,346                             |       | $ | 2,722,641 |   |
| Research and development (Note A)                                             |       | 2,727                                         |       | 32,910                       |       | 1,348,398                           |       |
| Impairment of intellectual property                                           |       | —                                        |       | —                       |       | 1,838,250                           |       |
| Depreciation                                                                  |       | 4,067                                         |       | 3,195                        |       | 169,401                             |       |
| Total operating expenses                                                      |       | 119,285                                       |       | 269,451                      |       | 6,078,690                           |       |
|                                                                          |       |                                          |       |                         |       |                                |       |
|  Net loss from operations                                                |       | (119,285                                      | )          | (269,451                     | )          | (6,078,690                          | )          |
|                                                                          |       |                                          |       |                         |       |                                |       |
| Other income (expense)                                                        |       |                                          |       |                         |       |                                |       |
| Interest income (expense)                                                     |       | —                                        |       | 1,373                        |       | 11,591                              |       |
|                                                                          |       |                                          |       |                         |       |                                |       |
| Net loss before provision for income taxes                                    |       | (119,285                                      | )          | (268,078                     | )          | (6,067,099                          | )          |
|                                                                          |       |                                          |       |                         |       |                                |       |
| Income taxes                                                                  |       | 77                                            |       | 800                          |       | 8,113                               |       |
|                                                                          |       |                                          |       |                         |       |                                |       |
| Net Loss                                                                      |       | $                                             | (119,362   | )                            | $          | (268,878                            | )          | $ | (6,075,212 | ) |
|                                                                          |       |                                          |       |                         |       |                                |       |
| Loss per common share-basic and fully diluted                                 |       | $                                             | (0.01      | )                            | $          | (0.03                               | )          | $ | (0.64 | ) |
|                                                                          |       |                                          |       |                         |       |                                |       |
| Weighted average number of common shares  outstanding-basic and fully diluted |       | 10,937,178                                    |       | 10,690,413                   |       | 9,479,777                           |       |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF(DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                          | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | **Deficit accumulated** | ** ** | ** **            | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                                                                          | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **              | ** ** |
| ** **                                                                                          | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation**        | ** ** | **Development stage** | ** ** | **Total** | ** ** |
| Common stock issued in February 1999 in exchange for  intellectual property at $0.25 per share |       | —               |       | $                 | —     |           | 7,200,000  |         | $          | 1,800,000           |       | $                       | —     |                  | $          | — |   | $ | — |   | $ | 1,800,000 |   |
| Common stock issued in March 1999 in exchange for services  rendered at $0.25 per share        |       | —               |       | —            |       | 120,000        |       | 30,000       |       | —              |       | —                  |       | —                |       | 30,000 |   |
| Sale of common stock in March 1999 at $0.25 per share                                          |       | —               |       | —            |       | 220,000        |       | 55,000       |       | —              |       | —                  |       | —                |       | 55,000 |   |
| Fair value of options issued in March 1999 in exchange for  services rendered                  |       | —               |       | —            |       | —         |       | —       |       | 9,240               |       | —                  |       | —                |       | 9,240 |   |
| Common stock issued in April 1999 in exchange for services rendered  at $0.25 per share        |       | —               |       | —            |       | 33,000         |       | 8,250        |       | —              |       | —                  |       | —                |       | 8,250 |   |
| Sale of common stock in April 1999 at $0.25 per share                                          |       | —               |       | —            |       | 107,000        |       | 26,750       |       | —              |       | —                  |       | —                |       | 26,750 |   |
| Exercise of options in April  1999 at $0.25 per share                                          |       | —               |       | —            |       | 50,000         |       | 12,500       |       | —              |       | —                  |       | —                |       | 12,500 |   |
| Sale of common stock in August 1999 at $0.25 per share                                         |       | —               |       | —            |       | 50,000         |       | 25,000       |       | —              |       | —                  |       | —                |       | 25,000 |   |
| Fair value of options issued in September 1999 in exchange for  services rendered              |       | —               |       | —            |       | —         |       | —       |       | 16,612              |       | —                  |       | —                |       | 16,612 |   |
| Sale of common stock in November 1999 at $0.25 per share                                       |       | —               |       | —            |       | 50,000         |       | 12,500       |       | —              |       | —                  |       | —                |       | 12,500 |   |
| Exercise of options in November 1999 at $0.50 per share                                        |       | —               |       | —            |       | 50,000         |       | 25,000       |       | —              |       | —                  |       | —                |       | 25,000 |   |
| Net loss                                                                                            |       | —               |       | —            |       | —         |       | —       |       | —              |       | —                  |       | (2,087,103            | )          | (2,087,103 | ) |
| Balance at December 31, 1999                                                                   |       | —               |       | $                 | —     |           | 7,880,000  |         | $          | 1,995,000           |       | $                       | 25,852     |                  | $          | — |   | $ | (2,087,103 | ) | $ | (66,251 | ) |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                     | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                     | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **       | ** ** |
| ** **                                                                                     | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                                |       | —               |       | $                 | —     |           | 7,880,000  |         | $          | 1,995,000           |       | $                | 25,852     |                    | $          | —     |       | $ | (2,087,103 | ) | $ | (66,251 | ) |
| Sale of common stock in June 2000 at $0.50 per share                                      |       | —               |       | —            |       | 100,000        |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Sale of common stock in July 2000 at $0.50 per share                                      |       | —               |       | —            |       | 250,000        |       | 125,000      |       | —              |       | —           |       | —                  |       | 125,000    |       |
| Sale of common stock in August 2000 at $0.50 per share                                    |       | —               |       | —            |       | 164,000        |       | 82,000       |       | —              |       | —           |       | —                  |       | 82,000     |       |
| Common stock issued in August 2000 at $0.50 per share in  exchange for services rendered  |       | —               |       | —            |       | 20,000         |       | 10,000       |       | —              |       | —           |       | —                  |       | 10,000     |       |
| Sale of common stock in September 2000 at $0.50 per share                                 |       | —               |       | —            |       | 250,000        |       | 125,000      |       | —              |       | —           |       | —                  |       | 125,000    |       |
| Sale of common stock in November 2000 at $0.50 per share                                  |       | —               |       | —            |       | 100,000        |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Net loss                                                                                       |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (378,039                | )          | (378,039   | )          |
| Balance at December 31, 2000                                                              |       | —               |       | —            |       | 8,764,000      |       | 2,437,000    |       | 25,852              |       | —           |       | (2,465,142              | )          | (2,290     | )          |
| Fair value of options issued in January 2000 in exchange for  services rendered           |       | —               |       | —            |       | —         |       | —       |       | 57,852              |       | —           |       | —                  |       | 57,852     |       |
| Sale of common stock in January 2001 at $0.50 per share                                   |       | —               |       | —            |       | 244,000        |       | 122,000      |       | —              |       | —           |       |                    |       | 122,000    |       |
| Net loss                                                                                       |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (266,224                | )          | (266,224   | )          |
| Balance at December 31, 2001                                                              |       | —               |       | —            |       | 9,008,000      |       | 2,559,000    |       | 83,704              |       | —           |       | (2,731,366              | )          | (88,662    | )          |
| Common stock issued in January 2002 at $0.50 per share in  exchange for services rendered |       | —               |       | —            |       | 20,000         |       | 10,000       |       | —              |       | —           |       | —                  |       | 10,000     |       |
| Sale of common stock in March 2002 at $0.50 per share                                     |       | —               |       | —            |       | 50,000         |       | 25,000       |       | —              |       | —           |       | —                  |       | 25,000     |       |
| Sale of common stock in April 2002 at $0.50 per share                                     |       | —               |       | —            |       | 200,000        |       | 100,000      |       | —              |       | —           |       | —                  |       | 100,000    |       |
| Fair value of options issued in May 2002 in exchange for  services rendered               |       | —               |       | —            |       | —         |       | —       |       | 17,892              |       | —           |       | —                  |       | 17,892     |       |
| Sale of common stock in May 2002 at $0.50 per share                                       |       | —               |       | —            |       | 60,000         |       | 30,000       |       | —              |       | —           |       | —                  |       | 30,000     |       |
| Sale of common stock in July 2002 at $0.50 per share                                      |       | —               |       | —            |       | 80,000         |       | 40,000       |       | —              |       | —           |       | —                  |       | 40,000     |       |
| Sale of common stock in August 2002 at $0.50 per share                                    |       | —               |       | —            |       | 55,400         |       | 27,700       |       | —              |       | —           |       | —                  |       | 27,700     |       |
| Sale of common stock in September 2002 at $0.50 per share                                 |       | —               |       | —            |       | 50,000         |       | 25,000       |       | —              |       | —           |       | —                  |       | 25,000     |       |
| Sale of common stock in October 2002 at $0.50 per share                                   |       | —               |       | —            |       | 50,000         |       | 25,000       |       | —              |       | —           |       | —                  |       | 25,000     |       |
| Sale of common stock in November 2002 at $0.50 per share                                  |       | —               |       | —            |       | 144,000        |       | 72,000       |       | —              |       | —           |       | —                  |       | 72,000     |       |
| Net loss                                                                                       |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (184,721                | )          | (184,721   | )          |
| Balance at December 31, 2002                                                              |       | —               |       | $                 | —     |           | 9,717,400  |         | $          | 2,913,700           |       | $                | 101,596    |                    | $          | —     |       | $ | (2,916,087 | ) | $ | 99,209 |   |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                   | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                              |       | —               |       | $                 | —     |           | 9,717,400  |         | $          | 2,913,700           |       | $                | 101,596    |                    | $          | —     |       | $ | (2,916,087 | ) | $ | 99,209 |   |
| Sale of common stock in January 2003 at $0.50 per share                                 |       | —               |       | —            |       | 35,378         |       | 17,689       |       | —              |       | —           |       | —                  |       | 17,689     |       |
| Common stock issued in February 2003 at $0.50 in exchange for  services rendered        |       | —               |       | —            |       | 20,000         |       | 10,000       |       | —              |       | —           |       | —                  |       | 10,000     |       |
| Sale of common stock in March 2003 at $0.50 per share                                   |       | —               |       | —            |       | 100,000        |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Common stock issued in March 2003 at $0.50 per share in exchange  for services rendered |       | —               |       | —            |       | 6,000          |       | 3,000        |       | —              |       | —           |       | —                  |       | 3,000      |       |
| Sale of common stock in July 2003 at $1.00 per share                                    |       | —               |       | —            |       | 63,080         |       | 63,080       |       | —              |       | —           |       | —                  |       | 63,080     |       |
| Sale of common stock in September 2003 at $1.00 per share                               |       | —               |       | —            |       | 25,000         |       | 25,000       |       | —              |       | —           |       | —                  |       | 25,000     |       |
| Sale of common stock in December 2003 at $1.00 per share                                |       | —               |       | —            |       | 32,597         |       | 32,597       |       | —              |       | —           |       | —                  |       | 32,597     |       |
| Net loss                                                                                     |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (216,804                | )          | (216,804   | )          |
| Balance at December 31, 2003                                                            |       | —               |       | —            |       | 9,999,455      |       | 3,115,066    |       | 101,596             |       | —           |       | (3,132,891              | )          | 83,771     |       |
| Sale of common stock in August 2004 at $1.00 per share                                  |       | —               |       | —            |       | 2,000          |       | 2,000        |       | —              |       | —           |       | —                  |       | 2,000      |       |
| Sale of common stock in September 2004 at $1.00 per share                               |       | —               |       | —            |       | 20,000         |       | 20,000       |       | —              |       | —           |       | —                  |       | 20,000     |       |
| Sale of common stock in November 2004 at $1.00 per share                                |       | —               |       | —            |       | 30,000         |       | 30,000       |       | —              |       | —           |       | —                  |       | 30,000     |       |
| Sale of common stock in December 2004 at $1.00 per share                                |       | —               |       | —            |       | 73,500         |       | 73,500       |       | —              |       | —           |       | —                  |       | 73,500     |       |
| Net loss                                                                                     |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (205,640                | )          | (205,640   | )          |
| Balance at December 31, 2004                                                            |       | —               |       | —            |       | 10,124,955     |       | 3,240,566    |       | 101,596             |       | —           |       | (3,338,531              | )          | 3,631      |       |
| Sale of common stock in December 2005 at $1.00 per share                                |       | —               |       | —            |       | 28,900         |       | 28,900       |       | —              |       | —           |       | —                  |       | 28,900     |       |
| Net loss                                                                                     |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (197,277                | )          | (197,277   | )          |
| Balance at December 31, 2005                                                            |       | —               |       | $                 | —     |           | 10,153,855 |         | $          | 3,269,4660          |       | $                | 101,596.   |                    | $          | —     |       | $ | (3,535,808. | ) | $ | (164,746. | ) |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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Tableof Contents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                   | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                              |       | —               |       | $                 | —     |           | 10,153,855 |         | $          | 3,269,466           |       | $                | 101,596    |                    | $          | —     |       | $ | (3,535,808 | ) | $ | (164,746 | ) |
| Sale of common stock in January 2006 at $1.00 per share                                 |       | —               |       | —            |       | 50,000         |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Common stock issued in March 2006 at $1.00 per share in exchange  for services rendered |       | —               |       | —            |       | 20,000         |       | 20,000       |       | —              |       | —           |       | —                  |       | 20,000     |       |
| Fair value of options issued in March 2006 in exchange for  services rendered           |       | —               |       | —            |       | —         |       | —       |       | 896,532             |       | —           |       | —                  |       | 896,532    |       |
| Sale of common stock in May 2006 at $2.00 per share                                     |       | —               |       | —            |       | 50,000         |       | 100,000      |       | —              |       | —           |       | —                  |       | 100,000    |       |
| Fair value of warrants issued in May 2006 in exchange for  services rendered            |       | —               |       | —            |       | —         |       | —       |       | 32,016              |       | —           |       | —                  |       | 32,016     |       |
| Sale of common stock in September 2006 at $2.00 per share                               |       | —               |       | —            |       | 10,000         |       | 20,000       |       | —              |       | —           |       | —                  |       | 20,000     |       |
| Sale of common stock in October 2006 at $2.00 per share                                 |       | —               |       | —            |       | 24,000         |       | 48,000       |       | —              |       | —           |       | —                  |       | 48,000     |       |
| Sale of common stock in December 2006 at $2.00 per share                                |       | —               |       | —            |       | 14,800         |       | 29,600       |       | —              |       | —           |       | —                  |       | 29,600     |       |
| Net loss                                                                                     |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (1,139,559              | )          | (1,139,559 | )          |
| Balance at December 31, 2006                                                            |       | —               |       | —            |       | 10,322,655     |       | 3,537,066    |       | 1,030,144           |       | —           |       | (4,675,367              | )          | (108,157   | )          |
| Fair value of warrants issued in January 2007 in exchange for  services rendered        |       | —               |       | —            |       | —         |       | —       |       | 25,913              |       | —           |       | —                  |       | 25,913     |       |
| Sale of common stock in January 2007 at $2.00 per share                                 |       | —               |       | —            |       | 13,000         |       | 26,000       |       | —              |       | —           |       | —                  |       | 26,000     |       |
| Sale of common stock in February 2007 at $2.00 per share                                |       | —               |       | —            |       | 162,500        |       | 325,000      |       | —              |       | —           |       | —                  |       | 325,000    |       |
| Sale of common stock in March 2007 at $2.00 per share                                   |       | —               |       | —            |       | 122,500        |       | 245,000      |       | —              |       | —           |       | —                  |       | 245,000    |       |
| Sale of common stock in April 2007 at $2.00 per share                                   |       | —               |       | —            |       | 12,500         |       | 25,000       |       | —              |       | —           |       | —                  |       | 25,000     |       |
| Fair of options issued in November 2007 in exchange for service  fees                   |       | —               |       | —            |       | —         |       | —       |       | 166,290             |       | (166,290         | )          | —                  |       | —     |       |
| Sale of common stock in December 2007 at $2.25 per share                                |       | —               |       | —            |       | 22,222         |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Amortization of deferred compensation                                                        |       | —               |       | —            |       | —         |       | —       |       | —              |       | 5,227            |       | —                  |       | 5,227      |       |
| Net loss                                                                                     |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (396,953                | )          | (396,953   | )          |
| Balance at December 31, 2007                                                            |       | —               |       | $                 | —     |           | 10,655,377 |         | $          | 4,208,066           |       | $                | 1,222,347  |                    | $          | (161,063   | )          | $ | (5,072,320 | ) | $ | 197,030 |   |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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Tableof Contents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                      | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **       | ** ** |
| ** **                                                                                      | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                                 |       | —               |       | $                 | —     |           | 10,655,377 |         | $          | 4,208,066           |       | $                | 1,222,347  |                    | $          | (161,063   | )          | $ | (5,072,320 | ) | $ | 197,030 |   |
| Sale of common stock in January 2008 at $2.25 per share                                    |       | —               |       | —            |       | 22,222         |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Common stock issued in January 2008 at $2.25 per share in  exchange for services rendered  |       | —               |       | —            |       | 4,000          |       | 9,000        |       | —              |       | —           |       | —                  |       | 9,000      |       |
| Sale of common stock in February 2008 at $2.25 per share                                   |       | —               |       | —            |       | 11,111         |       | 25,000       |       | —              |       | —           |       | —                  |       | 25,000     |       |
| Common stock issued in February 2008 at $2.25 per share in  exchange for services rendered |       | —               |       | —            |       | 4,000          |       | 9,000        |       | —              |       | —           |       | —                  |       | 9,000      |       |
| Sale of common stock in March 2008 at $2.25 per share                                      |       | —               |       | —            |       | 68,055         |       | 153,125      |       |                |       |             |       |                    |       | 153,125    |       |
| Common stock issued in March 2008 at $2.25 per share in exchange  for services rendered    |       | —               |       | —            |       | 6,222          |       | 14,000       |       | —              |       | —           |       | —                  |       | 14,000     |       |
| Sale of common stock in April 2008 at $2.25 per share                                      |       | —               |       | —            |       | 30,000         |       | 67,501       |       | —              |       | —           |       | —                  |       | 67,501     |       |
| Common stock issued in April 2008 at $2.25 per share in exchange  for services rendered    |       | —               |       | —            |       | 4,000          |       | 9,000        |       | —              |       | —           |       | —                  |       | 9,000      |       |
| Sale of common stock in May 2008 at $2.25 per share                                        |       | —               |       | —            |       | 22,222         |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Common stock issued in May 2008 at $2.25 per share in exchange  for services rendered      |       | —               |       | —            |       | 4,000          |       | 9,000        |       | —              |       | —           |       | —                  |       | 9,000      |       |
| Subtotal                                                                                        |       | —               |       | $                 | —     |           | 10,831,209 |         | $          | 4,603,692           |       | $                | 1,222,347  |                    | $          | (161,063   | )          | $ | (5,072,320 | ) | $ | 592,656 |   |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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Tableof Contents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                       | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                       | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **       | ** ** |
| ** **                                                                                       | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                                  |       | —               |       | $                 | —     |           | 10,831,209 |         | $          | 4,603,692           |       | $                | 1,222,347  |                    | $          | (161,063   | )          | $ | (5,072,320 | ) | $ | 592,656 |   |
| Fair value of vested options issued in exchange for services rendered                            |       | —               |       | —            |       | —         |       | —       |       | 55,016              |       | —           |       | —                  |       | 55,016     |       |
| Sale of common stock in June 2008 at $2.25 per share                                        |       | —               |       | —            |       | 22,222         |       | 50,000       |       | —              |       | —           |       | —                  |       | 50,000     |       |
| Common stock issued in July 2008 at $2.25 per share in exchange  for services rendered      |       | —               |       | —            |       | 8,000          |       | 18,000       |       | —              |       | —           |       | —                  |       | 18,000     |       |
| Sale of common stock in July 2008 at $2.25 per share                                        |       | —               |       | —            |       | 35,555         |       | 80,000       |       | —              |       | —           |       | —                  |       | 80,000     |       |
| Common stock issued in September 2008 at $2.00 per share in  exchange for services rendered |       | —               |       | —            |       | 4,000          |       | 8,000        |       | —              |       | —           |       | —                  |       | 8,000      |       |
| Sale of common stock in September 2008 at $2.25 per share                                   |       | —               |       | —            |       | 4,445          |       | 10,000       |       | —              |       | —           |       | —                  |       | 10,000     |       |
| Common stock issued in October 2008 at $1.35 per share in  exchange for services rendered   |       | —               |       | —            |       | 4,000          |       | 5,400        |       | —              |       | —           |       | —                  |       | 5,400      |       |
| Common stock issued in November 2008 at $1.95 per share in  exchange for services rendered  |       | —               |       | —            |       | 8,000          |       | 15,600       |       | —              |       | —           |       | —                  |       | 15,600     |       |
| Sale of common stock in December 2008 at $2.25 per share                                    |       | —               |       | —            |       | 11,110         |       | 25,000       |       |                |       |             |       |                    |       | 25,000     |       |
| Common stock issued in December 2008 at $1.60 per share in  exchange for services rendered  |       | —               |       | —            |       | 4,000          |       | 6,400        |       | —              |       | —           |       | —                  |       | 6,400      |       |
| Amortization of deferred compensation                                                            |       | —               |       | —            |       | —         |       | —       |       | —              |       | 41,699           |       | —                  |       | 41,699     |       |
| Net Loss                                                                                         |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (883,530                | )          | (883,530   | )          |
| Balance, December 31, 2008                                                                  |       | —               |       | $                 | —     |           | 10,932,541 |         | $          | 4,822,092           |       | $                | 1,277,363  |                    | $          | (119,364   | )          | $ | (5,955,850 | ) | $ | 24,241 |   |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS’ EQUITY**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2009**

**(unaudited)**

 
| ** **                                                                                   | ** ** | ** **           | ** ** | ** **        | ** ** | ** **     | ** ** | ** **   | ** ** | ** **          | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------|------------|-------------------|------------|----------------|------------|--------------|------------|---------------------|------------|------------------|------------|-------------------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**          | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Stock**            | ** ** | **Amount**        | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                              |       | —               |       | $                 | —     |           | 10,932,541 |         | $          | 4,822,092           |       | $                | 1,277,363  |                    | $          | (119,364   | )          | $ | (5,955,850 | ) | $ | 24,241 |   |
| Common stock issued in March 2009 at $1.03 per share in exchange  for services rendered |       | —               |       | —            |       | 18,667         |       | 19,227       |       | —              |       | —           |       | —                  |       | 19,227     |       |
| Sale of common stock in March 2009 at $2.25 per share                                   |       | —               |       | —            |       | 10,066         |       | 22,650       |       | —              |       | —           |       | —                  |       | 22,650     |       |
| Fair value of vested options for services rendered                                           |       | —               |       | —            |       | —         |       | —       |       | 23,579              |       | —           |       | —                  |       | 23,579     |       |
| Cancelled non vested warrants previously issued                                              |       | —               |       | —            |       | —         |       | —       |       | (119,364            | )          | 119,364          |       | —                  |       | —     |       |
| Net Loss, March 31, 2009                                                                |       | —               |       | —            |       | —         |       | —       |       | —              |       | —           |       | (119,362                | )          | (119,362   | )          |
| Balance, March 31, 2009                                                                 |       | —               |       | $                 | —     |           | 10,961,274 |         | $          | 4,863,969           |       | $                | 1,181,578  |                    | $          | —     |       | $ | (6,075,212 | ) | $ | (29,665 | ) |

 

The accompanying notes are an integral part of these unauditedcondensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENTSOF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                 | ** ** | **For the three months ended March 31,** | ** ** | **For the period from  February 16, 1999 (date of  inception) through** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                                      | ** ** | **2008**                                                                     | ** ** | **March 31, 2009** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                      |       |                                          |       |                                                                         |       |   |   |
| Net loss                                                                   |       | $                                             | (119,362   | )                                                                            | $          | (268,878 | ) | $ | (6,075,212 | ) |
| Adjustments to reconcile net loss to cash (used in) operating  activities: |       |                                          |       |                                                                         |       |   |   |
| Depreciation                                                               |       | 4,067                                         |       | 3,195                                                                        |       | 169,401 |   |
| Amortization of deferred compensation                                      |       | —                                        |       | 10,377                                                                       |       | 46,926 |   |
| Common stock issued in exchange for services rendered                      |       | 19,227                                        |       | 32,000                                                                       |       | 213,877 |   |
| Common stock issued in exchange for intellectual property                  |       | —                                        |       | —                                                                       |       | 1,800,000 |   |
| Options and warrants issued in exchange for services rendered              |       | 23,579                                        |       | —                                                                       |       | 1,134,652 |   |
| (Increase) decrease in:                                                    |       |                                          |       |                                                                         |       |   |   |
| Prepaid expenses                                                           |       | —                                        |       | —                                                                       |       | — |   |
| Increase (decrease) in:                                                    |       |                                          |       |                                                                         |       |   |   |
| Accounts payable and accrued liabilities                                   |       | 52,270                                        |       | 17,827                                                                       |       | 52,299 |   |
| Net cash (used in) operating activities:                                   |       | (20,219                                       | )          | (205,479                                                                     | )          | (2,658,057 | ) |
|                                                                       |       |                                          |       |                                                                         |       |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                      |       |                                          |       |                                                                         |       |   |   |
| Acquisition of property, plant and equipment                               |       | —                                        |       | (11,881                                                                      | )          | (214,615 | ) |
| Net cash (used in) investing activities:                                   |       | —                                        |       | (11,881                                                                      | )          | (214,615 | ) |
|                                                                       |       |                                          |       |                                                                         |       |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                      |       |                                          |       |                                                                         |       |   |   |
| Sale of common stock                                                       |       | 22,650                                        |       | 228,125                                                                      |       | 2,812,593 |   |
| Exercise of common stock options                                           |       | —                                        |       | —                                                                       |       | 37,500 |   |
| Net (payments) proceeds, related party                                     |       | 27,500                                        |       | —                                                                       |       | 53,500 |   |
| Net cash provided by financing activities                                  |       | 50,150                                        |       | 228,125                                                                      |       | 2,903,593 |   |
|                                                                       |       |                                          |       |                                                                         |       |   |   |
| Increase (decrease) in cash and cash equivalents                           |       | 29,931                                        |       | 10,765                                                                       |       | 30,921 |   |
| Cash and cash equivalents beginning of period                              |       | 990                                           |       | 179,617                                                                      |       | — |   |
| Cash and cash equivalents end of period                                    |       | $                                             | 30,921     |                                                                         | $          | 190,382 |   | $ | 30,921 |   |
|                                                                       |       |                                          |       |                                                                         |       |   |   |
| Supplemental disclosures of cash flow information:                         |       |                                          |       |                                                                         |       |   |   |
| Cash paid during the period for interest                                   |       | $                                             | —     |                                                                         | $          | — |   | $ | 277 |   |
| Cash paid during the period for taxes                                      |       | $                                             | 77         |                                                                         | $          | 800 |   | $ | 1,702 |   |
| Common stock issued in exchange for services                               |       | $                                             | 19,227     |                                                                         | $          | 32,000 |   | $ | 213,877 |   |
| Common stock issued in exchange for intellectual property                  |       | $                                             | —     |                                                                         | $          | — |   | $ | 1,800,000 |   |
| Options and warrants issued in exchange for services rendered              |       | $                                             | 23,579     |                                                                         | $          | — |   | $ | 1,134,652 |   |

 

The accompanyingnotes are an integral part of these unaudited condensed financial statements

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

A summary of thesignificant accounting policies applied in the preparation of the accompanyingunaudited condensed financial statements follows.

 

General

 

The accompanyingunaudited condensed financial statements have been prepared in accordance withaccounting principles generally accepted in the United States of America forinterim financial information and with the instructions to Form 10-Q.Accordingly, they do not include all of the information and footnotes requiredby generally accepted accounting principles for complete financial statements.

 

In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Accordingly,the results from operations for the three month period ended March 31,2009, are not necessarily indicative of the results that may be expected forthe year ended December 31, 2009. The unaudited condensed financialstatements should be read in conjunction with the December 31, 2008financial statements and footnotes thereto included in the Company’s Form 10-Kfiled on March 31, 2009.

 

Business and Basis ofPresentation

 

Iris BioTechnologies Inc.(the “Company”) was incorporated on February 16, 1999 under the laws ofthe State of California. The Company is in the development stage as definedunder Statement on Financial Accounting Standards No.7, Development StageEnterprises (“SFAS No.7”) and its efforts are principally devoted to developingsolutions for the detection and monitoring of monogenic and complex genomicdiseases. The Company has not generated any revenue to date and consequentlyits operations are subject to all risks inherent in the establishment of a newbusiness enterprise. For the period from inception through March 31, 2009,the Company has accumulated losses of $6,075,212.

 

Cash and Cash Equivalents

 

 For purposes of theStatements of Cash Flows, the Company considers all highly liquid debtinstruments purchased with a maturity date of three months or less to be cashequivalents.

 

Property and Equipment

 

 Property andequipment are stated at cost. When retired or otherwise disposed, the relatedcarrying value and accumulated depreciation are removed from the respectiveaccounts and the net difference less any amount realized from disposition, isreflected in earnings. For financial statement purposes, property and equipmentare recorded at cost and depreciated using the straight-line method over theirestimated useful lives of 3 to 5 years.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Long-Lived Assets

 

 The Company hasadopted Statement of Financial Accounting Standards No. 144 (“SFAS 144”).The Statement requires that long-lived assets and certain identifiableintangibles held and used by the Company be reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Events relating to recoverability may includesignificant unfavorable changes in business conditions, recurring losses, or aforecasted inability to achieve break-even operating results over an extendedperiod. The Company evaluates the recoverability of long-lived assets basedupon forecasted undiscounted cash flows. Should impairment in value beindicated, the carrying value of intangible assets will be adjusted, based onestimates of future discounted cash flows resulting from the use and ultimatedisposition of the asset. SFAS No. 144 also requires assets to be disposedof be reported at the lower of the carrying amount or the fair value less coststo sell.

 

Income Taxes

 

The Company followsStatement of Financial Accounting Standard No.109, Accounting for Income Taxes (SFASNo.109) for recording the provision for income taxes. Deferred tax assets andliabilities are computed based upon the difference between the financialstatement and income tax basis of assets and liabilities using the enactedmarginal tax rate applicable when the related asset or liability is expected tobe realized or settled. Deferred income tax expenses or benefits are based onthe changes in the asset or liability during each period. If available evidencesuggests that it is more likely than not that some portion or all of thedeferred tax assets will not be realized, a valuation allowance is required toreduce the deferred tax assets to the amount that is more likely than not to berealized. Future changes in such valuation allowance are included in theprovision for deferred income taxes in the period of change. Deferred incometaxes may arise from temporary differences resulting from income and expenseitems reported for financial accounting and tax purposes in different periods.Deferred taxes are classified as current or non-current, depending on theclassification of assets and liabilities to which they relate. Deferred taxesarising from temporary differences that are not related to an asset orliability are classified as current or non-current depending on the periods inwhich the temporary differences are expected to reverse.

 

Net Income (loss) PerCommon Share

 

The Company computesearnings per share under Financial Accounting Standard No. 128, “Earningsper Share” (“SFAS 128”). Net loss per common share is computed by dividing netloss by the weighted average number of shares of common stock and dilutivecommon stock equivalents outstanding during the year. Dilutive commonstock equivalents consist of shares issuable and the exercise of the Company’sstock options and warrants (calculated using the treasury stock method). Forthe three periods ended March 31, 2009 and 2008 common stock equivalentsderived from shares issuable in the exercise of options and warrants arenot considered in the calculation of the weighted average number of commonshares outstanding because they would be anti-dilutive, thereby decreasing thenet loss per share.

 

Use of Estimates

 

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectcertain reported amounts and disclosures. Accordingly, actual results coulddiffer from those estimates.

 

15

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Table ofContents

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Reclassifications

 

Certain reclassificationshave been made in prior year’s financial statements to conform toclassifications used in the current year.

 

Research and Development

 

The Company accounts forresearch and development costs in accordance with the Financial AccountingStandards Board’s Statement of Financial Accounting Standards No. 2 (“SFAS2”), “Accounting for Research and Development Costs”. Under SFAS 2, allresearch and development costs must be charged to expense as incurred. Accordingly,internal research and development costs are expensed as incurred. Third-partyresearch and developments costs are expensed when the contracted work has beenperformed or as milestone results have been achieved. Company-sponsoredresearch and development costs related to both present and future products areexpensed in the period incurred. The Company incurred research and developmentexpenditures of $2,727 and $32,910 for the three month periods ended March 31,2009 and 2008, respectively; and $1,348,398 from the period from February 16,1999 (date of inception) to March 31, 2009. The Company primarily usesstock or stock option for compensation, and key R&D equipment expenses wereincurred in the second half of 2008.

 

Liquidity

 

To date the Company hasgenerated no revenues, has incurred expenses, and has sustained losses. Asshown in the accompanying unaudited condensed****financial statements, the Company incurred a net loss of $119,362during the three month period ended March 31, 2009 and $268,878 during thethree month period ended March 31, 2008. For the period from inceptionthrough March 31, 2009, the Company has accumulated losses of $6,075,212.Consequently, its operations are subject to all risks inherent in theestablishment of a new business enterprise.

 

Concentrations of CreditRisk

 

Financial instruments andrelated items, which potentially subject the Company to concentrations ofcredit risk, consist primarily of cash, cash equivalents and related partyreceivables. The Company places its cash and temporary cash investments withcredit quality institutions. At times, such investments may be in excess of theFDIC insurance limit. The Company periodically reviews its trade receivables indetermining its allowance for doubtful accounts. The Company does not haveaccounts receivable and allowance for doubtful accounts at March 31, 2009.

 

Fair Value of FinancialInstruments

 

SFAS No. 107, “DisclosuresAbout Fair Value of Financial Instruments,” requires disclosure of the fairvalue of certain financial instruments. The carrying value of cash and cashequivalents, accounts payable and accrued liabilities, and short-termborrowings, as reflected in the balance sheets, approximate fair value becauseof the short-term maturity of these instruments.  All othersignificant financial assets, financial liabilities and equity instruments ofthe Company are either recognized or disclosed in the consolidated financialstatements together with other information relevant for making a reasonable assessmentof future cash flows, interest rate risk and credit risk. Where practicable thefair values of financial assets and financial liabilities have been determinedand disclosed; otherwise only available information pertinent to fair value hasbeen disclosed.

 

16

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Table ofContents

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Fair Value of FinancialInstruments (continued)

 

Effective January 1,2008, we adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”)and SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities - Including an Amendment of FASB Statement No. 115”(“SFAS No. 159”), which permits entities to choose to measure manyfinancial instruments and certain other items at fair value. Neither of thesestatements had an impact on the Company’s financial position, results ofoperations or cash flows.

 

Stock Based Compensation

 

Effective January 1,2006, the beginning of the Company’s first fiscal quarter of 2006, the Companyadopted the fair value recognition provisions of SFAS 123R, using themodified-prospective transition method. Under this transition method,stock-based compensation expense was recognized in the financial statements forgranted, modified, or settled stock options. Compensation expense recognizedincluded the estimated expense for stock options granted on and subsequent to January 1,2006, based on the grant date fair value estimated in accordance with theprovisions of SFAS 123R, and the estimated expense for the portion vesting inthe period for options granted prior to, but not vested as of January 1,2006, based on the grant date fair value estimated in accordance with theoriginal provisions of SFAS 123. Results for prior periods have not beenrestated, as provided for under the modified-prospective method.

 

SFAS 123(R) requiresforfeitures to be estimated at the time of grant and revised, if necessary, insubsequent periods if actual forfeitures differ from those estimates. In theCompany’s pro forma information required under SFAS 123 for the periods priorto fiscal 2006, the Company accounted for forfeitures as they occurred.

 

Upon adoption of SFAS123(R), the Company is using the Black-Scholes option-pricing model as itsmethod of valuation for share-based awards granted beginning in fiscal 2006,which was also previously used for the Company’s pro forma information requiredunder SFAS 123. The Company’s determination of fair value of share-basedpayment awards on the date of grant using an option-pricing model is affectedby the Company’s stock price as well as assumptions regarding a number ofhighly complex and subjective variables. These variables include, but are notlimited to the Company’s expected stock price volatility over the term of theawards, and certain other market variables such as the risk free interest rate.

 

For the three monthperiod ended March 31, 2009, the Company granted 105,000 non-employeeoptions to purchase the Company’s common stock at $1.40 per share over tenyears, vesting in three years. The fair value of the vested portion was chargedto current period operations.

 

17

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Table ofContents

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Revenue Recognition

 

The Company recognizesrevenue in accordance with Staff Accounting Bulletin No. 104, REVENUERECOGNITION (“SAB104”), which superseded Staff Accounting Bulletin No. 101,REVENUE RECOGNITION IN FINANCIAL STATEMENTS (“SAB101”). SAB 101 requires thatfour basic criteria must be met before revenue can be recognized: (1) persuasiveevidence of an arrangement exists; (2) delivery has occurred; (3) theselling price is fixed and determinable; and (4) collectibility isreasonably assured. Determination of criteria (3) and (4) are basedon management’s judgments regarding the fixed nature of the selling prices ofthe products delivered and the collectibility of those amounts. Provisions fordiscounts and rebates to customers, estimated returns and allowances, and otheradjustments are provided for in the same period the related sales are recorded.The Company defers any revenue for which the product has not been delivered oris subject to refund until such time that the Company and the customer jointlydetermine that the product has been delivered or no refund will be required.

 

SAB 104 incorporatesEmerging Issues Task Force 00-21 (“EITF 00-21”), MULTIPLE-DELIVERABLE REVENUEARRANGEMENTS. EITF 00-21 addresses accounting for arrangements that may involvethe delivery or performance of multiple products, services and/or rights to useassets. The effect of implementing EITF 00-21 on the Company’s financialposition and results of operations was not significant.

 

From the date ofinception through March 31, 2009, the Company has not generated anyrevenue.

 

Recent accountingpronouncements

 

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assetsand Financial Liabilities.”  SFAS 159 permits entities to choose tomeasure many financial instruments, and certain other items, at fairvalue.  SFAS 159 applies to reporting periods beginning after November 15,2007. The adoption of SFAS 159 did not have a material impact on the Company’sfinancial condition or results of operations.

 

In December 2007,the FASB issued SFAS No. 141(R), *“BusinessCombinations”* (“SFAS No. 141(R)”), which establishesprinciples and requirements for how an acquirer recognizes and measures in itsfinancial statements the identifiable assets acquired, the liabilities assumed,and any noncontrolling interest in an acquiree, including the recognition andmeasurement of goodwill acquired in a business combination. SFAS No. 141Ris effective as of the beginning of the first fiscal year beginning on or afterDecember 15, 2008. Earlier adoption is prohibited. The adoption did nothave a material impact on its financial position results of operations or cashflows.

 

In December 2007,the FASB issued SFAS No. 160, *“NoncontrollingInterest in Consolidated Financial Statements, an amendment of ARB No. 51”*(“SFAS No. 160”), which will change the accounting and reporting for minorityinterests, which will be recharacterized as noncontrolling interests andclassified as a component of equity within the consolidated balance sheets.SFAS No. 160 is effective as of the beginning of the first fiscal yearbeginning on or after December 15, 2008. Earlier adoption isprohibited. The adoption did not have a material impact on its financialposition results of operations or cash flows.

 

18

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Table ofContents

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Recent accounting pronouncements(continued)

 

In December 2007,the FASB ratified the consensus in Emerging Issues Task Force (EITF) Issue No. 07-1,“Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1defines collaborative arrangements and requires collaborators to present theresult of activities for which they act as the principal on a gross basis andreport any payments received from (made to) the other collaborators based onother applicable authoritative accounting literature, and in the absence ofother applicable authoritative literature, on a reasonable, rational andconsistent accounting policy is to be elected. EITF 07-1 also provides fordisclosures regarding the nature and purpose of the arrangement, the entity’srights and obligations, the accounting policy for the arrangement and theincome statement classification and amounts arising from the agreement.

 

EITF 07-1 will beeffective for fiscal years beginning after December 15, 2008, which willbe the Company’s fiscal year 2009, and will be applied as a change inaccounting principle retrospectively for all collaborative arrangementsexisting as of the effective date. The Company did not have a material impactof adopting EITF 07-1 on our financial position, results of operations orcash flows.

 

In March 2008, theFASB” issued SFAS No. 161, “*Disclosuresabout Derivative Instruments and Hedging Activities - an amendment to FASBStatement No. 133”* (“SFAS No. 161”)*.*  SFAS No. 161 is intendedto improve financial standards for derivative instruments and hedgingactivities by requiring enhanced disclosures to enable investors to betterunderstand their effects on an entity’s financial position, financialperformance, and cash flows.  Entities are required to provideenhanced disclosures about: (a) how and why an entity uses derivativeinstruments; (b) how derivative instruments and related hedged items areaccounted for under SFAS No. 133 and its related interpretations; and (c) howderivative instruments and related hedged items affect an entity’s financial position,financial performance and cash flows.  It is effective for financialstatements issued for fiscal years beginning after November 15, 2008, withearly adoption encouraged.  The Company did not have a materialimpact with the adoption of SFAS No. 161 on its financial position,results of operations or cash flows.

 

In April 2008, theFASB issued FSP No. FAS 142-3,*”Determinationof the Useful Life of Intangible Assets”.* This FSP amends thefactors that should be considered in developing renewal or extensionassumptions used to determine the useful life of a recognized intangible assetunder SFAS No. 142,*“Goodwill and OtherIntangible Assets”.*  The Company is required to adopt FSP142-3 on September 1, 2009, earlier adoption is prohibited.  Theguidance in FSP 142-3 for determining the useful life of a recognizedintangible asset shall be applied prospectively to intangible assets acquiredafter adoption, and the disclosure requirements shall be applied prospectivelyto all intangible assets recognized as of, and subsequent to,adoption.  The Company is currently evaluating the impact of FSP142-3 on its financial position, results of operations or cash flows.

 

In May 2008, theFASB issued SFAS No. 162, “*TheHierarchy of Generally Accepted Accounting Principles*” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and theframework for selecting the principles used in the preparation of financialstatements of nongovernmental entities that are presented in conformity withgenerally accepted accounting principles (theGAAP hierarchy).  SFAS No. 162 will become effective60 days following the SEC’s approval of the Public Company AccountingOversight Board amendments to AU Section 411, “The Meaning of PresentFairly in Conformity With Generally Accepted Accounting Principles.”  TheCompany does not expect the adoption of SFAS No. 162 to have amaterial effect on its financial position, results of operations or cash flows.

 

19

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Table ofContents

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Recent accountingpronouncements (continued)

 

In May 2008, theFASB issued FSP Accounting Principles Board (“APB”) 14-1 “*Accounting for Convertible Debt Instruments That May BeSettled in Cash upon Conversion (Including Partial Cash Settlement)* “(“FSP APB 14-1”).  FSP APB 14-1 requires the issuer ofcertain convertible debt instruments that may be settled in cash (or otherassets) on conversion to separately account for the liability (debt) and equity(conversion option) components of the instrument in a manner that reflects theissuer’s non-convertible debt borrowing rate.  FSP APB 14-1 iseffective for fiscal years beginning after December 15, 2008 on aretroactive basis.  The Company did not have a material impact withthe adoption of FSP APB 14-1 on its financial position, results ofoperations or cash flows.

 

In June 2008, theFASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1, “*Determining Whether Instruments Granted inShare-Based Payment Transactions Are Participating Securities*.”Under the FSP, unvested share-based payment awards that contain rights toreceive nonforfeitable dividends (whether paid or unpaid) are participatingsecurities, and should be included in the two-class method of computing EPS.The FSP is effective for fiscal years beginning after December 15, 2008,and interim periods within those years. The Company did not have a materialimpact with the adoption of FSP EITF No. 03-6-1 on its financial position,results of operations or cash flows.

 

In October 2008, theFASB issued FSP SFAS No. 157-3, “Determining the Fair Value of aFinancial Asset When the Market for That Asset Is Not Active.” This positionclarifies the application of SFAS No. 157 in a market that is notactive and provides an example to illustrate key considerations in determiningthe fair value of a financial asset when the market for that financial asset isnot active. It also reaffirms the notion of fair value as an exit price as ofthe measurement date. This position was effective upon issuance, includingprior periods for which financial statements have not been issued. The adoptionhad no impact on the Company’s financial statements.

 

In December 2008,the FASB issued FSP 132(R)-1, Employers’ Disclosures about PostretirementBenefit Plan Assets, which is effective for fiscal years ending after December 15,2009. FSP 132(R)-1 requires disclosures about fair value measurements of planassets that would be similar to the disclosures about fair value measurementsrequired by SFAS 157. The Company is assessing the potential effect of theadoption of FSP 132(R)-1 on its financial statements.

 

In December 2008,the FASB issued FSP SFAS 140-4 and FIN 46(R)-8, Disclosures aboutTransfers of Financial Assets and Interests in Variable Interest Entities. TheFSP requires extensive additional disclosure by public entities with continuinginvolvement in transfers of financial assets to special-purpose entities andwith variable interest entities (VIEs), including sponsors that have a variableinterest in a VIE. This FSP became effective for the first reporting periodending after December 15, 2008 and did not have any material impact on theCompany’s financial statements.

 

20

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE A —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

 

Recent accountingpronouncements (continued)

 

In January 2009, theFASB issued Financial Statement of Position (“FSP”) Issue No. EITF 99-20-1,“Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITFNo. 99-20-1”). FSP EITF No. 99-20-1 amends the impairment guidance inEITF Issue No. 99-20, “Recognition of Interest Income and Impairment onPurchased Beneficial Interests and Beneficial Interests that Continue to beHeld by a Transferor in Securitized Financial Assets” to achieve moreconsistent determination of whether an other-than-temporary impairment hasoccurred. The Company adopted FSP EITF No. 99-20-1 and it did not have amaterial impact on the financial statements.

 

Other recent accountingpronouncements issued by the FASB (including its Emerging Issues Task Force),the AICPA, and the SEC did not, or are not believed by management to, have amaterial impact on the Company’s present or future financial statements.

 

**NOTE B -PROPERTY, PLANT, AND EQUIPMENT**

 

Property, plant andequipment at March 31, 2009 and December 31, 2008 are as follows:

 
| ** **                     | ** ** | **March 31,  2009** | ** **   | **December 31,  2008** | ** ** |
|--------------------------------|------------|--------------------------|--------------|-----------------------------|------------|
| Computer equipment             |       | $                        | 61,201       |                        | $          | 61,201 |   |
| Office equipment               |       | 1,728                    |         | 1,728                       |       |
| Furniture and fixtures         |       | 3,586                    |         | 3,586                       |       |
| Manufacturing equipment        |       | 158,201                  |         | 158,201                     |       |
|                           |       | 224,716                  |         | 224,716                     |       |
| Less: accumulated depreciation |       | (169,401                 | )            | (165,334                    | )          |
|                           |       | $                        |  55,315 |                        | $          | 59,382 |   |

 

During the three monthperiod ended March 31, 2009 and 2008, depreciation expense charged tooperations was $4,067 and $3,195, respectively.

 

**NOTE C —ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**

 

Accounts payable andaccrued liabilities at March 31, 2009 and December 31, 2008:

 
| ** **                            | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|---------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Accounts payable and accrued expenses |       | $                        | 62,401     |                        | $          | 10,131 |   |
|                                       |            |                          |            |                             |            |  |  |

 

21

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE D —RELATED PARTY TRANSACTIONS**

 

The Company’s Presidenthas advanced funds to the Company for working capital purposes since theCompany’s inception in February 1999.  No formal repayment terms orarrangements exist. The net amount outstanding at March 31, 2009 and December 31, 2008 was$53,500 and $26,000, respectively.

 

**NOTE E —STOCKHOLDER EQUITY**

 

Preferred stock

 

The Company is authorizedto issue 5,000,000 shares of no par or stated value preferred stock. From dateof inception through March 31, 2009, the Company has not issued anypreferred shares.

 

Common stock

 

The Company is authorizedto issue 20,000,000 shares of no par or stated value common stock. As of March 31,2009  the Company has 10,961,274 sharesof common stock issued and outstanding.

 

On April 9, 2003,the Company effected a two-for-one (2 for 1) stock split ofits outstanding shares of common stock, no par value. All referencesin the financial statements and the notes to financial statements, number ofshares, and share amounts have been retroactively restated to reflect thesplit.

 

In February 1999,the Company issued 7,200,000 shares of common stock in exchange forintellectual property valued at $1,800,000.

 

During the year ended December 31,1999, the Company issued an aggregate of 153,000 shares of common stock toconsultants for services in the amount of $38,250. All valuations of commonstock issued for services were based upon the value of the services rendered,which did not differ materially from the fair value of the Company’s commonstock during the period the services were rendered.

 

During the year ended December 31,1999, the Company issued an aggregate of 50,000 shares of common stock inconjunction with the exercise of common stock options at $0.50 per share and50,000 shares of common stock at $0.25 per share.

 

During the year ended December 31,2000, the Company issued an aggregate of 20,000 shares of common stock toconsultants for services in the amount of $10,000. All valuations of commonstock issued for services were based upon the value of the services rendered,which did not differ materially from the fair value of the Company’s commonstock during the period the services were rendered.

 

During the year ended December 31,2002, the Company issued an aggregate of 20,000 shares of common stock toconsultants for services in the amount of $10,000. All valuations of commonstock issued for services were based upon the value of the services rendered,which did not differ materially from the fair value of the Company’s commonstock during the period the services were rendered

 

During the year ended December 31,2003, the Company issued an aggregate of 26,000 shares of common stock to consultantsfor services in the amount of $13,000. All valuations of common stock issuedfor services were based upon the value of the services rendered, which did notdiffer materially from the fair value of the Company’s common stock during theperiod the services were rendered.

 

22

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE E —STOCKHOLDEREQUITY (continued)**

 

Common stock (continued)

 

During the year ended December 31,2006, the Company issued an aggregate of 20,000 shares of common stock toconsultants for services in the amount of $20,000. All valuations of commonstock issued for services were based upon the value of the services rendered,which did not differ materially from the fair value of the Company’s commonstock during the period the services were rendered.

 

During the year ended December 31,2008, the Company issued an aggregate of 50,222 shares of common stock toconsultants for services in the amount of $103,400. All valuations of commonstock issued for services were based upon the value of the services rendered,which did not differ materially from the fair value of the Company’s commonstock during the period the services were rendered.

 

During the three monthperiod ended March 31, 2009, the Company issued 18,667 shares of commonstock for services in the amount of $19,227. All valuations of common stockissued for services were based upon the value of the services rendered, whichdid not differ materially from the fair value of the Company’s common stockduring the period the services were rendered.

 

**NOTE F —WARRANTS AND OPTIONS**

 

Warrants

 

The following tablesummarizes the changes in warrants outstanding and related prices for theshares of the Company’s common stock issued to shareholders at March 31,2009:

 
| ** **              | ** ** | ** **      | ** ** | **Warrants Outstanding**  | ** ** | ** **              | ** ** | ** **      | ** ** | **Warrants Exercisable** | ** ** |
|-------------------------|------------|-----------------|------------|--------------------------------|------------|-------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **              | ** ** | ** **      | ** ** | **Weighted Average**      | ** ** | **Weighted**            | ** ** | ** **      | ** ** | **Weighted**                  | ** ** |
| ** **              | ** ** | **Number**      | ** ** | **Remaining Contractual** | ** ** | **Average**             | ** ** | **Number**      | ** ** | **Average**                   | ** ** |
| **Exercise Price** | ** ** | **Outstanding** | ** ** | **Life (years)**          | ** ** | **Exercise price** | ** ** | **Exercisable** | ** ** | **Exercise Price**       | ** ** |
| $                       | 2.00       |            | 31,400     |                           | 2.45       |                    | $          | 2.00            |       | 31,400                        |       | $ | 2.00 |   |
| 2.25                    |       | 23,629          |       | 3.79                           |       | 2.25                    |       | 23,629          |       | 2.25                          |       |
|                    |       | 55,029          |       |                           |       |                    |       | 55,029          |       |                          |       |
|                         |            |                 |            |                                |            |                         |            |                 |            |                               |            |  |  |  |

 

Transactions involvingthe Company’s warrant issuance are summarized as follows:

 
| ** **                            | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Price Per Share** | ** ** |
|---------------------------------------|------------|----------------------------|------------|--------------------------------------------------|------------|
| Outstanding at December 31, 2007 |       | 131,400                    |       | $                                                | 2.19       |   |
| Issued                                |       | 2,778                      |       | 2.25                                             |       |
| Exercised                             |       | —                     |       | —                                           |       |
| Canceled or expired                   |       | —                     |       | —                                           |       |
| Outstanding at December 31, 2008 |       | 134,178                    |       | $                                                | 2.20       |   |
| Issued                                |       | 2,517                      |       | 2.25                                             |       |
| Exercised                             |       | —                     |       | —                                           |       |
| Canceled or expired                   |       | (81,666                    | )          | —                                           |       |
| Outstanding at March 31, 2009    |       | 55,029                     |       | $                                                | 2.11       |   |

 

23

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE F —WARRANTS AND OPTIONS**

 

Warrants (continued)

 

During the year ended December 31,2008, in connection with the sale of the Company’s common stock; the Companygranted an aggregate of 2,778 warrants to purchase the Company’s common stockat a exercise price of $2.25 per share for five years.

 

During the three monthsended March 31, 2009, in connection with the sale of the Company’s commonstock; the Company granted an aggregate of 2,517 warrants to purchase theCompany’s common stock at a exercise price of $2.25 per share for five years.

 

During the three monthsended March 31, 2009, 81,666 non vested warrants previously issued inconnection with services were returned and canceled.

 

Options

 

Employee Options

 

The following tablesummarizes the changes in options outstanding and the related prices for theshares of the Company’s common stock issued to employees under a stock optionplan at March 31, 2009:

 
| ** **   | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|--------------|------------|------------------------------|------------|------------------------------|------------|
| ** **   | ** ** | ** **                   | ** ** | **Weighted Average**    | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **   | ** ** | ** **                   | ** ** | **Remaining**                | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| **Exercise** | ** ** | **Number**                   | ** ** | **Contractual Life**    | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Prices**   | ** ** | **Outstanding**              | ** ** | **(Years)**                  | ** ** | **Price** | ** ** | **Exercisable** | ** ** | **Price** | ** ** |
| $            | 0.50       |                         | 276,000    |                         | 2.07       |   | 0.50 |   | 276,000 |   | 0.50 |   |
| 1.00         |       | 992,000                      |       | 6.05                         |       | 1.00 |   | 822,000 |   | 1.00 |   |
| 2.25         |       | 167,696                      |       | 9.16                         |       | 2.25 |   | 34,937 |   | 2.25 |   |
|         |       |                         |       |                         |       |   |   |   |   |   |   |
|         |       | 1,435,696                    |       |                         |       | 1.05 |   | 1,132,937 |   | 0.92 |   |
|              |            |                              |            |                              |            |  |  |  |  |  |  |  |

 

Transactions involvingemployee stock options issued are summarized as follows:

 
| ** **                             | ** ** | ** **                     | ** ** | **Weighted Average**     | ** ** |
|----------------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| ** **                             | ** ** | **Number of Shares** | ** ** | **Price Per Share** | ** ** |
| Outstanding at December 31, 2007: |       | 1,748,000                      |       | $                             | 0.73       |   |
| Granted                                |       | 167,696                        |       | 2.25                          |       |
| Exercised                              |       | —                         |       | —                        |       |
| Canceled or expired                    |       | —                         |       | —                        |       |
| Outstanding at December 31, 2008  |       | 1,915,696                      |       | $                             | 0.86       |   |
| Granted                                |       | —                         |       | —                        |       |
| Exercised                              |       | —                         |       | —                        |       |
| Canceled or expired                    |       | (480,000                       | )          | 0.25                          |       |
| Outstanding at March 31, 2009:    |       | 1,435,696                      |       | $                             | 1.05       |   |

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2009**

**(Unaudited)**

 

**NOTE F —WARRANTS AND OPTIONS**

 

Employee Options(continued)

 

During the year ended December 31,2008, the Company granted 167,696 employee stock options with an exercise priceof $2.25 vesting over four years and expiring ten years from issuance. The fair value of the vested portion (determined as described below) of $55,016was charged to current period earnings.

 

The weighted-average fairvalue of these stock options granted and the weighted-average significantassumptions used to determine those fair values, using a Black-Scholes optionpricing model are as follows:

 

For year ended December 31,2008:

 
| **Significant assumptions (weighted-average):** |   |   |   |
|-----------------------------------------------------------|--------|--------|--------|
| Risk-free interest rate at grant date                     |   | 3.25   | %      |
| Expected stock price volatility                           |   | 236.71 | %      |
| Expected dividend payout                                  |   | — |   |
| Expected option life-years (a)                            |   | 10     |   |

 

----

(a)The expected optionlife is based on contractual expiration dates

 

Non employee options

 

The following tablesummarizes the changes in options outstanding and the related prices for theshares of the Company’s common stock issued to non employees under a stockoption plan at March 31, 2009:

 
| ** **   | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|--------------|------------|------------------------------|------------|------------------------------|------------|
| ** **   | ** ** | ** **                   | ** ** | **Weighted Average**    | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **   | ** ** | ** **                   | ** ** | **Remaining**                | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| **Exercise** | ** ** | **Number**                   | ** ** | **Contractual Life**    | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Prices**   | ** ** | **Outstanding**              | ** ** | **(Years)**                  | ** ** | **Price** | ** ** | **Exercisable** | ** ** | **Price** | ** ** |
| $            | 0.25       |                         | 60,000     |                         | 0.14       |   | $ | 0.25 |   | 60,000 |   | $ | 0.25 |   |
| 0.50         |       | 200,000                      |       | 1.77                         |       | 0.50 |   | 200,000 |   | 0.50 |   |
| 1.00         |       | 110,000                      |       | 6.96                         |       | 1.00 |   | 110,000 |   | 1.00 |   |
| 1.40         |       | 105,000                      |       | 9.99                         |       | 1.40 |   | — |   | 1.40 |   |
|         |       |                         |       |                         |       |   |   |   |   |   |   |
|         |       | 475,000                      |       |                         |       | 0.78 |   | 370,000 |   | 0.61 |   |
|              |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |

 

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**IRISBIOTECHNOLOGIES INC.**

**(Adevelopment stage company)**

**NOTES TOTHE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31,2009**

**(Unaudited)**

 

**NOTE F — WARRANTS AND OPTIONS**

 

Nonemployee options

 

Transactionsinvolving non employee stock options issued are summarized as follows:

 
| ** **                             | ** ** | ** **                     | ** ** | **Weighted Average**     | ** ** |
|----------------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| ** **                             | ** ** | **Number of Shares** | ** ** | **Price Per Share** | ** ** |
| Outstanding at December 31, 2007: |       | 410,000                        |       | $                             | 0.60       |   |
| Granted                                |       | —                         |       | —                        |       |
| Exercised                              |       | —                         |       | —                        |       |
| Canceled or expired                    |       | —                         |       | —                        |       |
| Outstanding at December 31, 2008  |       | 410,000                        |       | $                             | 0.60       |   |
| Granted                                |       | 105,000                        |       | 1.40                          |       |
| Exercised                              |       | —                         |       | —                        |       |
| Canceled or expired                    |       | (40,000                        | )          | (0.25                         | )          |
| Outstanding at March 31, 2009:    |       | 475,000                        |       | $                             | 0.78       |   |

 

Duringthe three months ended March 31, 2009, the Company granted 105,000 nonemployee stock options with an exercise price of $1.40 vesting over three yearsand expiring ten years from issuance.  None of the above options wasvested during the quarter ended March 31, 2009.  The fair value of $0 was charged to currentperiod earnings.

 

OnFebruary 27, 2009, the Board approved the extension of the expirationperiod of the existing stock options by six months.  Upon further review, the Company has noteffected such change to the existing stock options. (refer Note —I)

 

****NOTE G - LOSSES PER SHARE****

 

Thefollowing table presents the computation of basic and diluted losses per share:

 
| ** **                                        | ** ** | **Three months  ended  March 31,** | ** ** | **Three months  ended  March 31,** | ** ** |
|---------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                        | ** ** | **2009**                                     | ** ** | **2008**                                     | ** ** |
| Net income loss available to Common  stockholders |       | $                                            | (119,362   | )                                            | $          | (268,878 | ) |
| Basic and diluted earning (loss) per share        |       | $                                            | (0.01      | )                                            | $          | (0.03 | ) |
| Weighted average common shares outstanding        |       | 10,937,178                                   |       | 10,690,413                                   |       |

 

InApril 2003, a two (2) for one (1) stock split of the Company’scommon stock was effected. Accordingly, all historical weighted average shareand per share amounts have been restated to reflect the stock split.

 

****NOTE H - INCOME TAXES****

 

FinancialAccounting Standard No. 109 requires the recognition of deferred taxliabilities and assets for the expected future tax consequences of events thathave been included in the financial statement or tax returns. Under thismethod, deferred tax liabilities and assets are determined based on thedifference between financial statements and tax bases of assets and liabilitiesusing enacted tax rates in effect for the year in which the differences areexpected to reverse. Temporary differences between taxable income reported forfinancial reporting purposes and income tax purposes are insignificant.

 

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**IRISBIOTECHNOLOGIES INC.**

**(Adevelopment stage company)**

**NOTES TOTHE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31,2009**

**(Unaudited)**

 

****NOTE H - INCOME TAXES (continued)****

 

Forincome tax reporting purposes, the Company’s aggregate unused net operatinglosses approximate $6,000,000 which expires through 2026, subject tolimitations of Section 382 of the Internal Revenue Code, as amended. Thedeferred tax asset related to the carry forward is approximately $2,040,000.The Company has provided a valuation reserve against the full amount of the netoperating loss benefit, because in the opinion of management based upon theearning history of the Company; it is more likely than not that the benefitswill not be realized. Due to significant changes in the Company’s ownership,the Company’s future use of its existing net operating losses may be limited.

 

Componentsof deferred tax assets as of March 31, 2009 are as follows:

 
| Non current:                    |   |       |      |
|---------------------------------|--------|------------|-----------|
| Net operating loss carryforward |   | $          | 2,040,000 |   |
| Valuation allowance             |   | (2,040,000 | )         |
| Net deferred tax asset          |   | $          | —    |   |

 

**NOTE I — SUBSEQUENT EVENTS**

 

The10-K reported the extension of the expiration period of the existing stockoptions by six months by Board resolution dated February 27, 2009. Upon further review in April 2009, after the original expiration date foroptions for three optionees to purchase a total of 520,000 shares ofcommon stock had expired, it was determined that such extensions were not incompliance with law and, therefore, were not implemented. The Company is indiscussions with the optionees who were adversely affected by thisdetermination to reach a resolution satisfactory to all parties and believesthere will not be any material risk to its business resulting from thisresolution.

 

Inthe months of April and May 2009, the Company issued an aggregate of196,250 shares of its common stock in connection with the exercise of optionsand 12,308 shares of its common stock for services rendered.

 

Inthe months of April and May 2009, the Company’s CEO loaned $46,700,net of repayments.  The loans are demandand non-interest bearing.

 

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**ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS.**

 

**Forward-Looking Statements**

 

The information in thisreport contains forward-looking statements. All statements other thanstatements of historical fact made in this report are forward looking. Inparticular, the statements herein regarding industry prospects and futureresults of operations or financial position are forward-looking statements.These forward-looking statements can be identified by the use of words such as “believes,”“estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,”“may,” “will,” or “should” or other variations or similar words. No assurancescan be given that the future results anticipated by the forward-lookingstatements will be achieved. Forward-looking statements reflect management’scurrent expectations and are inherently uncertain. Our actual results maydiffer significantly from management’s expectations.

 

The following discussion andanalysis should be read in conjunction with our financial statements, includedherewith. This discussion should not be construed to imply that the resultsdiscussed herein will necessarily continue into the future, or that anyconclusion reached herein will necessarily be indicative of actual operatingresults in the future. Such discussion represents only the best presentassessment of our management.

 

**Overview**

 

Since inception on February 16, 1999 through March 31, 2009,we have sustained cumulative net losses of $6,075,212. Our losses have resultedprimarily from research and development expenses, patent costs and legal andaccounting expenses. We have four issued patents, and we launched our BioWindowsTM2.0 medical informatics system in January 2009. We are building a newcommercial Nano-biochipTM manufacturing system and we expect to begin testing itJune or July 2009. We already have automated patient samplepreparation equipment.  Our clinical study,with hospital Internal Review Board (IRB) approval, is expected to begin in July orAugust 2009.  This is in preparationfor launching our clinical BreastCancerChipTM, which can be marketed as a CLIAlaboratory tests without FDA approval, similar to Genomic Health’s Oncotype Dxtest, or as a 510(k) product approved by the FDA, enabling our test to beused in any certified laboratory. From inception through March 31, 2009,we have not generated any revenue from operations. We expect to incuradditional losses to perform further research and development activities. Wehave no debt with the exception of related party notes. In order to accelerateour product introduction and to grow dynamically, we will need to raiseadditional funds. We do not currently have any commercial products. There aresome risks with respect to clinical testing, regulatory approval and reviewcycles and uncertainty of the costs. Net positive cash inflows from anyproducts developed may take several years to achieve.

 

Management plans to continuefinancing operations with a combination of equity issuances and debtarrangements. If adequate funds are not available, we may be required to delay,reduce the scope of, or eliminate our research or development programs, orcease operations.

 

**History**

 

We were incorporated in theState of California on February 16, 1999 and planned to sell theranostic(choosing therapy based upon personalized diagnostic results) products andservices in the medical field. In an effort to develop that business, we set upoperations in three locations in California - Headquarters in Santa Clara,Laboratory in San Leandro, and Informatics Office in Eureka.

 

Beginning on March 11,1999, Simon Chin, MBA, our founder, President and CEO, Secretary and principalshareholder, entered into Common Stock Purchase Agreements with variouscompanies, investment groups and private individuals. On March 1, 2003,Daniel Farnum, M.D., an owner of Humboldt Orthopedics and a key shareholder,and Grace Osborne, MBA, President of GCO Recruiting, joined Mr. Chinon our board of directors. On April 9, 2003, the board approved a 2for 1 stock split, changed the authorized shares of common stock from 10million to 20 million, and the authorized preferred stock remained at 5 millionshares.

 

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**Plan of Operation**

 

We are a life sciencecompany focused on the development and commercialization of a nano-biochip geneexpression kit and an artificial intelligence system to assist in establishingthe foundation for personalized medicine, which will initially be utilized inthe treatment of breast cancer. We are designing our products to be approved bythe FDA, which can then be used in any certified laboratory. Starting at thepoint of a breast biopsy diagnosis of cancer, the nano-biochip and informaticsprogram are designed to enable a treating physician to quickly prescribe apersonalized treatment regimen that will have the greatest probability ofsuccess for each patient’s particular type of cancer. Our product platform isexpected to lead to more effective diagnosis and treatment not only forpatients with breast cancer, but also for those with neurological disorders,heart disease, diabetes and other gene-related metabolic problems .

 

**Product Research and Development**

 

We anticipate spending, inorder to accelerate our growth, which is contingent upon raising additionalfunds, approximately $1,500,000 for product research and development activitiesrelated to our anticipated product launch during the next twelve months.

 

**Acquisition of Plant and Equipmentand Other Assets**

 

We do not anticipate thesale of any material property, plant or equipment during the next 12 months. Wedo not anticipate the acquisition of any material property, plant or equipmentduring the next 12 months, unless we raise additional funds to accelerate ourgrowth to fulfill the unmet needs of a large, growing market.

 

**Number of Employees**

 

From our inception, we haveprincipally relied on the services of outside consultants and part-timeemployees for services. As of May 15, 2009, we have five full timeemployees and 10 part-time employees. In order for us to attract and retainquality personnel, we anticipate we will have to offer competitive salaries tofuture employees. We anticipate that it may become desirable to add additionalfull and or part time employees to discharge certain critical functions duringthe next 12 months. This projected increase in personnel is dependent upon ourability to generate revenues and obtain sources of financing. There is noguarantee that we will be successful in raising the funds required orgenerating revenues sufficient to fund the projected increase in the number ofemployees. As we continue to expand, we will incur additional cost forpersonnel.

 

**Results of Operations**

 

As a development stagecompany, we have yet to earn revenues from operations. We may experiencefluctuations in operating results in future periods due to a variety offactors, including our ability to obtain additional financing in a timelymanner and on terms favorable to us, our ability to successfully develop ourbusiness model, the amount and timing of operating costs and capital expendituresrelating to the expansion of our business, operations and infrastructure andthe implementation of marketing programs, key agreements, and strategicalliances, and general economic conditions specific to our industry.

 

As a result of limited capitalresources and no revenues from operations since inception, wehave relied on the issuance of equity securities to employees andnon-employees in exchange for services. Our management enters into equitycompensation agreements with non-employees if it is in our best interestunder terms and conditions consistent with the requirements of FinancialAccounting Standards No. 123 R, “Share-Based Compensation.” In order toconserve our limited operating capital resources, we anticipate continuingto compensate non-employees with equity for services during the nexttwelve months. This policy may have a material effect on our results ofoperations during the next twelve months.

 

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**Three Months Ended March 31,2009 Compared to Three Months Ended March 31, 2008**

 

**Revenues**

 

We have generated nooperating revenues from operations from our inception. We believe we will beginearning revenues from operations in 2009 from actual operation as wetransition from a development stage company to that of an active growthstage company.

 

**Costs and Expenses**

 

From our inception through March 31,2009,we have incurred cumulative losses of $6,075,212. In addition, a significantpart of the overall remaining costs are associated principally withequity-based compensation to employees and consultants, research anddevelopment costs and professional services rendered.

 

Selling, general and administrative (“SG&A”) expenses decreased by$120,855 from $233,346 for the three months ended March 31, 2008 to$112,491 for the three months ended March 31, 2009. SG&A expensesconsisted of accounting, legal, consulting, public relations, startup andorganizational expenses. SG&A expenses also included non-cash charges fromthe issuance of stock, warrants and stock options in the amounts of $42,377 forthe three months ended March 31, 2008 and $42,806 for the three monthsended March 31, 2009, a period to period increase of $429. The remainingSG&A expenses which required cash amounted to approximately $58,097 and$190,969 for the three months ended March 31, 2009 and 2008, respectively.The decease is primarily from a reduction in professional service providers andin staff salaries. We used stock in lieu of cash to conserve our cashresources.

 

Research and development costs deceased from $32,910 for the threemonths ended March 31, 2008 to $2,727 for the three months ended March 31,2009. We compensate with stock options.

 

As a result of the above-mentioned expenses, net losses deceased from$268,878 for the three months ended March 31, 2008 to $119,362 for thethree months ended March 31, 2009.

 

**Liquidity and Capital Resources**

 

As of March 31, 2009,we had working capital deficit of $84,980 as compared to working capitaldeficit of $35,141 as of December 31, 2008. Our cash position was $30,921as of March 31, 2009 compared to $990 as of December 31, 2008. Frominception to March 31, 2009 we have incurred an operating cash flowdeficit of $2,658,057, which has been principally financed through the privateplacement of our common stock and borrowing from related parties. As of March 31,2009, we have no long term debt.

 

We expect to continue toincur additional losses and negative cash flows from operating activities forthe next two years.

 

Our available workingcapital and capital requirements will depend upon numerous factors, includingprogress of our research and development programs, our progress in and the costof pre-clinical and clinical testing, the timing and cost of obtainingregulatory approvals, the cost of filing and prosecuting patent claims andother intellectual property rights, completing technological and marketdevelopments, current and future licensing relationships, the status of ourcompetitors, and our ability to establish collaborative arrangements with otherorganizations .

 

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Our continued operationswill depend on whether we are able to raise additional funds through variouspotential sources, such as equity and debt financing, collaborative andlicensing agreements, strategic alliances, and our ability to realize the fullpotential of our technology in development. Such additional funds may notbecome available on acceptable terms, if at all, and there can be no assurancethat any additional funding that we do obtain will be sufficient to meet our needsin the long term. Through May 15, 2009, virtually all of our financing hasbeen through private placements of common stock and warrants. We intend tocontinue to fund operations from cash on-hand and through the similar sourcesof capital previously described for the foreseeable future. We can give noassurances that any additional capital that we are able to obtain will besufficient to meet our needs. We believe that we will continue to incur netlosses and negative cash flows from operating activities for the next twoyears. Based on the resources available to us on May 15, 2009, we willneed additional equity or debt financing to meet our current operating needs.

 

**Off-Balance Sheet Arrangements**

 

We do not have anyoff-balance sheet arrangements.

 

**Inflation**

 

It is our opinion thatinflation has not had a material effect on our operations.

 

**Critical Accounting Policies**

 

Our financial statements areprepared in accordance with accounting principles generally accepted in theUnited States of America, which requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

 

The following accountingpolicies are critical in fully understanding and evaluating our reportedfinancial results:

 

**Accounting for Stock-BasedCompensation**

 

We account for our stockoptions and warrants using the fair value method promulgated by Statement ofFinancial Accounting Standards No. 123R “Share-Based Compensation” whichaddresses the accounting for transactions in which an entity exchanges itsequity instruments for goods or services. Therefore, our results includenon-cash compensation expense as a result of the issuance of stock options andwarrants and we expect to record additional non-cash compensation expense inthe future.

 

**ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

 

N/A

 

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**ITEM 4T.CONTROLS AND PROCEDURES.**

 

*Evaluation of Disclosure Controls and Procedures*. Under the supervision and with theparticipation of our management, including our President, Chief FinancialOfficer and Secretary, we evaluated the effectiveness of the design andoperation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”))as of the end of the period covered by this report. Based upon that evaluation,our President, Chief Financial Officer and Secretary concluded that our disclosurecontrols and procedures as of the end of the period covered by this report wereeffective such that the information required to be disclosed by us in reportsfiled under the Securities Exchange Act of 1934 is (i) recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms and (ii) accumulated and communicated to ourmanagement to allow timely decisions regarding disclosure. A controls systemcannot provide absolute assurance, however, that the objectives of the controlssystem are met, and no evaluation of controls can provide absolute assurancethat all control issues and instances of fraud, if any, within a company havebeen detected.

 

*Changes in Internal Control Over Financial Reporting.* During the most recent quarter ended March 31,2009, there has been no change in our internal control over financial reporting(as defined in Rule 13a-15(f) and 15d-15(f) under the ExchangeAct) ) that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II**

 

**ITEM 1.LEGAL PROCEEDINGS.**

 

We are not a party to anypending legal proceeding, nor is our property the subject of a pending legalproceeding, that is not in the ordinary course of business or otherwisematerial to the financial condition of our business. None of our directors,officers or affiliates is involved in a proceeding adverse to our business orhas a material interest adverse to our business.

 

**ITEM 1A.RISK FACTORS.**

 

N/A

 

**ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**

 

During the three monthsended March 31, 2009, we issued and sold 10,066 shares of common stock forproceeds of $22,650.  In connection with the sale of our common stock, weissued 2,517 warrants to purchase our common stock at $2.25 per share for thenext five years.

 

In addition, we issued18,667 shares of common stock to consultants for services rendered in theamount of $19,227. In connection with the issuance of such shares, we relied onthe exemption from registration provided by Section 4(2) of theSecurities 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

 

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**ITEM 6.EXHIBITS.**

 
| **Exhibit  Number** | ** ** | **Description of Exhibit**                                                                                                                                                      |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                      |
| 31.1                |       | Certifications  required by Rule 13a-14, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                                                                 |
| 32.1                |       | Certification  of Chief Executive Officer and Principal Accounting Officer pursuant to 18  U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002. |

 

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**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|   | IRIS BIOTECHNOLOGIES INC. |
|--------|---------------------------|

 
|                   | /s/ Simon Chin                                                                                                                                                         |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| May 15, 2009 | Simon Chin                                                                                                                                                             |
|              | President, Chief Executive Officer, Chief Financial  Officer and Director (Principal Executive Officer,  Principal Accounting Officer and Principal Financial Officer) |

 

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