Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 

**(Mark One)**

 

**x****     ****QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**Forthe quarterly period ended March 31, 2010**

 

**OR**

 

**o****        ****TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from              to              **

 

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

 

**IRISBIOTECHNOLOGIES INC.**

(Exact Name of smallbusiness issuer as specified in its charter)

 

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

 

**5201Great America Parkway, Suite 320, Santa Clara, California 95054**

(Address of principalexecutive offices) (Zip Code)

 

Issuer’s telephoneNumber: **(408) 867-2885**

 

Indicate by check mark whether the issuer (1) filedall reports required to be filed by Section 13 or 15(d) of theExchange Act during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes x   No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch 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 11, 2010the issuer had 11,400,441 outstanding shares of Common Stock.

 

 

 

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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                                                                   | 29       |
|         |                                                                                       |     |
| 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.     | Reserved                                                                                   | 30       |
| Item 5.      | Other Information                                                                          | 30       |
| Item  6.     | Exhibits                                                                                   | 31       |

 

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Table of Contents

 

**PART I**

 

**ITEM 1. FINANCIAL STATEMENTS.**

 

**INDEXTO FINANCIAL STATEMENTS**

 
| ** **                                                                                                                                                                              | **Page** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| Condensed Balance Sheets as of March 31, 2010  (unaudited) and December 31, 2009                                                                                              | 4        |
|                                                                                                                                                                                    |     |
| Unaudited Condensed Statements of Losses for the three  months ended March 31, 2010 and 2009 and the period February 16,  1999 (date of inception) to March 31, 2010     | 5        |
|                                                                                                                                                                                    |     |
| Unaudited Condensed Statement of Stockholders’ Equity  for the period February 16, 1999 (date of inception) to March 31,  2010                                           | 6        |
|                                                                                                                                                                                    |     |
| Unaudited Condensed Statements of Cash Flows for the  three months ended March 31, 2010 and 2009 and the period  February 16, 1999 (date of inception) to March 31, 2010 | 14       |
|                                                                                                                                                                                    |     |
| Notes to the Unaudited Condensed Financial Statements                                                                                                                                   | 15       |

 

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**CONDENSED BALANCE SHEETS**

 
| ** **                                                                                                                                                                                              | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                              | ** ** | **2010**           | ** ** | **2009**              | ** ** |
| ** **                                                                                                                                                                                              | ** ** | **(unaudited)**    | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                                  |       |               |       |                  |       |
| Current  assets:                                                                                                                                                                                        |       |               |       |                  |       |
| Cash                                                                                                                                                                                                    |       | $                  | 1,284      |                  | $          | 442 |   |
| Total  current assets                                                                                                                                                                                   |       | 1,284              |       | 442                   |       |
|                                                                                                                                                                                                    |       |               |       |                  |       |
| Property,  plant and equipment, net of accumulated depreciation of $187,586 and $183,130  as of March 31, 2010 and December 31, 2009, respectively                                            |       | 44,432             |       | 48,888                |       |
|                                                                                                                                                                                                    |       |               |       |                  |       |
| Total  assets                                                                                                                                                                                           |       | $                  | 45,716     |                  | $          | 49,330 |   |
|                                                                                                                                                                                                    |       |               |       |                  |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                    |       |               |       |                  |       |
| Current  liabilities:                                                                                                                                                                                   |       |               |       |                  |       |
| Accounts  payable and accrued liabilities                                                                                                                                                               |       | $                  | 108,117    |                  | $          | 78,452 |   |
| Notes  payable, related party                                                                                                                                                                           |       | 87,550             |       | 98,500                |       |
| Total  current liabilities                                                                                                                                                                              |       | 195,667            |       | 176,952               |       |
|                                                                                                                                                                                                    |       |               |       |                  |       |
| Long  term debt:                                                                                                                                                                                        |       |               |       |                  |       |
| Notes  payable, related party                                                                                                                                                                           |       | 63,000             |       | 53,000                |       |
|                                                                                                                                                                                                    |       |               |       |                  |       |
| STOCKHOLDERS’  EQUITY (DEFICIT)                                                                                                                                                                    |       |               |       |                  |       |
| Preferred  stock, no par or stated value; 5,000,000 shares authorized; no shares issued  and outstanding as of March 31, 2010 and December 31, 2009                                           |       | -                  |       | -                     |       |
| Common  stock, no par or stated value; 20,000,000 shares authorized; 11,304,526 and  11,230,526 shares issued and outstanding as of March 31, 2010 and  December 31, 2009,  respectively |       | 5,099,781          |       | 5,028,781             |       |
| Additional  paid in capital                                                                                                                                                                             |       | 1,980,855          |       | 1,949,838             |       |
| Common  stock subscription receivable                                                                                                                                                                   |       | (108,750           | )          | (108,750              | )          |
| Deficit  accumulated during development stage                                                                                                                                                           |       | (7,184,837         | )          | (7,050,491            | )          |
| Total  stockholders’ equity (deficit)                                                                                                                                                              |       | (212,951           | )          | (180,622              | )          |
|                                                                                                                                                                                                    |       |               |       |                  |       |
| Total  liabilities and stockholders’ equity (deficit)                                                                                                                                              |       | $                  | 45,716     |                  | $          | 49,330 |   |

 

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

 

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**CONDENSED STATEMENTS OF LOSSES**

**(unaudited)**

 
| ** **                                                                    | ** ** | **Three months ended March 31,** | ** ** | **For the period from  February 16, 1999 (date  of inception) through** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2010**                              | ** ** | **2009**                                                                     | ** ** | **March 31, 2010** | ** ** |
| Operating  expenses:                                                          |       |                                  |       |                                                                         |       |   |   |
| Selling,  general and administrative                                          |       | $                                     | 128,747    |                                                                         | $          | 112,568 |   | $ | 3,791,370 |   |
| Research  and development (Note A)                                            |       | —                                |       | 2,727                                                                        |       | 1,377,538 |   |
| Impairment  of intellectual property                                          |       | —                                |       | —                                                                       |       | 1,838,250 |   |
| Depreciation                                                                  |       | 4,457                                 |       | 4,067                                                                        |       | 187,261 |   |
| Total  operating expenses                                                     |       | 133,204                               |       | 119,362                                                                      |       | 7,194,419 |   |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Net  loss from operations                                                     |       | (133,204                              | )          | (119,362                                                                     | )          | (7,194,419 | ) |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Other  income (expense)                                                       |       |                                  |       |                                                                         |       |   |   |
| Interest  income (expense)                                                    |       | (1,142                                | )          | —                                                                       |       | 9,582 |   |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Net  loss before provision for income taxes                                   |       | (134,346                              | )          | (119,362                                                                     | )          | (7,184,837 | ) |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Income  taxes                                                                 |       | —                                |       | —                                                                       |       | — |   |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Net  Loss                                                                     |       | $                                     | (134,346   | )                                                                            | $          | (119,362 | ) | $ | (7,184,837 | ) |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Loss  per common share-basic and fully diluted                                |       | $                                     | (0.01      | )                                                                            | $          | (0.01 | ) | $ | (0.75 | ) |
|                                                                          |       |                                  |       |                                                                         |       |   |   |
| Weighted  average number of common shares outstanding-basic and fully diluted |       | 11,268,415                            |       | 10,937,178                                                                   |       | 9,635,120 |   |

 

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

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSEDSTATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                          | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                          | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                          | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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 theseunaudited condensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                     | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                     | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                     | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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 theseunaudited condensed financial statements

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                   | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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 |             | $          | 3,269,466.0                   |       | $              | 101,596.0  |             | $          | —                       |       | $          | —     |   | $ | (3,535,808.0 | ) | $ | (164,746.0 | ) |

 

The accompanying notes are an integral part of theseunaudited condensed financial statements

 

8

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Table ofContents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                   | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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 theseunaudited condensed financial statements

 

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Table of Contents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                      | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                      | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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 theseunaudited condensed financial statements

 

10

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Table of Contents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                       | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                       | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                       | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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 theseunaudited condensed financial statements

 

11

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Table ofContents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31,2010**

**(Unaudited)**

 
| ** **                                                                                       | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                       | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                       | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **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                                               |       | —                    |       | —                 |       | —         |       | —           |       | 739,839                       |       | —         |       | —           |       | —                       |       | 739,839    |       |
| Cancelled outstanding non vested warrants for  services                                          |       | —                    |       | —                 |       | —         |       | —           |       | (119,364                      | )          | —         |       | 119,364          |       | —                       |       | —     |       |
| Fair value of warrants issued for services rendered                                              |       | —                    |       | —                 |       | —         |       | —           |       | 52,000                        |       | —         |       | —           |       | —                       |       | 52,000     |       |
| Common stock issued in April 2009 at $1.39 per  share in exchange for services rendered     |       | —                    |       | —                 |       | 6,154          |       | 8,554            |       | —                        |       | —         |       | —           |       | —                       |       | 8,554      |       |
| Common stock issued in April 2009 for options  exercised                                    |       | —                    |       | —                 |       | 176,250        |       | 108,750          |       | —                        |       | (108,750       | )          | —           |       | —                       |       | —     |       |
| Common stock issued in May 2009 at $1.30 per  share in exchange for services rendered       |       | —                    |       | —                 |       | 6,154          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Common stock issued in May 2009 for options  exercised                                      |       | —                    |       | —                 |       | 20,000         |       | 5,000            |       | —                        |       | —         |       | —           |       | —                       |       | 5,000      |       |
| Common stock issued in June 2009 at $1.30 per  share in exchange for services rendered      |       | —                    |       | —                 |       | 7,273          |       | 9,455            |       | —                        |       | —         |       | —           |       | —                       |       | 9,455      |       |
| Common stock issued in July 2009 at $0.46 per  share in exchange for services rendered      |       | —                    |       | —                 |       | 8,421          |       | 3,873            |       | —                        |       | —         |       | —           |       | —                       |       | 3,873      |       |
| Common stock issued in August 2009 at $1.00  per share in exchange for services rendered    |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Common stock issued in September 2009 at $0.21  per share in exchange for services rendered |       | —                    |       | —                 |       | 8,000          |       | 1,680            |       | —                        |       | —         |       | —           |       | —                       |       | 1,680      |       |
| Common stock issued in October 2009 at $0.38  per share in exchange for services rendered   |       | —                    |       | —                 |       | 13,000         |       | 4,940            |       | —                        |       | —         |       | —           |       | —                       |       | 4,940      |       |
| Common stock issued in December 2009 at $0.41  per share in exchange for services rendered  |       | —                    |       | —                 |       | 16,000         |       | 6,560            |       | —                        |       | —         |       | —           |       | —                       |       | 6,560      |       |
| Net Loss                                                                                         |       | —                    |       | —                 |       | —         |       | —           |       | —                        |       | —         |       | —           |       | (1,094,641                   | )          | (1,094,641 | )          |
|                                                                                             |       |                      |       |                   |       |           |       |             |       |                          |       |           |       |             |       |                         |       |       |       |
| Balance, December 31, 2009                                                                  |       | —                    |       | $                      | —     |           | 11,230,526 |             | $          | 5,028,781                     |       | $              | 1,949,838  |             | $          | (108,750                     | )          | $          | —     |   | $ | (7,050,491 | ) | $ | (180,622 | ) |

 

The accompanying notes are an integral part of theseunaudited condensed financial statements

 

12

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Table of Contents

 

**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**CONDENSEDSTATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**

**FROMFEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31, 2010**

**(Unaudited)**

 
| ** **                                                                                      | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                      | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                                 |       | —                    |       | $                      | —     |           | 11,230,526 |             | $          | 5,028,781                     |       | $              | 1,949,838  |             | $          | (108,750                     | )          | $          | —     |   | $ | (7,050,491 | ) | $ | (180,622 | ) |
| Common stock issued in January 2010 at $1.00  per share in exchange for accrual            |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Common stock issued at $0.88 per share in exchange  for compensation shown as accrual           |       | —                    |       | —                 |       | 25,000         |       | 22,000           |       | —                        |       | —         |       | —           |       | —                       |       | 22,000     |       |
| Common stock issued in February 2010 at $1.00  per share in exchange for services rendered |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Common stock issued in March 2010 at $1.00 per  share in exchange for services rendered    |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Sale of common stock in March 2010 at $1.00  per share                                     |       | —                    |       | —                 |       | 25,000         |       | 25,000           |       | —                        |       | —         |       | —           |       | —                       |       | 25,000     |       |
| Fair value of vested options issued for services                                                |       | —                    |       | —                 |       | —         |       | —           |       | 31,017                        |       | —         |       | —           |       | —                       |       | 31,017     |       |
| Net loss                                                                                        |       | —                    |       | —                 |       | —         |       | —           |       | —                        |       | —         |       | —           |       | (134,346                     | )          | (134,346   | )          |
|                                                                                            |       |                      |       |                   |       |           |       |             |       |                          |       |           |       |             |       |                         |       |       |       |
| Balance, March 31, 2010                                                                    |       | —                    |       | $                      | —     |           | 11,304,526 |             | $          | 5,099,781                     |       | $              | 1,980,855  |             | $          | (108,750                     | )          | $          | —     |   | $ | (7,184,837 | ) | $ | (212,951 | ) |

 

The accompanying notes are an integral part of theseunaudited condensed financial statements

 

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**CONDENSED STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                 | ** ** | ** **                                                             | ** ** | **For the period from**     | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                 | ** ** | ** **                                                             | ** ** | **February 16, 1999 (date** | ** ** |
| ** **                                                                 | ** ** | **For the three months ended March 31,** | ** ** | **of inception) through**        | ** ** |
| ** **                                                                 | ** ** | **2010**                                                               | ** ** | **2009**                                   | ** ** | **March 31, 2010** | ** ** |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                     |       |                                                                   |       |                                       |       |   |   |
| Net  loss                                                                  |       | $                                                                      | (134,346   | )                                          | $          | (119,362 | ) | $ | (7,184,837 | ) |
| Adjustments  to reconcile net loss to cash (used in) operating activities: |       |                                                                   |       |                                       |       |   |   |
| Depreciation                                                               |       | 4,456                                                                  |       | 4,067                                      |       | 187,260 |   |
| Amortization  of deferred compensation                                     |       | —                                                                 |       | —                                     |       | 46,926 |   |
| Common  stock issued in exchange for services rendered                     |       | 16,000                                                                 |       | 19,227                                     |       | 280,939 |   |
| Impairment  of intellectual property                                       |       | —                                                                 |       | —                                     |       | 1,800,000 |   |
| Options  and warrants issued in exchange for services rendered             |       | 31,017                                                                 |       | 23,579                                     |       | 1,933,929 |   |
| Increase  (decrease) in:                                                   |       |                                                                   |       |                                       |       |   |   |
| Accounts  payable and accrued liabilities                                  |       | 59,665                                                                 |       | 52,270                                     |       | 128,015 |   |
| Net  cash (used in) operating activities:                                  |       | (23,208                                                                | )          | (20,219                                    | )          | (2,807,768 | ) |
|                                                                       |       |                                                                   |       |                                       |       |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                     |       |                                                                   |       |                                       |       |   |   |
| Acquisition  of property, plant and equipment                              |       | —                                                                 |       | —                                     |       | (221,591 | ) |
| Net  cash (used in) investing activities:                                  |       | —                                                                 |       | —                                     |       | (221,591 | ) |
|                                                                       |       |                                                                   |       |                                       |       |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                     |       |                                                                   |       |                                       |       |   |   |
| Sale  of common stock                                                      |       | 25,000                                                                 |       | 22,650                                     |       | 2,837,593 |   |
| Exercise  of common stock options                                          |       | —                                                                 |       | —                                     |       | 42,500 |   |
| Net  (payments) proceeds, related party                                    |       | (950                                                                   | )          | 27,500                                     |       | 150,550 |   |
| Net  cash provided by financing activities                                 |       | 24,050                                                                 |       | 50,150                                     |       | 3,030,643 |   |
|                                                                       |       |                                                                   |       |                                       |       |   |   |
| Increase  (decrease) in cash and cash equivalents                          |       | 842                                                                    |       | 29,931                                     |       | 1,284 |   |
| Cash  and cash equivalents beginning of period                             |       | 442                                                                    |       | 990                                        |       | — |   |
| Cash  and cash equivalents end of period                                   |       | $                                                                      | 1,284      |                                       | $          | 30,921 |   | $ | 1,284 |   |
|                                                                       |       |                                                                   |       |                                       |       |   |   |
| Supplemental  disclosures of cash flow information:                        |       |                                                                   |       |                                       |       |   |   |
| Cash  paid during the period for interest                                  |       | $                                                                      | —     |                                       | $          | — |   | $ | 277 |   |
| Cash  paid during the period for taxes                                     |       | $                                                                      | —     |                                       | $          | — |   | $ | — |   |
| Common  stock issued in exchange for intellectual property                 |       | $                                                                      | —     |                                       | $          | — |   | $ | 1,800,000 |   |

 

The accompanying notesare an integral part of these unaudited condensed financial statements

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 1 — 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 period ended March 31, 2010, arenot necessarily indicative of the results that may be expected for the yearended December 31, 2010. The unaudited condensed financial statementsshould be read in conjunction with the December 31, 2009 financialstatements and footnotes thereto included in the Company’s Form 10-K filedon March 31, 2010.

 

Businessand Basis of Presentation

 

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 Accounting Standards Codification subtopic 915-10 Development StageEntities and its efforts are principally devoted to developing solutions forthe detection and monitoring of monogenic and complex genomic diseases. TheCompany has not generated any revenue to date and consequently its operationsare subject to all risks inherent in the establishment of a new business enterprise.For the period from inception through March 31, 2010, the Company hasaccumulated losses of $7,184,837.

 

Cashand 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.

 

Propertyand Equipment

 

Property and equipmentare stated at cost. When retired or otherwise disposed, the related carryingvalue and accumulated depreciation are removed from the respective accounts andthe net difference less any amount realized from disposition, is reflected inearnings. For financial statement purposes, property and equipment are recordedat cost and depreciated using the straight-line method over their estimateduseful lives of 3 to 5 years.

 

Long-LivedAssets

 

The Company has adoptedAccounting Standards Codification subtopic 360-10, Property, plant andequipment (“ASC 360-10”). The Statement requires that long-lived assets andcertain identifiable intangibles held and used by the Company be reviewed forimpairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Events relating torecoverability may include significant unfavorable changes in business conditions,recurring losses, or a forecasted inability to achieve break-even operatingresults over an extended period. The Company evaluates the recoverability oflong-lived assets based upon forecasted undiscounted cash flows. Shouldimpairment in value be indicated, the carrying value of intangible assets willbe adjusted, based on estimates of future discounted cash flows resulting fromthe use and ultimate disposition of the asset. ASC 360-10 also requires assetsto be disposed of be reported at the lower of the carrying amount or the fairvalue less costs to sell.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)**

 

IncomeTaxes

 

The Company followsAccounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) forrecording the provision for income taxes. Deferred tax assets and liabilitiesare computed based upon the difference between the financial statement andincome tax basis of assets and liabilities using the enacted marginal tax rateapplicable when the related asset or liability is expected to be realized orsettled. Deferred income tax expenses or benefits are based on the changes inthe asset or liability during each period. If available evidence suggests thatit is more likely than not that some portion or all of the deferred tax assetswill not be realized, a valuation allowance is required to reduce the deferredtax assets to the amount that is more likely than not to be realized. Futurechanges in such valuation allowance are included in the provision for deferredincome taxes in the period of change. Deferred income taxes may arise fromtemporary differences resulting from income and expense items reported forfinancial accounting and tax purposes in different periods. Deferred taxes areclassified as current or non-current, depending on the classification of assetsand liabilities to which they relate. Deferred taxes arising from temporarydifferences that are not related to an asset or liability are classified ascurrent or non-current depending on the periods in which the temporarydifferences are expected to reverse and are considered immaterial.

 

NetIncome (loss) Per Common Share

 

The Company computesearnings per share under Accounting Standards Codification subtopic 260-10,Earnings Per Share (“ASC 260-10”). Net loss per common share is computed bydividing net loss by the weighted average number of shares of common stock anddilutive common stock equivalents outstanding during the year. Dilutivecommon stock equivalents consist of shares issuable and the exercise of theCompany’s stock options and warrants (calculated using the treasury stockmethod). For the three month periods ended March 31, 2010 and 2009 commonstock equivalents derived from shares issuable in the exercise of options andwarrants are not considered in the calculation of the weighted averagenumber of common shares outstanding because they would be anti-dilutive,thereby decreasing the net loss per share.

 

Useof 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.

 

Reclassifications

 

Certainreclassifications have been made in prior year’s financial statements toconform to classifications used in the current year.

 

Researchand Development

 

The Company accounts forresearch and development costs in accordance with the Accounting StandardsCodification subtopic 730-10, Research and Development (“ASC 730-10”). UnderASC 730-10, all research and development costs must be charged to expense asincurred. Accordingly, internal research and development costs are expensed asincurred. Third-party research and developments costs are expensed when thecontracted work has been performed or as milestone results have been achieved.Company-sponsored research and development costs related to both present andfuture products are expensed in the period incurred. The Company incurredresearch and development expenditures of $-0- and $2,727 for the three monthperiods ended March 31, 2010 and 2009, respectively; and $1,377,538 fromthe period from February 16, 1999 (date of inception) to March 31,2010.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)**

 

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 $134,346during the three month period ended March 31, 2010 and $119,362 during thethree month period ended March 31, 2009. For the period from inceptionthrough March 31, 2010, the Company has accumulated losses of $7,184,837.Consequently, its operations are subject to all risks inherent in theestablishment of a new business enterprise.

 

Concentrationsof Credit Risk

 

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, 2010.

 

Dependency on key management

 

Thefuture success or failure of the Company is dependent primarily upon thecontinued efforts and financial support of Simon Chin, the Company’s ChiefExecutive Officer, Chief Financial Officer and the majority sharehold**e**r****(seeNote 3). He has agreed to fund the deficit for December 31, 2010 whichcurrently is estimated at $100,000.

 

FairValue of Financial Instruments

 

Accounting StandardsCodification subtopic 825-10, Financial Instruments (“ASC 825-10”) requiresdisclosure of the fair value of certain financial instruments. The carryingvalue of cash and cash equivalents, accounts payable and accrued liabilities,and short-term borrowings, as reflected in the balance sheets, approximate fairvalue because of the short-term maturity of these instruments.  Allother significant financial assets, financial liabilities and equityinstruments of the Company are either recognized or disclosed in the  financial statements together with otherinformation relevant for making a reasonable assessment of future cash flows,interest rate risk and credit risk. Where practicable the fair values offinancial assets and financial liabilities have been determined and disclosed;otherwise only available information pertinent to fair value has beendisclosed.

 

Effective January 1,2008, the company adopted Accounting Standards Codification subtopic 820-10,Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting StandardsCodification subtopic 825-10, Financial Instruments (“ASC 825-10”), whichpermits entities to choose to measure many financial instruments and certainother items at fair value. Neither of these statements had an impact on theCompany’s financial position, results of operations or cash flows.

 

StockBased Compensation

 

Effective January 1,2006, the beginning of the Company’s first fiscal quarter of 2006, the Companyadopted the fair value recognition provisions of Accounting StandardsCodification subtopic 718-10, Compensation (“ASC 718-10”) 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 ASC 718-10, 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 ASC 718-10. Results for prior periods have not beenrestated, as provided for under the modified-prospective method.

 

ASC 718-10 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 ASC 718-10 for the periods priorto fiscal 2006, the Company accounted for forfeitures as they occurred.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)**

 

Upon adoption of ASC718-10, 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, 2010, the Company did not grant any employeeoption.  The fair value of  previously issued vesting options of $23,579was charged to current period operations.

 

Recent AccountingPronouncements

 

In February 2010 theFASB issued Update No. 2010-09 “Subsequent Events (Topic 855)” (“2010-09”).2010-09 clarifies the interaction of Accounting Standards Codification 855 “SubsequentEvents” (“Topic 855”) with guidance issued by the Securities and Exchange Commission(the “SEC”) as well as the intended breadth of the reissuance disclosureprovision related to subsequent events found in paragraph 855-10-50-4 in Topic855. This update is effective for annual or interim periods ending after June 15,2010. Management is currently evaluating whether these changes will have anymaterial impact on its financial position, results of operations or cash flows.

 

In February 2010 theFASB issued Update No. 2010-08 “Technical Corrections to Various Topics” (“2010-08”).2010-08 represents technical corrections to SEC paragraphs within varioussections of the Codification. Management is currently evaluating whether thesechanges will have any material impact on its financial position, results ofoperations or cash flows.

 

In January 2010 theFASB issued Update No. 2010-06 “Fair Value Measurements andDisclosures—Improving Disclosures about Fair Value Measurements” (“2010-06”).2010-06 requires new disclosures regarding significant transfers between Level1 and Level 2 fair value measurements, and disclosures regarding purchases,sales, issuances and settlements, on a gross basis, for Level 3 fair valuemeasurements. 2010-06 also calls for further disaggregation of all assets andliabilities based on line items shown in the statement of financial position.This amendment is effective for fiscal years beginning after December 15,2010 and interim periods within those fiscal years. The Company is currentlyevaluating whether adoption of this standard will have a material impact on itsfinancial position, results of operations or cash flows.

 

In January 2010 theFASB issued Update No. 2010-05 “Compensation—Stock Compensation—EscrowedShare Arrangements and Presumption of Compensation” (“2010-05”). 2010-05re-asserts that the Staff of the Securities Exchange Commission (the “SEC Staff”)has stated the presumption that for certain shareholders escrowed sharerepresent a compensatory arrangement. 2010-05 further clarifies the criteriarequired to be met to establish a position different from the SEC Staff’sposition. The Company does not believe this pronouncement will have anymaterial impact on its financial position, results of operations or cash flows.

 

In January 2010 theFASB issued Update No. 2010-04 “Accounting for Various Topics—TechnicalCorrections to SEC Paragraphs” (“2010-04”). 2010-04 represents technicalcorrections to SEC paragraphs within various sections of the Codification.Management is currently evaluating whether these changes will have any materialimpact on its financial position, results of operations or cash flows.

 

In January 2010 theFASB issued Update No. 2010-02 “Accounting and Reporting for Decreases inOwnership of a Subsidiary—a Scope Clarification” (“2010-02”) an update of ASC810 “Consolidation.” 2010-02 clarifies the scope of ASC 810 with respect todecreases in ownership in a subsidiary to those of a subsidiary or group ofassets that are a business or nonprofit, a subsidiary that is transferred to anequity method investee or joint venture, and an exchange of a group of assetsthat constitutes a business or nonprofit activity to a non-controlling interestincluding an equity method investee or a joint venture. Management, does notexpect adoption of this standard to have any material impact on its financial position,results of operations or operating cash flows. Management does not intend todecrease its ownership in any of its wholly-owned subsidiaries.

 

In January 2010 theFASB issued Update No. 2010-01 “Accounting for Distributions toShareholders with Components of Stock and Cash—a consensus of the FASB EmergingIssues Task Force” (“2010-03”) an update of ASC 505 “Equity.” 2010-03 clarifiesthe treatment of stock distributions as dividends to shareholders and theiraffect on the computation of earnings per shares. Management does not expectadoption of this standard to have any material impact on its financialposition, results of operations or operating cash flows.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 2 - PROPERTY, PLANT, AND EQUIPMENT**

 

Property, plant andequipment at March 31, 2010 and December 31, 2009 are as follows:

 
| ** **                     | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Computer equipment             |       | $                        | 61,201     |                        | $          | 61,201 |   |
| Office equipment               |       | 1,728                    |       | 1,728                       |       |
| Furniture and fixtures         |       | 3,586                    |       | 3,586                       |       |
| Manufacturing equipment        |       | 165,503                  |       | 165,503                     |       |
|                           |       | 232,018                  |       | 232,018                     |       |
| Less: accumulated depreciation |       | (187,586                 | )          | (183,130                    | )          |
|                           |       | $                        | 44,432     |                        | $          | 48,888 |   |

 

**NOTE 3 — RELATED PARTY TRANSACTIONS**

 

The Company’s Presidentand shareholders have advanced funds to the Company for working capitalpurposes since the Company’s inception in February 1999.  No formalrepayment terms or arrangements exist. The net amount outstanding at March 31,2010 and December 31, 2009  was$87,550 and $98,500, respectively.

 

**NOTE 4 — LONG TERM DEBT**

 

Long term debt at March 31,2010 and December 31, 2009 are as follows:

 
| ** **                     | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Notes payable, related party   |       | $                        | 38,000     |                        | $          | 38,000 |   |
| Note payables, unrelated party |       | $                        | 25,000     |                        | $          | 15,000 |   |

 

On September 24,2009, the Company issued a note totaling $38,000 to a shareholder/director,unsecured and bearing an interest rate of 7.5% per annum, due five years fromdate of issuance.  The notes are convertible into the Company’s commonstock at a conversion rate of $2.25 per share.

 

On October 9, 2009,the Company issued a $5,000 note to an unrelated party, unsecured and bearingan interest rate of 7.5% per annum, due five years from date of issuance. The note is convertible into the Company’s common stock at a conversion rate of$2.25 per share.

 

On December 23,2009, the Company issued a $10,000 note to an unrelated party, unsecured andbearing an interest rate of 7.5% per annum, due five years from date ofissuance.  The note is convertible into the Company’s common stock at aconversion rate of $2.25 per share.

 

On January 10, 2010,the Company issued a $10,000 note to an unrelated party, unsecured and bearingan interest rate of 7.5% per annum, due five years from date of issuance.  The note is convertible into the Company’scommon stock at a conversion rate of $2.25 per share.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 5 — STOCKHOLDER EQUITY**

 

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 for intellectualproperty 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 toconsultants for services in the amount of $13,000. 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 31,2006, 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.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 5 — STOCKHOLDER EQUITY (continued)**

 

Commonstock (continued)

 

During the year ended December 31,2009, the Company issued 91,669 shares of common stock for services in theamount of $70,289. All valuations of common stock issued for services werebased upon the fair value of the Company’s common stock during the period theservices were rendered.

 

During the three monthperiod ended March 31, 2010, the Company issued an aggregate of 49,000shares of common stock for services in the amount of $46,000 out of which$30,000 relates to accruals.  Allvaluations of common stock issued for services were based upon the fair value ofthe Company’s common stock during the period the services were rendered.

 

**NOTE 6 — 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 31,2010:

 
| **Exercise Price** | ** ** | **Number  Outstanding** | ** ** | **Warrants Outstanding  Weighted Average  Remaining Contractual  Life (years)** | ** ** | **Weighted  Average  Exercise price** | ** ** | **Number  Exercisable** | ** ** | **Warrants Exercisable  Weighted  Average  Exercise Price** | ** ** |
|-------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------|------------|
| $                       |  0.13 |                    | 40,000     |                                                                                                | 4.22       |                                       | $          | 0.13                    |       | 40,000                                                                |       | $ | 0.13 |   |
| $                       |  2.00 |                    | 31,400     |                                                                                                | 1.45       |                                       | $          | 2.00                    |       | 31,400                                                                |       | $ | 2.00 |   |
| $                       |  2.25 |                    | 23,629     |                                                                                                | 2.89       |                                       | $          | 2.25                    |       | 23,629                                                                |       | $ | 2.25 |   |
|                    |       | 95,029                  |       |                                                                                                |       |                                       |       | 95,029                  |       |                                                                  |       |

 

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

 
| ** **                            | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Price Per Share** | ** ** |
|---------------------------------------|------------|----------------------------|------------|--------------------------------------------------|------------|
| Outstanding at December 31, 2008 |       | 134,178                    |       | $                                                | 2.20       |   |
| Issued                                |       | 42,517                     |       | 0.26                                             |       |
| Exercised                             |       | —                     |       | —                                           |       |
| Canceled or expired                   |       | (81,666                    | )          | 2.25                                             |       |
| Outstanding at December 31, 2009 |       | 95,029                     |       | $                                                | 1.29       |   |
| Issued                                |       | —                     |       | —                                           |       |
| Exercised                             |       | —                     |       | —                                           |       |
| Canceled or expired                   |       | —                     |       | —                                           |       |
| Outstanding at March 31, 2010    |       | 95,029                     |       | $                                                | 1.29       |   |

 

During the year ended December 31,2009, in connection with the sale of the Company’s common stock; the Companyissued an aggregate of 2,517 warrants to purchase the Company’s common stock ata exercise price of $2.25 per share for five years.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 6 — WARRANTS AND OPTIONS (continued)**

 

Warrants

 

During the year ended December 31,2009, 81,666 non-vested warrants previously issued in connection with serviceswere returned and canceled. The balance unamortized fair value of the warrantof $119,364 recognized as contra equity which was transferred to Additionalpaid in capital during the year 2009.

 

On June 19, 2009,the Company issued 40,000 warrants to purchase the Company’s common stock at anexercise price of $0.13 over five years, vesting immediately for servicesrendered.  Accordingly, the Company recorded fair value of the warrants of$52,000 for year 2009.

 

The fair value of thewarrants issued and the significant assumptions used to determine those fairvalues, using a Black-Scholes option pricing model are as follows:

 
| **Significant assumptions:**     |   |   |   |
|---------------------------------------|--------|--------|--------|
| Risk-free interest rate at grant date |   | 2.82   | %      |
| Expected stock price volatility       |   | 458.97 | %      |
| Expected dividend payout              |   | — |   |
| Expected option life-years (a)        |   | 5      |   |

 

----

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

 

Options

 

EmployeeOptions

 

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, 2010:

 
| ** **               | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                         | ** ** |
|--------------------------|------------|------------------------------|------------|----------------------------------------------------------------------|------------|
| **Exercise  Prices (S)** | ** ** | **Number  Outstanding**      | ** ** | **Weighted Average  Remaining  Contractual Life  (Years)** | ** ** | **Weighted  Average  Exercise  Price (S)** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $                        |  0.13 |                         | 80,000     |                                                                 | 9.22       |   | $ | 0.13 |   | 80,000 |   | $ | 0.13 |   |
| 0.15                     |       | 400,000                      |       | 4.22                                                                 |       | 0.15 |   | 400,000 |   | 0.15 |   |
| 0.50                     |       | 91,000                       |       | 0.93                                                                 |       | 0.50 |   | 91,000 |   | 0.50 |   |
| 1.00                     |       | 950,750                      |       | 5.01                                                                 |       | 1.00 |   | 950,750 |   | 1.00 |   |
| 2.25                     |       | 167,696                      |       | 8.16                                                                 |       | 2.25 |   | 76,861 |   | 2.25 |   |
|                     |       | 1,689,446                    |       |                                                                 |       | 0.85 |   | 1,598,611 |   | 0.76 |   |
|                          |            |                              |            |                                                                      |            |  |  |  |  |  |  |  |  |  |

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 6 — WARRANTS AND OPTIONS (continued)**

 

EmployeeOptions (continued)

 

Transactions involvingemployee stock options issued are summarized as follows:

 
| ** **                             | ** ** | **Number of Shares** | ** ** | **Weighted Average  Price Per Share** | ** ** |
|----------------------------------------|------------|--------------------------------|------------|------------------------------------------------------|------------|
| Outstanding at December 31, 2008: |       | 1,915,696                      |       | $                                                    | 0.86       |   |
| Granted                                |       | 480,000                        |       | 0.15                                                 |       |
| Exercised                              |       | (176,250                       | )          | 0.62                                                 |       |
| Canceled or expired                    |       | (530,000                       | )          | 0.33                                                 |       |
| Outstanding at December 31, 2009  |       | 1,689,446                      |       | $                                                    | 0.85       |   |
| Granted                                |       | —                         |       | —                                               |       |
| Exercised                              |       | —                         |       | —                                               |       |
| Canceled or expired                    |       | —                         |       | —                                               |       |
| Outstanding at March 31, 2010:    |       | 1,689,446                      |       | $                                                    | 0.85       |   |

 

On June 19, 2009,the Company granted 480,000 employee stock options with exercise prices of$0.13 and $0.15 vesting immediately and expiring five to ten years fromissuance.  The fair value of the vested portion (determined as describedbelow) of $624,000 was charged to expenses for year 2009.

 

The fair value of thesestock options granted and the significant assumptions used to determine thosefair values, using a Black-Scholes option pricing model are as follows:

 
| **Significant assumptions :** |   |         |   |
|-----------------------------------------|--------|--------------|--------|
| Risk-free interest rate at grant date   |   | 2.82% - 3.79 | %      |
| Expected stock price volatility         |   | 458.97       | %      |
| Expected dividend payout                |   | —       |   |
| Expected option life-years (a)          |   | 5- 10        |   |

 

----

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

 

The fair value of thevested portion previously granted options of $23,579 and $23,579 was chargedduring the three month period  March 31,2010 and 2009, respectively.

 

Nonemployee 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, 2010:

 
| ** **           | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                         | ** ** |
|----------------------|------------|------------------------------|------------|----------------------------------------------------------------------|------------|
| **Exercise  Prices** | ** ** | **Number  Outstanding**      | ** ** | **Weighted Average  Remaining  Contractual Life  (Years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $                    | 0.50       |                         | 160,000    |                                                                 | 1.09       |   | $ | 0.50 |   | 160,000 |   | $ | 0.50 |   |
| 1.00                 |       | 110,000                      |       | 5.96                                                                 |       | 1.00 |   | 110,000 |   | 1.00 |   |
| 1.40                 |       | 105,000                      |       | 8.99                                                                 |       | 1.40 |   | 34,250 |   | 1.40 |   |
|                 |       | 375,000                      |       |                                                                 |       | 0.90 |   | 304,650 |   | 0.77 |   |
|                      |            |                              |            |                                                                      |            |  |  |  |  |  |  |  |  |  |

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

**NOTE 6 — WARRANTS AND OPTIONS (continued)**

 

Transactions involvingnon employee stock options issued are summarized as follows:

 
| ** **                             | ** ** | **Number of Shares** | ** ** | **Weighted Average  Price Per Share** | ** ** |
|----------------------------------------|------------|--------------------------------|------------|------------------------------------------------------|------------|
| Outstanding at December 31, 2008: |       | 410,000                        |       | $                                                    | 0.60       |   |
| Granted                                |       | 105,000                        |       | 1.40                                                 |       |
| Exercised                              |       | (20,000                        | )          | (0.25                                                |       |
| Canceled or expired                    |       | (120,000                       | )          | (0.38                                                |       |
| Outstanding at December 31, 2009  |       | 375,000                        |       | $                                                    | 0.90       |   |
| Granted                                |       | —                         |       | —                                               |       |
| Exercised                              |       | —                         |       | —                                               |       |
| Canceled or expired                    |       | —                         |       | —                                               |       |
| Outstanding at March 31, 2010:    |       | 375,000                        |       | $                                                    | 0.90       |   |

 

During the year ended December 31,2009, the Company granted 105,000 non employee stock options with an exerciseprice of $1.40 vesting over three years and expiring ten years fromissuance.  The fair value of the vested portion (determined as describedbelow) of $7,438 was charged to current period earnings.

 

The fair value of thesestock options granted and the significant assumptions used to determine thosefair values, using a Black-Scholes option pricing model are as follows:

 
| **Significant assumptions :** |   |   |   |
|-----------------------------------------|--------|--------|--------|
| Risk-free interest rate at grant date   |   | 3.84   | %      |
| Expected stock price volatility         |   | 455.63 | %      |
| Expected dividend payout                |   | — |   |
| Expected option life-years (a)          |   | 8.99   |   |

 

----

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

 

****NOTE 7 - LOSSES PER SHARE****

 

The following tablepresents the computation of basic and diluted losses per share for the three monthperiods ended March 31, 2010 and 2009:

 
| ** **                                       | ** ** | **2010**   | ** ** | **2009**   | ** ** |
|--------------------------------------------------|------------|------------|------------|------------|------------|
| Net income loss available to Common stockholders |       | $          | (134,346   | )          | $          | (119,362 | ) |
| Basic and diluted earning (loss) per share       |       | $          | (0.01      | )          | $          | (0.01 | ) |
| Weighted average common shares outstanding       |       | 11,268,415 |       | 10,937,178 |       |

 

****NOTE 8 - INCOME TAXES****

 

ASC 740-10 requires therecognition of deferred tax liabilities and assets for the expected future taxconsequences of events that have been included in the financial statement ortax returns. Under this method, deferred tax liabilities and assets aredetermined based on the difference between financial statements and tax basesof assets and liabilities using enacted tax rates in effect for the year inwhich the differences are expected to reverse. Temporary differences betweentaxable income reported for financial reporting purposes and income taxpurposes are insignificant.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2010**

**(Unaudited)**

 

****NOTE 8 - INCOME TAXES (continued)****

 

For income tax reportingpurposes, the Company’s aggregate unused net operating losses approximate$7,150,000 which expires through 2029, subject to limitations of Section 382of the Internal Revenue Code, as amended. The deferred tax asset related to thecarry forward is approximately $2,500,000. The Company has provided a valuationreserve against the full amount of the net operating loss benefit, because inthe opinion of management based upon the earning history of the Company; it ismore likely than not that the benefits will not be realized. Due to significantchanges in the Company’s ownership, the Company’s future use of its existingnet operating losses may be limited.

 

Components of deferredtax assets as of March 31, 2010 are as follows:

 
| Noncurrent:                      |   |       |      |
|----------------------------------|--------|------------|-----------|
| Net operating loss carry forward |   | $          | 2,500,000 |   |
| Valuation allowance              |   | (2,500,000 | )         |
| Net deferred tax asset           |   | $          | —    |   |

 

**NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS**

 

ASC 825-10 defines fairvalue as the price that would be received from selling an asset or paid totransfer a liability in an orderly transaction between market participants atthe measurement date. When determining the fair value measurements for assetsand liabilities required or permitted to be recorded at fair value, the Companyconsiders the principal or most advantageous market in which it would transactand considers assumptions that market participants would use when pricing theasset or liability, such as inherent risk, transfer restrictions, and risk ofnonperformance. ASC 825-10 establishes a fair value hierarchy that requires anentity to maximize the use of observable inputs and minimize the use ofunobservable inputs when measuring fair value. ASC 825-10 establishes threelevels of inputs that may be used to measure fair value:

 

Level1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observableinputs other than Level 1 prices such as quoted prices for similar assets orliabilities; quoted prices in markets with insufficient volume or infrequenttransactions (less active markets); or model-derived valuations in which allsignificant inputs are observable or can be derived principally from orcorroborated by observable market data for substantially the full term of theassets or liabilities.

 

Level3 - Unobservable inputs to the valuation methodology that are significant tothe measurement of fair value of assets or liabilities.

 

To the extent thatvaluation is based on models or inputs that are less observable or unobservablein the market, the determination of fair value requires more judgment. Incertain cases, the inputs used to measure fair value may fall into differentlevels of the fair value hierarchy. In such cases, for disclosure purposes, thelevel in the fair value hierarchy within which the fair value measurement isdisclosed is determined based on the lowest level input that is significant tothe fair value measurement.

 

Thecompany doesn’t have any items recorded or measured at fair value on arecurring basis as of March 31, 2010.

 

**NOTE 10- SUBSEQUENT EVENTS**

 

In themonth of April 2010, the Company issued an aggregate of 33,000 shares ofits common stock for services rendered.

 

In themonth of April 2010, the Company issued an aggregate of 58,100 shares ofits common stock in exchange for cash of $65,002.

 

In themonth of May 2010, the Company entered into an agreement to issue 4,815shares of its common stock in exchange for cash of $6,500.25.

 

Subsequentevents have been evaluated through May 11, 2010, the date that thefinancial statements were issued.

 

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**ITEM 2. MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

**Forward-Looking Statements**

 

The information in this report containsforward-looking statements. All statements other than statements of historicalfact made in this report are forward looking. In particular, the statementsherein regarding industry prospects and future results of operations orfinancial position are forward-looking statements. These forward-lookingstatements 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 assurances can be giventhat the future results anticipated by the forward-looking statements will beachieved. Forward-looking statements reflect management’s current expectationsand are inherently uncertain. Our actual results may differ significantly frommanagement’s expectations.

 

The following discussion and analysis should be readin conjunction with our financial statements, included herewith. Thisdiscussion should not be construed to imply that the results discussed hereinwill necessarily continue into the future, or that any conclusion reachedherein will necessarily be indicative of actual operating results in thefuture. Such discussion represents only the best present assessment of ourmanagement.

 

**Overview**

 

Since inception on February 16,1999 through March 31, 2010, we have sustained cumulative net losses of$7,184,837. Our losses have resulted primarily from research and developmentexpenses, patent costs and legal and accounting expenses. From inceptionthrough March 31, 2010, we have not generated any revenue from operations.We expect to incur additional losses to perform further research anddevelopment activities. We have sufficient cash to operate for one year at thecurrent burn rate. In order to accelerate our product introduction and to growdynamically, we will need to raise additional funds. We do not currently haveany commercial products. With additional funding, we expect to launch ournano-biochip products in less than a year.

 

During the past 18 months,hawse have spent less than $1,000 for public relations. Due to the severerecession we felt that is was prudent to spend investor dollars on designingand building an advanced chip making system, streamlining the automatedpatient sample processing protocols and product tracking system, andinteracting with physicians and patients to demonstrate the usefulness of Iris’sBioWindows medical informatics system. As of May 1, 2010, Iris has hiredan investor relations firm to access targeted investors and share the Iris storywith the world.

 

There are some risks withrespect to clinical testing, regulatory approval and review cycles anduncertainty of the costs. Net positive cash inflows from any products developedmay take several years to achieve.

 

Management plans to continue financing operations witha combination of equity issuances and debt arrangements. If adequate funds arenot available, we may be required to delay, reduce the scope of, or eliminateour research or development programs, or cease operations.

 

**History**

 

We were incorporated in the State of California on February 16,1999 and planned to sell theranostic (choosing therapy based upon personalizeddiagnostic results) products and services in the medical field. In an effort todevelop that business, we set up operations in two locations in California -Headquarters in Santa Clara and Laboratory in San Leandro.

 

Beginning on March 11, 1999, Simon Chin, MBA, ourfounder, President and CEO, Secretary and principal shareholder, enteredinto Common Stock Purchase Agreements with various companies, investmentgroups and private individuals. On March 1, 2003, Daniel Farnum, M.D., anowner of Humboldt Orthopedics and a key shareholder, and Grace Osborne, MBA,President of GCO Recruiting, joined Mr. Chin on our board ofdirectors. On April 9, 2003, the board approved a 2 for 1 stock split,changed the authorized shares of common stock from 10 million to 20 million,and the authorized preferred stock remained at 5 million shares.

 

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**Plan of Operation**

 

We are a life sciences company andthe recipient of the Frost and Sullivan 2008 Technology Innovation Award inPharmacogenomics. Without a clinically accurate tool to measure therelevant genetic/genomic malfunctions involved, cancer diagnosis is a trial anderror process leading to unnecessary or ill-directed therapy with unintendedrisks and adverse side effects. The development of our proprietaryNano-biochipsTM assists medical professionals in the diagnosis and prognosisprocess.  Our manufacturing system has thecapability to produce a variety of chips with a choice of mRNAs,microRNAs, proteins, or other biomarker probes for the diagnosis and prognosisof breast cancer, colon cancer, and many other diseases.

 

The IrisBioWindowsTM Informatics System for Personalized andTargeted Medicine handles the analysis of the Nano-biochipTM gene andprotein signatures. BioWindowsTM is an artificial intelligencesystem, which includes apowerful database with molecular data, in-depth patient demographics andlifestyle information, family medical histories and treatment-response profilesfor many diseases. We launched “Health Passport”in its BioWindowsTM 2.0 Informatics System a year ago.

 

Health Passport is a HIPAAcompliant, web based, medical information storage system that allowsparticipants to grant selective or full sharing capabilities of theirconfidential medical and lifestyle information to physicians and/or familymembers anywhere in the world. This allows families to build multi-generationalmedical family trees that will help assure that they receive more personalizedcare now and in the future — the right medical treatment for the right patientat the right time.

 

Starting at the point of a breast biopsy diagnosis ofcancer, the nano-biochip and informatics program are designed to enable atreating physician to quickly prescribe a personalized treatment regimen thatwill have the greatest probability of success for each patient’s particulartype of cancer. Our product platform is expected to lead to more effectivediagnosis and treatment not only for patients with breast cancer, but also forthose with other cancer, neurological disorders, heart disease, diabetes andother gene-related metabolic problems.

 

On April 4, 2010, CBSNews’ 60 Minutes program on “Patented Genes” covered New YorkDistrict Judge Robert Sweet’s March 29, 2010ground-breaking ruling that Myriad Genetics’ BRCA1 and BRCA2 patents areinvalid. His ruling found that the patents “are directed to a law of nature andwere therefore improperly granted, ... may lead to other challenges togene-related patents,” Bloomberg News reported.This is good news for Iris and opens up another multi-billion-dollar market forproducts and services that the company previously didn’t plan on offering dueto patent constraints.

 

**Product Research and Development**

 

We anticipate spending, in order to accelerate ourgrowth, which is contingent upon raising additional funds, approximately$1,500,000 for product research and development activities related to ouranticipated product launch during the next twelve months.

 

**Acquisition of Plant and Equipmentand Other Assets**

 

We do not anticipate the sale of any materialproperty, plant or equipment during the next 12 months. We do not anticipatethe acquisition of any material property, plant or equipment during the next 12months, unless we raise additional funds to accelerate our growth to fulfillthe unmet needs of a large, growing market.

 

**Number of Employees**

 

From our inception, we have principally relied on theservices of outside consultants and part-time employees for services. As of May 11,2010, we have five full time employees and 9 part-time employees. In order forus to attract and retain quality personnel, we anticipate we will have to offercompetitive salaries to future employees. We anticipate that it may becomedesirable to add additional full and or part time employees to dischargecertain critical functions during the next 12 months. This projected increasein personnel is dependent upon our ability to generate revenues and obtainsources of financing. There is no guarantee that we will be successful inraising the funds required or generating revenues sufficient to fund theprojected increase in the number of employees. As we continue to expand, wewill incur additional cost for personnel.

 

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**Results of Operations**

 

As a development stage company, we have yet to earnrevenues from operations. We may experience fluctuations in operating resultsin future periods due to a variety of factors, including our ability to obtainadditional financing in a timely manner and on terms favorable to us, ourability to successfully develop our business model, the amount and timing ofoperating costs and capital expenditures relating to the expansion of ourbusiness, operations and infrastructure and the implementation of marketingprograms, key agreements, and strategic alliances, and general economicconditions specific to our industry.

 

As a result of limited capital resources and norevenues from operations since inception, we have relied on theissuance of equity securities to employees and non-employees in exchange forservices. Our management enters into equity compensation agreements withnon-employees if it is in our best interest under terms and conditionsconsistent with the requirements of Accounting Standards Codification Subtopic718-10, “Compensation”.” In order to conserve our limited operatingcapital resources, we anticipate continuing to compensate non-employees withequity for services during the next twelve months. This policy may have amaterial effect on our results of operations during the next twelvemonths.

 

**Three Months Ended March 31,2010 Compared to Three Months Ended March 31, 2009**

 

**Revenues**

 

We have generated no operating revenues from operationsfrom our inception. We believe we will begin earning revenues from operationsin 2010 from actual operation as we transition from a developmentstage company to that of an active growth stage company.

 

**Costs and Expenses**

 

From our inception through March 31, 2010, wehave incurred cumulative losses of $7,184,837. In addition, a significant partof the overall remaining costs are associated principally with equity-basedcompensation to employees and consultants, research and development costs andprofessional services rendered.

 

Selling, general and administrative (“SG&A”)expenses increased by $16,179 from $112,568 for the three months ended March 31,2009 to $128,747 for the three months ended March 31, 2010. SG&Aexpenses consisted of accounting, legal, consulting, public relations, startupand organizational expenses. SG&A expenses also included non-cash chargesfrom the issuance of stock, warrants and stock options in the amounts of$47,017 for the three months ended March 31, 2010 and $42,806 for thethree months ended March 31, 2009, a period to period increase of $4,211.The remaining SG&A expenses which required cash amounted to approximately$81,730 and $69,685 for the three months ended March 31, 2010 and 2009,respectively. We used stock in lieu of cash to conserve our cash resources.

 

Research and development costs decreased from $2,727for the three months ended March 31, 2009 to $-0- for the three monthsended March 31, 2010.

 

As a result of the above-mentioned expenses, netlosses increased from $119,362 for the three months ended March 31, 2009to $134,346 for the three months ended March 31, 2010.

 

**Liquidity and Capital Resources**

 

As of March 31, 2010, we had a working capitaldeficit of $194,383 as compared to a working capital deficit of $176,510 as of December 31,2009. Our cash position was $1,284 as of March 31, 2010 compared to $442as of December 31, 2009. From inception to March 31, 2010 we haveincurred an operating cash flow deficit of $2,807,768, which has beenprincipally financed through the private placement of our common stock,advances from related parties and issuance of notes payable. As of March 31,2010, we have long term debt of $63,000.

 

We expect to continue to incur additional losses andnegative cash flows from operating activities for the next two years.

 

Our available working capital and capital requirementswill depend upon numerous factors, including progress of our research anddevelopment programs, our progress in and the cost of pre-clinical and clinicaltesting, the timing and cost of obtaining regulatory approvals, the cost offiling and prosecuting patent claims and other intellectual property rights,completing technological and market developments, current and future licensingrelationships, the status of our competitors, and our ability to establishcollaborative arrangements with other organizations .

 

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Our continued operations will depend on whether we areable to raise additional funds through various potential sources, such asequity and debt financing, collaborative and licensing agreements, strategicalliances, and our ability to realize the full potential of our technology indevelopment. Such additional funds may not become available on acceptableterms, if at all, and there can be no assurance that any additional fundingthat we do obtain will be sufficient to meet our needs in the long term.Through May 11, 2010, virtually all of our financing has been throughprivate placements of common stock and warrants. We intend to continue to fundoperations from cash on-hand and through the similar sources of capitalpreviously described for the foreseeable future. We can give no assurances thatany additional capital that we are able to obtain will be sufficient to meetour needs. We believe that we will continue to incur net losses and negativecash flows from operating activities for the next two years. Based on the resourcesavailable to us on May 11, 2010, we can sustain our present burn ratefor one year. We will need additional equity or debt financing to acceleratethe growth of our operations through the remainder of 2010 and we may needadditional financing thereafter.

 

**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 are prepared in accordancewith accounting principles generally accepted in the United States of America,which requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

 

The following accounting policies are critical infully understanding and evaluating our reported financial results:

 

**Accounting for Stock-BasedCompensation**

 

We account for our stock options and warrants usingthe fair value method promulgated by Accounting Standards Codification subtopic718-10, Compensation (“ASC 718-10”) which addresses the accounting fortransactions in which an entity exchanges its equity instruments for goods orservices. Therefore, our results include non-cash compensation expense as aresult of the issuance of stock options and warrants and we expect to recordadditional non-cash compensation expense in the future.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

 

N/A

 

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

 

*Evaluation of Disclosure Controlsand Procedures* .Under the supervision and with the participation of our management, includingour President, Chief Financial Officer and Secretary, we evaluated theeffectiveness of the design and operation of our disclosure controls andprocedures (as defined in Rule 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934 (the “Exchange Act”)) as of the end of theperiod covered by this report. Based upon that evaluation, our President, ChiefFinancial Officer and Secretary concluded that our disclosure controls andprocedures as of the end of the period covered by this report were effectivesuch that the information required to be disclosed by us in reports filed underthe Securities Exchange Act of 1934 is (i) recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andforms and (ii) accumulated and communicated to our management to allowtimely decisions regarding disclosure. A controls system cannot provideabsolute assurance, however, that the objectives of the controls system aremet, and no evaluation of controls can provide absolute assurance that allcontrol issues and instances of fraud, if any, within a company have beendetected.

 

*Changes in Internal Control OverFinancial Reporting.*During the most recent quarter ended March 31, 2010, there has been nochange in our internal control over financial reporting (as defined in Rule 13a-15(f) and15d-15(f) under 

 

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the Exchange Act) ) that has materially affected, oris reasonably likely to materially affect, our internal control over financialreporting.

 

**PART II**

 

**ITEM 1. LEGAL PROCEEDINGS.**

 

We are not a party to any pending legal proceeding,nor is our property the subject of a pending legal proceeding, that is not inthe ordinary course of business or otherwise material to the financialcondition of our business. None of our directors, officers or affiliates isinvolved in a proceeding adverse to our business or has a material interestadverse to our business.

 

**ITEM 1A. RISK FACTORS.**

 

N/A

 

**ITEM 2. UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS.**

 

During the three months ended March 31, 2010, weissued and sold 25,000 shares of common stock for proceeds of $25,000.  Inaddition, we issued 49,000 shares of common stock to consultants for servicesrendered in the amount of $46,000 out of which $30,000 relates to accruals. Inconnection with the issuance of such shares, we relied on the exemption fromregistration provided by Section 4(2) of the Securities Act of 1933,as amended.

 

**ITEM 3. DEFAULTS UPON SENIORSECURITIES.**

 

None

 

**ITEM 4. RESERVED.**

 

**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 requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
|                    | IRIS BIOTECHNOLOGIES INC. |
|-------------------------|---------------------------|
|                    |                      |
|                    |                      |   |
|  May 12, 2010 |                      | /s/ Simon Chin |
|                    |                      | 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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