Table ofContents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 

**(Mark One)**

 
| **x** | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|-------|---------------------------------------------------------------------------------------------------|

 

**For thequarterly period ended June 30, 2009**

 

**OR**

 
| **o** | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
|-------|----------------------------------------------------------------------------------------------------|

 

**For thetransition period from          to**

** **

**COMMISSION****FILE NUMBER 333-142076**

 

**IRIS BIOTECHNOLOGIES INC.**

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

 

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

 

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

(Address of principal executive offices) (ZipCode)

 

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

 

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

 

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 during the preceding 12 months (or for such shorter periodthat the registrant was required to submit and post such files). Yes  o   No  o

 

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

 

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

 

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

 

As of August 13, 2009 the issuer had 11,185,526outstanding shares of Common Stock.

 

 

 

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Table ofContents

 

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 | 28       |
| Item 3.    | Quantitative  and Qualitative Disclosures About Market Risk                                | 31       |
| Item 4T    | Controls and  Procedures                                                                   | 32       |
|       |                                                                                       |     |
|       | PART II                                                                               |     |
|       |                                                                                       |     |
| Item 1.    | Legal Proceedings                                                                          | 32       |
| Item 1A.   | Risk Factors                                                                               | 32       |
| Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                               | 32       |
| Item 3.    | Defaults  Upon Senior Securities                                                           | 32       |
| Item 4.    | Submission  of Matters to a Vote of Security Holders                                       | 32       |
| Item 5.    | Other Information                                                                          | 32       |
| Item 6.    | Exhibits                                                                                   | 33       |
|       |                                                                                       |     |
| SIGNATURES | 34                                                                                         |

 

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Table of Contents

 

**PART I**

 

**ITEM 1. FINANCIAL STATEMENTS.**

 

**INDEX TO FINANCIAL STATEMENTS**

 
| ** **                                                                                                                                                                                 | **Page** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| Unaudited Condensed  Balance Sheets as of June 30, 2009 and December 31, 2008                                                                                                    | 4        |
|                                                                                                                                                                                       |     |
| Unaudited  Condensed Statements of Losses for the three and six months ended  June 30, 2009 and 2008 and the period February 16, 1999 (date of  inception) to June 30, 2009 | 5        |
|                                                                                                                                                                                       |     |
| Unaudited Condensed Statement of Stockholders’  (deficit) Equity for the period February 16, 1999 (date of inception) to  June 30, 2009                                     | 6        |
|                                                                                                                                                                                       |     |
| Unaudited  Condensed Statements of Cash Flows for the six months ended June 30,  2009 and 2008 and the period February 16, 1999 (date of inception) to  June 30, 2009       | 13       |
|                                                                                                                                                                                       |     |
| Notes to the Unaudited Condensed Financial Statements                                                                                                                                      | 14       |

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSED BALANCE SHEETS**

 
| ** **                                                                                                                                                                                       | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                       | ** ** | **2009**          | ** ** | **2008**              | ** ** |
| ** **                                                                                                                                                                                       | ** ** | **(unaudited)**   | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                           |       |              |       |                  |       |
| Current  assets:                                                                                                                                                                                 |       |              |       |                  |       |
| Cash                                                                                                                                                                                             |       | $                 | 2,969      |                  | $          | 990 |   |
| Total  current assets                                                                                                                                                                            |       | 2,969             |       | 990                   |       |
|                                                                                                                                                                                             |       |              |       |                  |       |
| Property,  plant and equipment, net of accumulated depreciation of $174,217 and $165,334  as of June 30, 2009 and December 31, 2008, respectively                                      |       | 57,802            |       | 59,382                |       |
|                                                                                                                                                                                             |       |              |       |                  |       |
| Total  assets                                                                                                                                                                                    |       | $                 | 60,771     |                  | $          | 60,372 |   |
|                                                                                                                                                                                             |       |              |       |                  |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                                                                       |       |              |       |                  |       |
| Current  liabilities:                                                                                                                                                                            |       |              |       |                  |       |
| Accounts  payable and accrued liabilities                                                                                                                                                        |       | $                 | 76,125     |                  | $          | 10,131 |   |
| Notes  payable, related party                                                                                                                                                                    |       | 104,700           |       | 26,000                |       |
| Total  current liabilities                                                                                                                                                                       |       | 180,825           |       | 36,131                |       |
|                                                                                                                                                                                             |       |              |       |                  |       |
| STOCKHOLDERS’  (DEFICIT) EQUITY                                                                                                                                                             |       |              |       |                  |       |
| Preferred  stock, no par or stated value; 5,000,000 shares authorized; no shares issued  and outstanding as of June 30, 2009 and December 31, 2008                                     |       | —            |       | —                |       |
| Common  stock, no par or stated value; 20,000,000 shares authorized; 11,177,105 and  10,932,541 shares issued and outstanding as of June 30, 2009 and  December 31, 2008, respectively |       | 5,003,728         |       | 4,822,092             |       |
| Additional  paid in capital                                                                                                                                                                      |       | 1,890,781         |       | 1,277,363             |       |
| Common  stock subscription receivable                                                                                                                                                            |       | (108,750          | )          | —                |       |
| Deferred  compensation                                                                                                                                                                           |       | —            |       | (119,364              | )          |
| Deficit  accumulated during development stage                                                                                                                                                    |       | (6,905,813        | )          | (5,955,850            | )          |
| Total  stockholders’ (deficit) equity                                                                                                                                                       |       | (120,054          | )          | 24,241                |       |
|                                                                                                                                                                                             |       |              |       |                  |       |
| Total  liabilities and stockholders’ (deficit) equity                                                                                                                                       |       | $                 | 60,771     |                  | $          | 60,372 |   |

 

Theaccompanying notes are an integral part of these unaudited condensed financialstatements

 

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**STATEMENTSOF LOSSES**

**(unaudited)**

 
| ** **                                                                    | ** ** | **For the three months ended  June 30,** | ** ** | **For the six months ended  June 30,** | ** ** | **For the period from  February 16, 1999 (date of  inception) through June 30,** | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2009**                                      | ** ** | **2008**                                    | ** ** | **2009**                                                                                   | ** ** | **2008** | ** ** | **2009** | ** ** |
| Operating expenses:                                                           |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Selling, general and  administrative                                          |       | $                                             | 797,891    |                                        | $          | 221,462                                                                                    |       | $ | 910,382 |   | $ | 454,809 |   | $ | 3,520,532 |   |
| Research and development  (Note A)                                            |       | 27,895                                        |       | 71,816                                      |       | 30,622                                                                                     |       | 104,726 |   | 1,376,293 |   |
| Impairment of intellectual  property                                          |       | —                                        |       | —                                      |       | —                                                                                     |       | — |   | 1,838,250 |   |
| Depreciation                                                                  |       | 4,816                                         |       | 3,331                                       |       | 8,883                                                                                      |       | 6,526 |   | 174,217 |   |
| Total operating expenses                                                      |       | 830,602                                       |       | 296,609                                     |       | 949,887                                                                                    |       | 566,061 |   | 6,909, 292 |   |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Net loss from operations                                                      |       | (830,602                                      | )          | (296,609                                    | )          | (949,887                                                                                   | )          | (566,061 | ) | (6,909,292 | ) |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Other income (expense)                                                        |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Interest income (expense)                                                     |       | —                                        |       | 874                                         |       | —                                                                                     |       | 2,247 |   | 11,591 |   |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Net loss before provision  for income taxes                                   |       | (830,602                                      | )          | (295,735                                    | )          | (949,887                                                                                   | )          | (563,814 | ) | (6,897,701 | ) |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Income taxes                                                                  |       | —                                        |       | —                                      |       | 76                                                                                         |       | 800 |   | 8,112 |   |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Net Loss                                                                      |       | $                                             | (830,602   | )                                           | $          | (295,735                                                                                   | )          | $ | (949,963 | ) | $ | (564,614 | ) | $ | (6,905,813 | ) |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Loss per common share-basic  and fully diluted                                |       | $                                             | (0.07      | )                                           | $          | (0.03                                                                                      | )          | $ | (0.09 | ) | $ | (0.05 | ) | $ | (0.73 | ) |
|                                                                          |       |                                          |       |                                        |       |                                                                                       |       |   |   |   |   |
| Weighted average number of  common shares outstanding-basic and fully diluted |       | 11,142,855                                    |       | 10,812,435                                  |       | 11,040,585                                                                                 |       | 10,751,761 |   | 9,519,751 |   |

 

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

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

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

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE30, 2009**

**(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 these unauditedcondensed financial statements

 

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

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

**FROMFEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 2009**

**(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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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

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

**FROMFEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 2009**

**(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                     |       | $              | 101,596    |             | $          | —                       |       | $          | —     |   | $ | (3,535,808 | ) | $ | (164,746 | ) |

 

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

 

8

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Table of Contents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

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

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE30, 2009**

**(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 these unauditedcondensed financial statements

 

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Table ofContents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

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

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE30, 2009**

**(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 these unauditedcondensed financial statements

 

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Table ofContents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

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

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE30, 2009**

**(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 these unauditedcondensed financial statements

 

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Table ofContents

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

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

**FROM FEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH JUNE30, 2009**

**(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                                           |       | —                    |       | —                 |       | —         |       | —           |       | 680,782                       |       | —         |       | —           |       | —                       |       | 680,782    |       |
| 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      |       |
| Net loss, June 30, 2009                                                                 |       | —                    |       | —                 |       | —         |       | —           |       | —                        |       | —         |       | —           |       | (949,963                     | )          | (949,963   | )          |
| Balance, June 30, 2009                                                                  |       | —                    |       | $                      | —     |           | 11,177,105 |             | $          | 5,003,728                     |       | $              | 1,890,781  |             | $          | (108,750                     | )          | $          | —     |   | $ | (6,905,813 | ) | $ | (120,054 | ) |

 

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

 

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                 | ** ** | **For the six months ended June 30,** | ** ** | **For the period from  February 16, 1999 (date of  inception) through** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2009**                                   | ** ** | **2008**                                                                     | ** ** | **June 30, 2009** | ** ** |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                     |       |                                       |       |                                                                         |       |   |   |
| Net  loss                                                                  |       | $                                          | (949,963   | )                                                                            | $          | (564,614 | ) | $ | (6,905,813 | ) |
| Adjustments  to reconcile net loss to cash (used in) operating activities: |       |                                       |       |                                                                         |       |   |   |
| Depreciation                                                               |       | 8,883                                      |       | 6,526                                                                        |       | 174,217 |   |
| Amortization  of deferred compensation                                     |       | —                                     |       | 20,742                                                                       |       | 46,926 |   |
| Common  stock issued in exchange for services rendered                     |       | 45,236                                     |       | 50,000                                                                       |       | 239,886 |   |
| Common  stock issued in exchange for intellectual property                 |       | —                                     |       | —                                                                       |       | 1,800,000 |   |
| Options  and warrants issued in exchange for services rendered             |       | 732,782                                    |       | 7,855                                                                        |       | 1,843,855 |   |
| (Increase)  decrease in:                                                   |       |                                       |       |                                                                         |       |   |   |
| Prepaid  expenses                                                          |       | —                                     |       | —                                                                       |       | — |   |
| Increase  in:                                                              |       |                                       |       |                                                                         |       |   |   |
| Accounts  payable and accrued liabilities                                  |       | 65,994                                     |       | 36,303                                                                       |       | 66,023 |   |
| Net  cash (used in) operating activities:                                  |       | (97,068                                    | )          | (443,188                                                                     | )          | (2,734,906 | ) |
|                                                                       |       |                                       |       |                                                                         |       |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                     |       |                                       |       |                                                                         |       |   |   |
| Acquisition  of property, plant and equipment                              |       | (7,303                                     | )          | (15,939                                                                      | )          | (221,918 | ) |
| Net  cash (used in) investing activities:                                  |       | (7,303                                     | )          | (15,939                                                                      | )          | (221,918 | ) |
|                                                                       |       |                                       |       |                                                                         |       |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                     |       |                                       |       |                                                                         |       |   |   |
| Sale  of common stock                                                      |       | 22,650                                     |       | 395,626                                                                      |       | 2,812,593 |   |
| Exercise  of common stock options                                          |       | 5,000                                      |       | —                                                                       |       | 42,500 |   |
| Net  proceeds, related party                                               |       | 78,700                                     |       | —                                                                       |       | 104,700 |   |
| Net  cash provided by financing activities                                 |       | 106,350                                    |       | 395,626                                                                      |       | 2,959,793 |   |
|                                                                       |       |                                       |       |                                                                         |       |   |   |
| Increase  (decrease) in cash and cash equivalents                          |       | 1,979                                      |       | (63,501                                                                      | )          | 2,969 |   |
| Cash  and cash equivalents beginning of period                             |       | 990                                        |       | 179,617                                                                      |       | — |   |
| Cash  and cash equivalents end of period                                   |       | $                                          | 2,969      |                                                                         | $          | 116,116 |   | $ | 2,969 |   |
|                                                                       |       |                                       |       |                                                                         |       |   |   |
| Supplemental  disclosures of cash flow information:                        |       |                                       |       |                                                                         |       |   |   |
| Cash  paid during the period for interest                                  |       | $                                          | —     |                                                                         | $          | — |   | $ | 277 |   |
| Cash  paid during the period for taxes                                     |       | $                                          | 76         |                                                                         | $          | 800 |   | $ | 2,425 |   |
| Common  stock issued in exchange for services                              |       | $                                          | 45,236     |                                                                         | $          | 50,000 |   | $ | 239,886 |   |
| Common  stock issued in exchange for intellectual property                 |       | $                                          | —     |                                                                         | $          | — |   | $ | 1,800,000 |   |
| Options  and warrants issued in exchange for services rendered             |       | $                                          | 732,782    |                                                                         | $          | 7,855 |   | $ | 1,843,855 |   |

 

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

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

 

General

 

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

 

In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Accordingly,the results from operations for the three and six month periods ended June 30,2009, are not necessarily indicative of the results that may be expected forthe year ended December 31, 2009. The unaudited condensed financialstatements should be read in conjunction with the December 31, 2008financial statements and footnotes thereto included in the Company’s Form 10-Kfiled on March 31, 2009.

 

Business and Basis ofPresentation

 

Iris BioTechnologies Inc.(the “Company”) was incorporated on February 16, 1999 under the laws ofthe State of California. The Company is in the development stage as definedunder Statement on Financial Accounting Standards No.7, Development StageEnterprises (“SFAS No.7”) and its efforts are principally devoted to developingsolutions for the detection and monitoring of monogenic and complex genomicdiseases. The Company has not generated any revenue to date and consequentlyits operations are subject to all risks inherent in the establishment of a newbusiness enterprise. For the period from inception through June 30, 2009,the Company has accumulated losses of $6,905,813.

 

Cash and Cash Equivalents

 

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

 

Property and Equipment

 

Property 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.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Long-Lived Assets

 

The Company has adoptedStatement of Financial Accounting Standards No. 144 (“SFAS 144”). TheStatement requires that long-lived assets and certain identifiable intangibles heldand used by the Company be reviewed for impairment whenever events or changesin circumstances indicate that the carrying amount of an asset may not berecoverable. Events relating to recoverability may include significantunfavorable changes in business conditions, recurring losses, or a forecastedinability to achieve break-even operating results over an extended period. TheCompany evaluates the recoverability of long-lived assets based upon forecastedundiscounted cash flows. Should impairment in value be indicated, the carryingvalue of intangible assets will be adjusted, based on estimates of futurediscounted cash flows resulting from the use and ultimate disposition of theasset. SFAS No. 144 also requires assets to be disposed of be reported atthe lower of the carrying amount or the fair value less costs to sell.

 

Income Taxes

 

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

 

Net Income (loss) PerCommon Share

 

The Company computesearnings per share under Financial Accounting Standard No. 128, “Earningsper Share” (“SFAS 128”). Net loss per common share is computed by dividing netloss by the weighted average number of shares of common stock and dilutivecommon stock equivalents outstanding during the year. Dilutive commonstock equivalents consist of shares issuable and the exercise of the Company’sstock options and warrants (calculated using the treasury stock method). Forthe three and six month periods ended June 30, 2009 and 2008 common stockequivalents 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.

 

Use of Estimates

 

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Reclassifications

 

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

 

Research and Development

 

The Company accounts forresearch and development costs in accordance with the Financial AccountingStandards Board’s Statement of Financial Accounting Standards No. 2 (“SFAS2”), “Accounting for Research and Development Costs”. Under SFAS 2, allresearch and development costs must be charged to expense as incurred.Accordingly, internal research and development costs are expensed as incurred.Third-party research and developments costs are expensed when the contractedwork 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 $27,895 and $71,816 for the three month periods ended June 30, 2009and 2008, respectively; $30,622 and $104,726 for the six months ended June 30,2009 and 2008, respectively; and $1,376,293 from the period from February 16,1999 (date of inception) to June 30, 2009. The Company primarily usesstock or stock option for compensation, and key R&D equipment expenses wereincurred in the second half of 2008.

 

Liquidity

 

To date the Company hasgenerated no revenues, has incurred expenses, and has sustained losses. Asshown in the accompanying unaudited condensed****financial statements, the Company incurred a net loss of $949,963during the six month period ended June 30, 2009 and $564,614 during thesix month period ended June 30, 2008. For the period from inceptionthrough June 30, 2009, the Company has accumulated losses of $6,905,813.Consequently, its operations are subject to all risks inherent in the establishmentof a new business enterprise.

 

Concentrations of CreditRisk

 

Financial instruments andrelated items, which potentially subject the Company to concentrations ofcredit risk, consist primarily of cash, cash equivalents and related partyreceivables. The Company places its cash and temporary cash investments withcredit quality institutions. At times, such investments may be in excess of theFDIC insurance limit. The Company periodically reviews its trade receivables indetermining its allowance for doubtful accounts. The Company does not haveaccounts receivable and allowance for doubtful accounts at June 30, 2009.

 

Fair Value of FinancialInstruments

 

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Fair Value of FinancialInstruments (continued)

 

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

 

Stock Based Compensation

 

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

 

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

 

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

 

For the six month periodended June 30, 2009, the Company granted 480,000 employee options topurchase the Company’s common stock at $0.13 - $0.15 per share over five - tenyears, vesting immediately and 105,000 non-employee options to purchase theCompany’s common stock at $1.40 per share over ten years, vesting in threeyears. The fair value of the vested portion was charged to current periodoperations.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Revenue Recognition

 

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

 

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

 

From the date ofinception through June 30, 2009, the Company has not generated anyrevenue.

 

Recent AccountingPronouncements

 

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

 

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

 

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Recent AccountingPronouncements (continued)

 

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

 

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

 

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

 

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

 

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Recent AccountingPronouncements (continued)

 

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

 

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

 

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

 

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

 

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Recent AccountingPronouncements (continued)

 

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

 

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

 

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

 

Property, plant andequipment at June 30, 2009 and December 31, 2008 are as follows:

 
| ** **                      | ** ** | **June 30,  2009** | ** **   | **December 31,  2008** | ** ** |
|---------------------------------|------------|-------------------------|--------------|-----------------------------|------------|
| Computer  equipment             |       | $                       | 61,201       |                        | $          | 61,201 |   |
| Office  equipment               |       | 1,728                   |         | 1,728                       |       |
| Furniture  and fixtures         |       | 3,586                   |         | 3,586                       |       |
| Manufacturing  equipment        |       | 165,504                 |         | 158,201                     |       |
|                            |       | 232,019                 |         | 224,716                     |       |
| Less:  accumulated depreciation |       | (174,217                | )            | (165,334                    | )          |
|                            |       | $                       |  57,802 |                        | $          | 59,382 |   |

 

During the three monthperiod ended June 30, 2009 and 2008, depreciation expense charged tooperations was $4,816 and $3,331, respectively.

 

During the six monthperiod ended June 30, 2009 and 2008, depreciation expense charged tooperations was $8,883 and $6,526, respectively.

 

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

 

Accounts payable andaccrued liabilities at June 30, 2009 and December 31, 2008:

 
| ** **                             | ** ** | **June 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|----------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Accounts  payable and accrued expenses |       | $                       | 76,125     |                        | $          | 10,131 |   |
|                                        |            |                         |            |                             |            |  |  |

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

**NOTE D —RELATED PARTY TRANSACTIONS**

 

The Company’s Presidenthas advanced funds to the Company for working capital purposes since theCompany’s inception in February 1999.  No formal repayment terms orarrangements exist. The net amount outstanding at June 30, 2009 and December 31,2008 was $104,700 and $26,000, respectively.

 

**NOTE E —STOCKHOLDER EQUITY**

 

Preferred stock

 

The Company is authorizedto issue 5,000,000 shares of no par or stated value preferred stock. From dateof inception through  June 30, 2009,the Company has not issued any preferred shares.

 

Common stock

 

The Company is authorizedto issue 20,000,000 shares of no par or stated value common stock. As of  June 30, 2009  the Company has  11,177,105 shares of common stock issued andoutstanding.

 

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

 

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

 

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

 

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

 

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

 

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

 

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.

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

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

 

Common stock (continued)

 

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

 

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

 

During the six monthperiod ended June 30, 2009, the Company issued 38,248 shares of commonstock for services in the amount of $45,236. All valuations of common stockissued for services were based upon the value of the services rendered, whichdid not differ materially from the fair value of the Company’s common stockduring the period the services were rendered.

 

**NOTE F —WARRANTS AND OPTIONS**

 

Warrants

 

The following tablesummarizes the changes in warrants outstanding and related prices for theshares of the Company’s common stock issued to shareholders at June 30,2009:

 
| ** **              | ** ** | ** **      | ** ** | **Warrants Outstanding**  | ** ** | ** **              | ** ** | ** **      | ** ** | **Warrants Exercisable** | ** ** |
|-------------------------|------------|-----------------|------------|--------------------------------|------------|-------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **              | ** ** | ** **      | ** ** | **Weighted Average**      | ** ** | **Weighted**            | ** ** | ** **      | ** ** | **Weighted**                  | ** ** |
| ** **              | ** ** | **Number**      | ** ** | **Remaining Contractual** | ** ** | **Average**             | ** ** | **Number**      | ** ** | **Average**                   | ** ** |
| **Exercise Price** | ** ** | **Outstanding** | ** ** | **Life (years)**          | ** ** | **Exercise price** | ** ** | **Exercisable** | ** ** | **Exercise Price**       | ** ** |
| $                       |  0.13 |            | 40,000     |                           | 4.97       |                    | $          | 0.13            |       | 40,000                        |       | $ | 0.13 |   |
| $                       |  2.00 |            | 31,400     |                           | 2.20       |                    | $          | 2.00            |       | 31,400                        |       | $ | 2.00 |   |
| $                       |  2.25 |            | 23,629     |                           | 3.54       |                    | $          | 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, 2007 |       | 131,400                    |       | $                                                | 2.19       |   |
| Issued                                 |       | 2,778                      |       | 2.25                                             |       |
| Exercised                              |       | —                     |       | —                                           |       |
| Canceled  or expired                   |       | —                     |       | —                                           |       |
| Outstanding  at December 31, 2008 |       | 134,178                    |       | $                                                | 2.20       |   |
| Issued                                 |       | 42,517                     |       | 0.26                                             |       |
| Exercised                              |       | —                     |       | —                                           |       |
| Canceled  or expired                   |       | (81,666                    | )          | 2.25                                             |       |
| Outstanding  at June 30, 2009     |       | 95,029                     |       | $                                                | 1.29       |   |

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

**NOTE F —WARRANTS AND OPTIONS ( Continued)**

 

Warrants (continued)

 

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

 

During the six monthsended June 30, 2009, in connection with the sale of the Company’s commonstock; the Company issued an aggregate of 2,517 warrants to purchase theCompany’s common stock at a exercise price of $2.25 per share for five years.

 

During the six monthsended June 30, 2009, 81,666 non vested warrants previously issued inconnection with services were returned and canceled.

 

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 Companyrecorded fair value of the warrants of $52,000 current period expense.

 

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

 

Employee Options

 

The following tablesummarizes the changes in options outstanding and the related prices for theshares of the Company’s common stock issued to employees under a stock optionplan at  June 30, 2009:

 
| ** **     | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|----------------|------------|------------------------------|------------|------------------------------|------------|
| ** **     | ** ** | ** **                   | ** ** | **Weighted Average**    | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **     | ** ** | ** **                   | ** ** | **Remaining**                | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| **Exercise**   | ** ** | **Number**                   | ** ** | **Contractual Life**    | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Prices (S)** | ** ** | **Outstanding**              | ** ** | **(Years)**                  | ** ** | **Price  (S)** | ** ** | **Exercisable** | ** ** | **Price** | ** ** |
| $              |  0.15 |                         | 400,000    |                         | 4.97       |   | $ | 0.15 |   | 400,000 |   | $ | 0.15 |   |
| 0.50           |       | 91,000                       |       | 1.68                         |       | 0.50 |   | 91,000 |   | 0.50 |   |
| 1.00           |       | 950,750                      |       | 5.76                         |       | 1.00 |   | 823,250 |   | 1.00 |   |
| 2.25           |       | 167,696                      |       | 8.91                         |       | 2.25 |   | 45,418 |   | 2.25 |   |
| 0.13           |       | 80,000                       |       | 9.97                         |       | 0.13 |   | 80,000 |   | 0.13 |   |
|           |       | 1,689,446                    |       |                         |       | 0.86 |   | 1,439,668 |   | 0.72 |   |
|                |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

**NOTE F —WARRANTS AND OPTIONS ( Continued)**

 

Employee Options(continued)

 

Transactions involvingemployee stock options issued are summarized as follows:

 
| ** **                              | ** ** | ** **                     | ** ** | **Weighted Average**     | ** ** |
|-----------------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| ** **                              | ** ** | **Number of Shares** | ** ** | **Price Per Share** | ** ** |
| Outstanding  at December 31, 2007: |       | 1,748,000                      |       | $                             | 0.73       |   |
| Granted                                 |       | 167,696                        |       | 2.25                          |       |
| Exercised                               |       | —                         |       | —                        |       |
| Canceled  or expired                    |       | —                         |       | —                        |       |
| Outstanding  at December 31, 2008  |       | 1,915,696                      |       | $                             | 0.86       |   |
| Granted                                 |       | 480,000                        |       | 0.15                          |       |
| Exercised                               |       | (176,250                       | )          | 0.62                          |       |
| Canceled  or expired                    |       | (530,000                       | )          | 0.33                          |       |
| Outstanding  at June 30, 2009:     |       | 1,689,446                      |       | $                             | 0.86       |   |

 

During the year ended December 31,2008, the Company granted 167,696 employee stock options with an exercise priceof $2.25 vesting over four years and expiring ten years from issuance. The fair value of the vested portion (determined as described below) of $55,016was charged to current period earnings, and $47,157 was charged during theperiod ended June 30, 2009

 

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

 

For year ended December 31,2008:

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

 

----

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

 

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 vestedportion (determined as described below) of $624,000 was charged to currentperiod 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  |       | 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

 

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** **

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

**NOTE F —WARRANTS AND OPTIONS ( Continued)**

 

Non employee options

 

The following tablesummarizes the changes in options outstanding and the related prices for theshares of the Company’s common stock issued to non employees under a stockoption plan at June 30, 2009:

 
| ** **   | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|--------------|------------|------------------------------|------------|------------------------------|------------|
| ** **   | ** ** | ** **                   | ** ** | **Weighted Average**    | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **   | ** ** | ** **                   | ** ** | **Remaining**                | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| **Exercise** | ** ** | **Number**                   | ** ** | **Contractual Life**    | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Prices**   | ** ** | **Outstanding**              | ** ** | **(Years)**                  | ** ** | **Price** | ** ** | **Exercisable** | ** ** | **Price** | ** ** |
| $            | 0.50       |                         | 200,000    |                         | 1.52       |   | $ | 0.50 |   | 200,000 |   | $ | 0.50 |   |
| 1.00         |       | 110,000                      |       | 6.71                         |       | 1.00 |   | 110,000 |   | 1.00 |   |
| 1.40         |       | 105,000                      |       | 9.74                         |       | 1.40 |   | 8,750 |   | 1.40 |   |
|         |       | 415,000                      |       |                         |       | 0.86 |   | 318,750 |   | 1.12 |   |
|              |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |

 

Transactions involvingnon employee stock options issued are summarized as follows:

 
| ** **                              | ** ** | ** **                     | ** ** | **Weighted Average**     | ** ** |
|-----------------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| ** **                              | ** ** | **Number of Shares** | ** ** | **Price Per Share** | ** ** |
| Outstanding  at December 31, 2007: |       | 410,000                        |       | $                             | 0.60       |   |
| Granted                                 |       | —                         |       | —                        |       |
| Exercised                               |       | —                         |       | —                        |       |
| Canceled  or expired                    |       | —                         |       | —                        |       |
| Outstanding  at December 31, 2008  |       | 410,000                        |       | $                             | 0.60       |   |
| Granted                                 |       | 105,000                        |       | 1.40                          |       |
| Exercised                               |       | (20,000                        | )          | (0.25                         | )          |
| Canceled  or expired                    |       | (80,000                        | )          | (0.38                         | )          |
| Outstanding  at June 30, 2009:     |       | 415,000                        |       | $                             | 0.86       |   |

 

During the six monthsended June 30, 2009, the Company granted 105,000 non employee stockoptions with an exercise price of $1.40 vesting over three years and expiringten years from issuance.  The fair value of the vested portion (determinedas described below) of $9,625 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  |       | 3.53       | %          |
| Expected  stock price volatility        |       | 452.13     | %          |
| Expected  dividend payout               |       | —     |       |
| Expected  option life-years (a)         |       | 9.74       |       |

 

----

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

 

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**JUNE 30, 2009**

**(Unaudited)**

 

****NOTE G - LOSSESPER SHARE****

 

The following tablespresent the computation of basic and diluted losses per share:

 
| ** **                                        | ** ** | **Three months  ended  June 30,** | ** ** | **Three months  ended  June 30,** | ** ** |
|---------------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                        | ** ** | **2009**                                    | ** ** | **2008**                                    | ** ** |
| Net  income loss available to Common stockholders |       | $                                           | (830,602   | )                                           | $          | (295,735 | ) |
| Basic  and diluted earning (loss) per share       |       | $                                           | (0.07      | )                                           | $          | (0.03 | ) |
| Weighted  average common shares outstanding       |       | 11,142,855                                  |       | 10,812,435                                  |       |

 
| ** **                                        | ** ** | **Six  months  ended  June 30,** | ** ** | **Six months  ended  June 30,** | ** ** |
|---------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------------|------------|
| ** **                                        | ** ** | **2009**                              | ** ** | **2008**                                  | ** ** |
| Net  income loss available to Common stockholders |       | $                                     | (949,963   | )                                         | $          | (564,614 | ) |
| Basic  and diluted earning (loss) per share       |       | $                                     | (0.09      | )                                         | $          | (0.05 | ) |
| Weighted  average common shares outstanding       |       | 11,040,585                            |       | 10,751,761                                |       |

 

In April 2003, a two(2) for one (1) stock split of the Company’s common stock wasaffected. Accordingly, all historical weighted average share and per shareamounts have been restated to reflect the stock split.

 

****NOTE H - INCOMETAXES****

 

Financial AccountingStandard No. 109 requires the recognition of deferred tax liabilities andassets for the expected future tax consequences of events that have beenincluded in the financial statement or tax returns. Under this method, deferredtax liabilities and assets are determined based on the difference betweenfinancial statements and tax bases of assets and liabilities using enacted taxrates in effect for the year in which the differences are expected to reverse.Temporary differences between taxable income reported for financial reportingpurposes and income tax purposes are insignificant.

 

For income tax reportingpurposes, the Company’s aggregate unused net operating losses approximate$6,900,000 which expires through 2026, subject to limitations of Section 382of the Internal Revenue Code, as amended. The deferred tax asset related to thecarry forward is approximately $2,346,000. 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 June 30, 2009 are as follows:

 
| Non  current:                    |   |       |      |
|----------------------------------|--------|------------|-----------|
| Net  operating loss carryforward |   | $          | 2,346,000 |   |
| Valuation  allowance             |   | (2,346,000 | )         |
| Net  deferred tax asset          |   | $          | —    |   |

 

**NOTE I —SUBSEQUENT EVENTS**

 

In the month of July 2009,the Company issued an aggregate of 8,421 shares of its common stock forservices rendered and the Company’s CEO loaned $6,500. The loans aredemand and non-interest bearing.

 

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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 June 30, 2009, we have sustained cumulative net losses of$6,905,813. Our losses have resulted primarily from research and developmentexpenses, patent costs and legal and accounting expenses. We have four issuedpatents, and we launched our BioWindowsTM 2.0 medical informatics system in January 2009. As of July 2009,we have built a new chip manufacturing system with the flexibility not only toproduce our breast cancer chips but also other products for various clinicaland research applications that will improve efficacy and save money. Also, ourtracking process has been tested with 2D and 1D barcode scanners on bothlabeled and stamped products in conjunction with touch screen functions. Inaddition, we streamlined the automated patient sample processingprotocols.  Part of the processentails hospital internal review board approval and we have successfullyobtained that approval for our clinical study.

 

This is in preparation for launching our clinicalBreastCancerChipTM, which can be marketed as a CLIA laboratory tests without FDAapproval, similar to Genomic Health’s Oncotype Dx test, or as a 510(k) productapproved by the FDA, enabling our test to be used in any certified laboratory.From inception through June 30, 2009, we have not generated any revenuefrom operations. We expect to incur additional losses to perform furtherresearch and development activities. We have no debt with the exception of relatedparty notes. In order to accelerate our product introduction and to growdynamically, we will need to raise additional funds. We do not currently haveany commercial products. There are some risks with respect to clinical testing,regulatory approval and review cycles and uncertainty of the costs. Netpositive cash inflows from any products developed may take several years toachieve.

 

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 three locations in California -Headquarters in Santa Clara, Laboratory in San Leandro, and Informatics Officein Eureka.

 

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 science company focused on thedevelopment and commercialization of a nano-biochip gene expression kit and anartificial intelligence system to assist in establishing the foundation forpersonalized medicine, which will initially be utilized in the treatment ofbreast cancer. We are designing our products to be approved by the FDA, whichcan then be used in any certified laboratory. Starting at the point of a breastbiopsy diagnosis of cancer, the nano-biochip and informatics program aredesigned to enable a treating physician to quickly prescribe a personalizedtreatment regimen that will have the greatest probability of success for eachpatient’s particular type of cancer. Our product platform is expected to leadto more effective diagnosis and treatment not only for patients with breastcancer, but also for those with neurological disorders, heart disease, diabetesand other gene-related metabolic problems .

 

**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 Equipment and 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 August 13,2009, we have five full time employees and 10 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.

 

**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 Financial Accounting Standards No. 123R, “Share-Based 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.

 

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**Three Months Ended June 30, 2009 Compared to ThreeMonths Ended June 30, 2008**

 

**Revenues**

 

We have generated no operating revenues fromoperations  since our inception. Webelieve we will begin earning revenues from operations in 2009 from actualoperation as we transition from a development stage company to thatof an active growth stage company.

 

**Costs and Expenses**

 

From our inception through June 30, 2009, we haveincurred cumulative losses of $6,905,813. In addition, a significant part ofthe overall remaining costs are associated principally with equity-basedcompensation to employees and consultants, research and development costs andprofessional services rendered.

 

Selling, generaland administrative (“SG&A”) expenses increased by $576,429 from$221,462 for the three months ended June 30, 2008 to $797,891 for thethree months ended June 30, 2009. SG&A expenses consisted ofaccounting, legal, consulting, public relations, startup and organizationalexpenses. SG&A expenses also included non-cash charges from the issuance ofstock, warrants and stock options in the amounts of $36,220 for the threemonths ended June 30, 2008 and $735,213 for the three months ended June 30,2009, a period to period increase of $698,993. The remaining SG&A expenseswhich required cash amounted to approximately $62,678 and $185,242 for thethree months ended June 30, 2009 and 2008, respectively. The  decrease is primarily from a reduction in professional service providers and instaff salaries. We used stock in lieu of cash to conserve our cash resources.

 

Research anddevelopment costs  decrease  from $71,816 for the three months ended June 30,2008 to $27,895 for the three months ended June 30, 2009. We compensatewith stock options.

 

As a result of theabove-mentioned expenses, net losses increased from $295,735 for the threemonths ended June 30, 2008 to $830,602 for the three months ended June 30,2009.

 

**Six Months Ended June 30, 2009 Compared to Six MonthsEnded June 30, 2008**

 

**Revenues**

 

We have generated no operating revenues fromoperations from our inception. We believe we will begin earning revenues fromoperations in 2009 from actual operation as we transition from adevelopment stage company to that of an active growth stage company.

 

**Costs and Expenses**

 

From our inception through June 30, 2009, we haveincurred cumulative losses of $6,905,813. In addition, a significant part ofthe overall remaining costs are associated principally with equity-basedcompensation to employees and consultants, research and development costs andprofessional services rendered.

 

Selling, generaland administrative (“SG&A”) expenses increased by $455,573 from$454,809 for the six months ended June 30, 2008 to $910,382 for the sixmonths ended June 30, 2009. SG&A expenses consisted of accounting,legal, consulting, public relations, startup and organizational expenses.SG&A expenses also included non-cash charges from the issuance of stock,warrants and stock options in the amounts of $78,597 for the six months ended June 30,2008 and $778,018 for the six months ended June 30, 2009, a period toperiod increase of $699,421. The remaining SG&A expenses which requiredcash amounted to approximately $132,364 and $376,212 for the six months ended June 30,2009 and 2008, respectively. The decrease is primarily from a reduction in professional service providersand in staff salaries. We used stock in lieu of cash to conserve our cashresources.

 

Research anddevelopment costs  decrease  from $104,726 for the six months ended June 30,2008 to $30,622 for the six months ended June 30, 2009. We compensate withstock options.

 

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As a result of theabove-mentioned expenses, net losses increased from $564,614 for the six monthsended June 30, 2008 to $949,963 for the six months ended June 30,2009.

 

**Liquidity and Capital Resources**

 

As of June 30, 2009, we had working capitaldeficit of $177,856 as compared to working capital deficit of $35,141 as of December 31,2008. Our cash position was $2,969 as of June 30, 2009 compared to $990 asof December 31, 2008. From inception to June 30, 2009 we haveincurred an operating cash flow deficit of $2,734,906, which has beenprincipally financed through the private placement of our common stock andborrowing from related parties. As of June 30, 2009, we have no long termdebt.

 

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 .

 

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 August 13, 2009, 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 theresources available to us on August 13, 2009, we will need additionalequity or debt financing to meet our current operating needs.

 

**Off-Balance Sheet Arrangements**

 

We do not have anyoff-balance sheet arrangements.

 

**Inflation**

 

It is our opinion that inflation has not had amaterial 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-Based Compensation**

 

We account for our stock options and warrants usingthe fair value method promulgated by Statement of Financial AccountingStandards No. 123R “Share-Based Compensation” which addresses theaccounting for transactions in which an entity exchanges its equity instrumentsfor goods or services. Therefore, our results include non-cash compensationexpense as a result of the issuance of stock options and warrants and we expectto record additional non-cash compensation expense in the future.

 

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

 

N/A

 

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

 

*Evaluationof Disclosure Controls and Procedures*. Under the supervision and with the participation ofour management, including our President, Chief Financial Officer and Secretary,we evaluated the effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Rule 13a-15(e) and 15d-15(e) underthe Securities 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.

 

*Changesin Internal Control Over Financial Reporting.* During the most recent quarter ended June 30,2009, there has been no change in our internal control over financial reporting(as defined in Rule 13a-15(f) and 15d-15(f) under the ExchangeAct) ) that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II**

 

**ITEM 1. LEGAL PROCEEDINGS.**

 

We are not a party to 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 six months ended June 30, 2009, weissued and sold 10,066 shares of common stock for proceeds of $22,650.  Inconnection with the sale of our common stock, we issued 2,517 warrants topurchase our common stock at $2.25 per share for the next five years,

 

In addition, we issued 38,248 shares of common stockto consultants for services rendered in the amount of $45,236. In connectionwith the issuance of such shares, we relied on the exemption from registrationprovided by Section 4(2) of the Securities Act of 1933, as amended.

 

**ITEM 3. DEFAULTS UPON SENIORSECURITIES.**

 

None

 

**ITEM 4. SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS.**

 

None

 

**ITEM 5. OTHER INFORMATION.**

 

None

 

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**ITEM 6. EXHIBITS.**

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

 

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**SIGNATURES**

 

Pursuant to the 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.                                                                                                                                             |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                   |
|                  | /s/ Simon Chin                                                                                                                                                         |
| August 13,  2009 | Simon Chin                                                                                                                                                             |
|                  | President, Chief  Executive Officer, Chief Financial Officer and Director (Principal Executive  Officer, Principal Accounting Officer and Principal Financial Officer) |
|                       |                                                                                                                                                                        |  |

 

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