**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 

**(Mark One)**

 

**x**** QUARTERLY REPORT UNDERSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended March 31, 2008**

 

**OR**

 

o **TRANSITION REPORT UNDER SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thetransition period from                    to**

 

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

 

**IRISBIOTECHNOLOGIES INC.**

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

 

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

 

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

(Address of principalexecutive offices) (Zip Code)

 

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

 

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

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

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

Yes o   No x

 

As of May 14, 2008, the issuer had 10,804,987outstanding shares of Common Stock.

 

 

----

 

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 | 19       |
| Item 3.    | Quantitative  and Qualitative Disclosures About Market Risk                                | 22       |
| Item 4T    | Controls and  Procedures                                                                   | 22       |
|       |                                                                                       |     |
|       | PART II                                                                               |     |
| Item 1.    | Legal Proceedings                                                                          | 22       |
| Item 1A.   | Risk Factors                                                                               | 22       |
| Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                               | 22       |
| Item 3.    | Defaults  Upon Senior Securities                                                           | 22       |
| Item 4.    | Submission  of Matters to a Vote of Security Holders                                       | 22       |
| Item 5.    | Other Information                                                                          | 23       |
| Item 6.    | Exhibits                                                                                   | 23       |
|       |                                                                                       |     |
| SIGNATURES | 24                                                                                         |

 

2

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**PART I**

 

**ITEM 1.FINANCIAL STATEMENTS.**

** **

**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**CONDENSEDBALANCE SHEETS**

 
| ** **                                                                                                                                                                                       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                       | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| ** **                                                                                                                                                                                       | ** ** | **(unaudited)**    | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                           |       |               |       |                  |       |
| Current assets:                                                                                                                                                                                  |       |               |       |                  |       |
| Cash                                                                                                                                                                                             |       | $                  | 190,382    |                  | $          | 179,617 |   |
| Total current assets                                                                                                                                                                             |       | 190,382            |       | 179,617               |       |
|                                                                                                                                                                                             |       |               |       |                  |       |
| Property, plant and equipment, net of accumulated depreciation of  $154,381 and $151,186 as of March 31, 2008 and December 31, 2007,  respectively                                     |       | 52,889             |       | 55,442                |       |
|                                                                                                                                                                                             |       |               |       |                  |       |
| Total assets                                                                                                                                                                                     |       | $                  | 243,271    |                  | $          | 235,059 |   |
|                                                                                                                                                                                             |       |               |       |                  |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                        |       |               |       |                  |       |
| Current liabilities:                                                                                                                                                                             |       |               |       |                  |       |
| Accounts payable and accrued liabilities                                                                                                                                                         |       | $                  | 44,617     |                  | $          | 38,029 |   |
| Total current liabilities                                                                                                                                                                        |       | 44,617             |       | 38,029                |       |
|                                                                                                                                                                                             |       |               |       |                  |       |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                        |       |               |       |                  |       |
| Preferred stock, no par or stated value; 5,000,000 shares authorized;  no shares issued and outstanding as of March 31, 2008 and  December 31, 2007                                    |       | —             |       | —                |       |
| Common stock, no par or stated value; 20,000,000 shares authorized;  10,770,987 and 10,655,377 shares issued and outstanding as of March 31,  2008 and December 31, 2007, respectively |       | 4,468,191          |       | 4,208,066             |       |
| Additional paid in capital                                                                                                                                                                       |       | 1,222,347          |       | 1,222,347             |       |
| Deferred compensation                                                                                                                                                                            |       | (150,686           | )          | (161,063              | )          |
| Deficit accumulated during development stage                                                                                                                                                     |       | (5,341,198         | )          | (5,072,320            | )          |
| Total stockholders’ equity                                                                                                                                                                  |       | 198,654            |       | 197,030               |       |
|                                                                                                                                                                                             |       |               |       |                  |       |
| Total liabilities and stockholders’ equity                                                                                                                                                  |       | $                  | 243,271    |                  | $          | 235,059 |   |

 

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

 

3

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**STATEMENTSOF LOSSES**

**(unaudited)**

 
| ** **                                                                    | ** ** | **Three months ended March 31,** | ** ** | **For the period from  February 16, 1999 (date  of inception) through** | ** ** |
|-------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2008**                                             | ** ** | **2007**                                                                                                        | ** ** | **March 31, 2008** | ** ** |
| Operating expenses:                                                           |       |                                                 |       |                                                                                                            |       |   |   |
| Selling, general and administrative                                           |       | $                                                    | 233,346    |                                                                                                            | $          | 54,439 |   | $ | 2,152,120 |   |
| Research and development (Note A)                                             |       | 32,910                                               |       | 46,102                                                                                                          |       | 1,198,794 |   |
| Impairment of intellectual property                                           |       | —                                               |       | —                                                                                                          |       | 1,838,250 |   |
| Depreciation                                                                  |       | 3,195                                                |       | 1,490                                                                                                           |       | 154,381 |   |
| Total operating expenses                                                      |       | 269,451                                              |       | 102,031                                                                                                         |       | 5,343,545 |   |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Net loss from operations                                                      |       | (269,451                                             | )          | (102,031                                                                                                        | )          | (5,343,545 | ) |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Other income (expense)                                                        |       |                                                 |       |                                                                                                            |       |   |   |
| Interest income (expense)                                                     |       | 1,373                                                |       | —                                                                                                          |       | 10,383 |   |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Net loss before provision for income taxes                                    |       | (268,078                                             | )          | (102,031                                                                                                        | )          | (5,333,162 | ) |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Income taxes                                                                  |       | 800                                                  |       | 825                                                                                                             |       | 8,036 |   |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Net Loss                                                                      |       | $                                                    | (268,878   | )                                                                                                               | $          | (102,856 | ) | $ | (5,341,198 | ) |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Loss per common share-basic and fully diluted                                 |       | $                                                    | (0.03      | )                                                                                                               | $          | (0.01 | ) | $ | (0.57 | ) |
|                                                                          |       |                                                 |       |                                                                                                            |       |   |   |
| Weighted average number of common shares outstanding-basic and fully  diluted |       | 10,690,413                                           |       | 10,432,188                                                                                                      |       | 9,325,193 |   |

 

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

 

4

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**IRISBIOTECHNOLOGIES, INC**

**(adevelopment stage company)**

**STATEMENTOF STOCKHOLDERS’ EQUITY**

**FROMFEBRUARY 16, 1999 (DATE OF INCEPTION) THROUGH MARCH 31, 2008**

**(unaudited)**

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

 

5

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

 

6

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| ** **                                                                                   | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **   | ** ** | ** **                    | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|--------------|------------|-------------------------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                   | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**                    | ** ** | ** **       | ** ** |
| ** **                                                                                   | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
|                                                                                         |       |                      |       |                   |       |           |       |         |       |                          |       |             |       |                         |       |       |       |
| Balance forward                                                                              |       | —                    |       | $                      | —     |           | 9,717,400  |         | $          | 2,913,700                     |       | $                | 101,596    |                         | $          | —     |       | $ | (2,916,087 | ) | $ | 99,209 |   |
| Sale of common stock in January 2003  at $0.50 per share                                |       | —                    |       | —                 |       | 35,378         |       | 17,689       |       | —                        |       | —           |       | —                       |       | 17,689     |       |
| Common stock issued in February 2003  at $0.50 in exchange for services rendered        |       | —                    |       | —                 |       | 20,000         |       | 10,000       |       | —                        |       | —           |       | —                       |       | 10,000     |       |
| Sale of common stock in March 2003 at  $0.50 per share                                  |       | —                    |       | —                 |       | 100,000        |       | 50,000       |       | —                        |       | —           |       | —                       |       | 50,000     |       |
| Common stock issued in March 2003 at  $0.50 per share in exchange for services rendered |       | —                    |       | —                 |       | 6,000          |       | 3,000        |       | —                        |       | —           |       | —                       |       | 3,000      |       |
| Sale of common stock in July 2003 at  $1.00 per share                                   |       | —                    |       | —                 |       | 63,080         |       | 63,080       |       | —                        |       | —           |       | —                       |       | 63,080     |       |
| Sale of common stock in September 2003  at $1.00 per share                              |       | —                    |       | —                 |       | 25,000         |       | 25,000       |       | —                        |       | —           |       | —                       |       | 25,000     |       |
| Sale of common stock in December 2003  at $1.00 per share                               |       | —                    |       | —                 |       | 32,597         |       | 32,597       |       | —                        |       | —           |       | —                       |       | 32,597     |       |
| Net loss                                                                                     |       | —                    |       | —                 |       | —         |       | —       |       | —                        |       | —           |       | (216,804                     | )          | (216,804   | )          |
| Balance at December 31, 2003                                                            |       | —                    |       | —                 |       | 9,999,455      |       | 3,115,066    |       | 101,596                       |       | —           |       | (3,132,891                   | )          | 83,771     |       |
| Sale of common stock in August 2004 at  $1.00 per share                                 |       | —                    |       | —                 |       | 2,000          |       | 2,000        |       | —                        |       | —           |       | —                       |       | 2,000      |       |
| Sale of common stock in September 2004  at $1.00 per share                              |       | —                    |       | —                 |       | 20,000         |       | 20,000       |       | —                        |       | —           |       | —                       |       | 20,000     |       |
| Sale of common stock in November 2004  at $1.00 per share                               |       | —                    |       | —                 |       | 30,000         |       | 30,000       |       | —                        |       | —           |       | —                       |       | 30,000     |       |
| Sale of common stock in December 2004  at $1.00 per share                               |       | —                    |       | —                 |       | 73,500         |       | 73,500       |       | —                        |       | —           |       | —                       |       | 73,500     |       |
| Net loss                                                                                     |       | —                    |       | —                 |       | —         |       | —       |       | —                        |       | —           |       | (205,640                     | )          | (205,640   | )          |
| Balance at December 31, 2004                                                            |       | —                    |       | —                 |       | 10,124,955     |       | 3,240,566    |       | 101,596                       |       | —           |       | (3,338,531                   | )          | 3,631      |       |
| Sale of common stock in December 2005  at $1.00 per share                               |       | —                    |       | —                 |       | 28,900         |       | 28,900       |       | —                        |       | —           |       | —                       |       | 28,900     |       |
| Net loss                                                                                     |       | —                    |       | —                 |       | —         |       | —       |       | —                        |       | —           |       | (197,277                     | )          | (197,277   | )          |
| Balance at December 31, 2005                                                            |       | —                    |       | $                      | —     |           | 10,153,855 |         | $          | 3,269,466                     |       | $                | 101,596    |                         | $          | —     |       | $ | (3,535,808 | ) | $ | (164,746 | ) |

 

7

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

 

8

----

 
| ** **                                                                                      | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **   | ** ** | ** **                    | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|--------------|------------|-------------------------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Deferred** | ** ** | **during**                    | ** ** | ** **       | ** ** |
| ** **                                                                                      | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**   | ** ** | **Paid in Capital** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance forward                                                                                 |       | —                    |       | $                      | —     |           | 10,655,377 |         | $          | 4,208,066                     |       | $                | 1,222,347  |                         | $          | (161,063   | )          | $ | (5,072,320 | ) | $ | 197,030 |   |
| Sale of common stock in January 2008  at $2.25 per share                                   |       | —                    |       | —                 |       | 22,222         |       | 50,000       |       | —                        |       | —           |       | —                       |       | 50,000     |       |
| Common stock issued in January 2008 at  $2.25 per share in exchange for services rendered  |       | —                    |       | —                 |       | 4,000          |       | 9,000        |       | —                        |       | —           |       | —                       |       | 9,000      |       |
| Sale of common stock in February 2008  at $2.25 per share                                  |       | —                    |       | —                 |       | 11,111         |       | 25,000       |       | —                        |       | —           |       | —                       |       | 25,000     |       |
| Common stock issued in February 2008  at $2.25 per share in exchange for services rendered |       | —                    |       | —                 |       | 4,000          |       | 9,000        |       | —                        |       | —           |       | —                       |       | 9,000      |       |
| Sale of common stock in March 2008 at  $2.25 per share                                     |       | —                    |       | —                 |       | 68,055         |       | 153,125      |       |                          |       |             |       |                         |       | 153,125    |       |
| Common stock issued in March 2008 at  $2.25 per share in exchange for services rendered    |       | —                    |       | —                 |       | 6,222          |       | 14,000       |       | —                        |       | —           |       | —                       |       | 14,000     |       |
| Amortization of deferred compensation                                                           |       | —                    |       | —                 |       | —         |       | —       |       | —                        |       | 10,377           |       | —                       |       | 10,377     |       |
| Net Loss                                                                                        |       | —                    |       | —                 |       | —         |       | —       |       | —                        |       | —           |       | (268,878                     | )          | (268,878   | )          |
|                                                                                            |       | —                    |       | $                      | —     |           | 10,770,987 |         | $          | 4,468,191                     |       | $                | 1,222,347  |                         | $          | (150,686   | )          | $ | (5,341,198 | ) | $ | 198,654 |   |

 

Theaccompanying notes are an integral part of these unaudited condensed financialstatements

 

9

----

 

**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                 | ** ** | **For the three months ended March 31,** | ** ** | **For the period from  February 16, 1999 (date of  inception) through** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2008**                                                               | ** ** | **2007**                                                                                                        | ** ** | **March 31, 2008** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                      |       |                                                                   |       |                                                                                                            |       |   |   |
| Net loss                                                                   |       | $                                                                      | (268,878   | )                                                                                                               | $          | (102,856 | ) | $ | (5,341,198 | ) |
| Adjustments to reconcile net loss to cash  (used in) operating activities: |       |                                                                   |       |                                                                                                            |       |   |   |
| Depreciation                                                               |       | 3,195                                                                  |       | 1,490                                                                                                           |       | 154,381 |   |
| Amortization of deferred compensation                                      |       | 10,377                                                                 |       | —                                                                                                          |       | 15,604 |   |
| Common stock issued in exchange for  services rendered                     |       | 32,000                                                                 |       | —                                                                                                          |       | 123,250 |   |
| Common stock issued in exchange for  intellectual property                 |       | —                                                                 |       | —                                                                                                          |       | 1,800,000 |   |
| Options and warrants issued in exchange for  services rendered             |       | —                                                                 |       | 25,913                                                                                                          |       | 1,056,057 |   |
| (Increase) decrease in:                                                    |       |                                                                   |       |                                                                                                            |       |   |   |
| Prepaid expenses                                                           |       | —                                                                 |       | 13,393                                                                                                          |       | — |   |
| Increase (decrease) in:                                                    |       |                                                                   |       |                                                                                                            |       |   |   |
| Accounts payable and accrued liabilities                                   |       | 17,827                                                                 |       | (47,834                                                                                                         | )          | 44,617 |   |
| Net cash (used in) operating activities:                                   |       | (205,479                                                               | )          | (109,894                                                                                                        | )          | (2,147,289 | ) |
|                                                                       |       |                                                                   |       |                                                                                                            |       |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                      |       |                                                                   |       |                                                                                                            |       |   |   |
| Acquisition of property, plant and  equipment                              |       | (11,881                                                                | )          | (949                                                                                                            | )          | (207,270 | ) |
|                                                                       |       |                                                                   |       |                                                                                                            |       |   |   |
| Net cash (used in) investing activities:                                   |       | (11,881                                                                | )          | (949                                                                                                            | )          | (207,270 | ) |
|                                                                       |       |                                                                   |       |                                                                                                            |       |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                      |       |                                                                   |       |                                                                                                            |       |   |   |
| Sale of common stock                                                       |       | 228,125                                                                |       | 596,000                                                                                                         |       | 2,507,442 |   |
| Exercise of common stock options                                           |       | —                                                                 |       | —                                                                                                          |       | 37,500 |   |
| Net (payments) proceeds, related party                                     |       | —                                                                 |       | (92,000                                                                                                         | )          | — |   |
| Net cash provided by financing activities                                  |       | 228,125                                                                |       | 504,000                                                                                                         |       | 2,544,942 |   |
|                                                                       |       |                                                                   |       |                                                                                                            |       |   |   |
| Increase (decrease) in cash and cash  equivalents                          |       | 10,765                                                                 |       | 393,157                                                                                                         |       | 190,383 |   |
| Cash and cash equivalents beginning of  period                             |       | 179,617                                                                |       | 13,667                                                                                                          |       | — |   |
| Cash and cash equivalents end of period                                    |       | $                                                                      | 190,382    |                                                                                                            | $          | 406,824 |   | $ | 190,383 |   |
|                                                                       |       |                                                                   |       |                                                                                                            |       |   |   |
| Supplemental disclosures of cash flow  information:                        |       |                                                                   |       |                                                                                                            |       |   |   |
| Cash paid during the period for interest                                   |       | $                                                                      | —     |                                                                                                            | $          | — |   | $ | 277 |   |
| Cash paid during the period for taxes                                      |       | $                                                                      | 800        |                                                                                                            | $          | 837 |   | $ | 1,625 |   |
| Common stock issued in exchange for  services                              |       | $                                                                      | 32,000     |                                                                                                            | $          | — |   | $ | 123,250 |   |
| Common stock issued in exchange for  intellectual property                 |       | $                                                                      | —     |                                                                                                            | $          | — |   | $ | 1,800,000 |   |
| Options and warrants issued in exchange for  services rendered             |       | $                                                                      | —     |                                                                                                            | $          | 25,913 |   | $ | 1,056,057 |   |

 

The accompanying notes are anintegral part of these unaudited condensed financial statements

 

10

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

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

 

Asummary of the significant accounting policies applied in the preparation ofthe accompanying unaudited condensed financial statements follows.

 

General

 

Theaccompanying unaudited condensed financial statements have been prepared in accordancewith accounting principles generally accepted in the United States of Americafor interim 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.

 

Inthe opinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.Accordingly, the results from operations for the three month period ended March 31,2008, are not necessarily indicative of the results that may be expected forthe year ended December 31, 2008. The unaudited condensed financialstatements should be read in conjunction with the December 31, 2007financial statements and footnotes thereto included in the Company’s10-KSB filed on March 31, 2008.

 

Businessand Basis of Presentation

 

IrisBioTechnologies Inc. (the “Company”) was incorporated on February 16, 1999under the laws of the State of California. The Company is in the developmentstage as defined under Statement on Financial Accounting Standards No.7,Development Stage Enterprises (“SFAS No.7”) and its efforts are principallydevoted to developing solutions for the detection and monitoring of monogenicand complex genomic diseases. The Company has not generated any revenue to dateand consequently its operations are subject to all risks inherent in theestablishment of a new business enterprise. For the period from inceptionthrough March 31, 2008, the Company has accumulated losses of $5,341,198.

 

Cashand Cash Equivalents

 

Forpurposes of the Statements of Cash Flows, the Company considers all highlyliquid debt instruments purchased with a maturity date of three months or lessto be cash equivalents.

 

Propertyand Equipment

 

Propertyand equipment are stated at cost. When retired or otherwise disposed, therelated carrying value and accumulated depreciation are removed from therespective accounts and the net difference less any amount realized fromdisposition, is reflected in earnings. For financial statement purposes,property and equipment are recorded at cost and depreciated using thestraight-line method over their estimated useful lives of 3 to 5 years.

 

Long-LivedAssets

 

TheCompany has adopted Statement of Financial Accounting Standards No. 144 (“SFAS144”). The Statement requires that long-lived assets and certain identifiableintangibles held and used by the Company be reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Events relating to recoverability may includesignificant unfavorable changes in business conditions, recurring losses, or aforecasted inability to achieve break-even operating results over an extendedperiod. The Company evaluates the recoverability of long-lived assets basedupon forecasted undiscounted cash flows. Should impairment in value beindicated, the carrying value of intangible assets will be adjusted, based onestimates of future discounted cash flows resulting from the use and ultimatedisposition of the asset. SFAS No. 144 also requires assets to be disposedof be reported at the lower of the carrying amount or the fair value less coststo sell.

 

11

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

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

 

IncomeTaxes

 

TheCompany follows Statement of Financial Accounting Standard No.109, Accountingfor Income Taxes (SFAS No.109) for recording the provision for income taxes.Deferred tax assets and liabilities are computed based upon the differencebetween the financial statement and income tax basis of assets and liabilitiesusing the enacted marginal tax rate applicable when the related asset orliability is expected to be realized or settled. Deferred income tax expensesor benefits are based on the changes in the asset or liability during eachperiod. If available evidence suggests that it is more likely than not thatsome portion or all of the deferred tax assets will not be realized, avaluation allowance is required to reduce the deferred tax assets to the amountthat is more likely than not to be realized. Future changes in such valuationallowance are included in the provision for deferred income taxes in the periodof change. Deferred income taxes may arise from temporary differences resultingfrom income and expense items reported for financial accounting and taxpurposes in different periods. Deferred taxes are classified as current ornon-current, depending on the classification of assets and liabilities to whichthey relate. Deferred taxes arising from temporary differences that are notrelated to an asset or liability are classified as current or non-currentdepending on the periods in which the temporary differences are expected toreverse.

 

NetIncome (loss) Per Common Share

 

TheCompany computes earnings per share under Financial Accounting Standard No. 128,“Earnings per Share” (“SFAS 128”). Net loss per common share is computed bydividing net loss by the weighted average number of shares of common stock anddilutive common stock equivalents outstanding during the year. Dilutivecommon stock equivalents consist of shares issuable and the exercise of theCompany’s stock options and warrants (calculated using the treasury stockmethod). For the three month period ended March 31, 2008 and 2007 commonstock equivalents derived from shares issuable in the exercise of options andwarrants  are not considered in thecalculation of the weighted average number of common shares outstanding becausethey would be anti-dilutive, thereby decreasing the net loss per share

 

Useof Estimates

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect certain reported amounts and disclosures. Accordingly, actualresults could differ from those estimates.

 

Reclassifications

 

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

 

Researchand Development

 

TheCompany accounts for research and development costs in accordance with theFinancial Accounting Standards Board’s Statement of Financial AccountingStandards No. 2 (“SFAS 2”), “Accounting for Research and Development Costs”.Under SFAS 2, all research and development costs must be charged to expense asincurred. Accordingly, internal research and development costs are expensed asincurred. Third-party research and developments costs are expensed when thecontracted work has been performed or as milestone results have been achieved.Company-sponsored research and development costs related to both present andfuture products are expensed in the period incurred. The Company incurredresearch and development expenditures of $32,910 and $46,102 for the threemonth period ended March 31, 2008 and 2007, respectively; and $1,198,794from the period from February 16, 1999 (date of inception) to March 31,2008.

 

Liquidity

 

Todate the Company has generated no revenues, has incurred expenses, and hassustained losses. As shown in the accompanying financial statements, the Companyincurred a net loss of $268,878 during the three month period ended March 31,2008 and $102,856 during the three month period ended March 31, 2007. Forthe period from inception through March 31, 2008, the Company hasaccumulated losses of $5,341,198. Consequently, its operations are subject toall risks inherent in the establishment of a new business enterprise.

 

Concentrationsof Credit Risk

 

Financialinstruments and related items, which potentially subject the Company toconcentrations of credit risk, consist primarily of cash, cash equivalents andrelated party receivables. The Company places its cash and temporary cashinvestments with credit quality institutions. At times, such investments may bein excess of the FDIC insurance limit. The Company periodically reviews itstrade receivables in determining its allowance for doubtful accounts. TheCompany does not have accounts receivable and allowance for doubtful accountsat March 31, 2008.

 

12

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

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

 

FairValue of Financial Instruments

 

Statementof Financial Accounting Standards No. 107, “Disclosures About Fair Valueof Financial Instruments,” requires disclosure of the fair value of certainfinancial instruments. The carrying value of cash and cash equivalents,accounts receivable, accounts payable and short-term borrowings, as reflectedin the balance sheets, approximate fair value because of the short-termmaturity of these instruments.

 

StockBased Compensation

 

EffectiveJanuary 1, 2006, the beginning of the Company’s first fiscal quarter of2006, the Company adopted the fair value recognition provisions of SFAS 123R,using the modified-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.

 

SFAS123(R) requires forfeitures to be estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeitures differ fromthose estimates. In the Company’s pro forma information required under SFAS 123for the periods prior to fiscal 2006, the Company accounted for forfeitures asthey occurred.

 

Uponadoption of SFAS 123(R), the Company is using the Black-Scholes option-pricingmodel as its method of valuation for share-based awards granted beginning infiscal 2006, which was also previously used for the Company’s pro formainformation required under SFAS 123. The Company’s determination of fair valueof share-based payment awards on the date of grant using an option-pricing modelis affected by the Company’s stock price as well as assumptions regarding anumber of highly complex and subjective variables. These variables include, butare not limited to the Company’s expected stock price volatility over the termof the awards, and certain other market variables such as the risk freeinterest rate.

 

Forthe three month period ended March 31, 2008, the Company did not issue anyemployee options.

 

RevenueRecognition

 

TheCompany recognizes revenue in accordance with Staff Accounting Bulletin No. 104,REVENUE RECOGNITION (“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.

 

SAB104 incorporates Emerging Issues Task Force 00-21 (“EITF 00-21”),MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting forarrangements that may involve the delivery or performance of multiple products,services and/or rights to use assets. The effect of implementing EITF 00-21 onthe Company’s consolidated financial position and results of operations was notsignificant.

 

Fromthe date of inception through March 31, 2008, the Company has notgenerated any revenue to date.

 

Recentaccounting pronouncements

 

In February 2007, theFinancial Accounting Standards Board (the “FASB”) issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities.” SFAS 159permits entities to choose to measure many financial instruments, and certainother items, at fair value. SFAS 159 applies to reporting periods beginningafter November 15, 2007. The adoption of SFAS 159 is not expected to havea material impact on the Company’s financial condition or results ofoperations.

 

13

----

 

**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

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

 

Recentaccounting pronouncements (continued)

 

In December 2006, theFASB issued FASB Staff Position (“FSP”) EITF 00-19-2, “Accounting forRegistration Payment Arrangements” (“FSP 00-19-2”) which addresses accountingfor registration payment arrangements. FSP 00-19-2 specifies that thecontingent obligation to make future payments or otherwise transferconsideration under a registration payment arrangement, whether issued as aseparate agreement or included as a provision of a financial instrument orother agreement, should be separately recognized and measured in accordancewith FASB Statement No. 5, Accounting for Contingencies. FSP 00-19-2further clarifies that a financial instrument subject to a registration paymentarrangement should be accounted for in accordance with other applicablegenerally accepted accounting principles without regard to the contingentobligation to transfer consideration pursuant to the registration paymentarrangement. For registration payment arrangements and financial instrumentssubject to those arrangements that were entered into prior to  the issuance of EITF 00-19-2, this guidanceshall be effective for financial statements issued for fiscal years beginningafter December 15, 2006 and interim periods within those fiscal years. TheCompany does not expect adoption of this FSP will have a material impact on itsfinancial position, operations or cash flows.

 

InDecember 2007, the FASB issued SFAS No. 141(R),*”Business Combinations”* (“SFAS No. 141(R)”),which establishes principles and requirements for how an acquirer recognizesand measures in its financial statements the identifiable assets acquired, theliabilities assumed, and any noncontrolling interest in an acquiree, includingthe recognition and measurement of goodwill acquired in a business combination.SFAS No. 141R is effective as of the beginning of the first fiscal yearbeginning on or after December 15, 2008. Earlier adoption is prohibited and the Company is currently evaluatingthe effect, if any, that the adoption will have on its financial position,results of operations or cash flows.

 

InDecember 2007, the FASB issued SFAS No. 160, *“Noncontrolling Interest in Consolidated FinancialStatements, an amendment of ARB No. 51”* (“SFAS No. 160”),which will change the accounting and reporting for minority interests, whichwill be recharacterized as noncontrolling interests and classified as acomponent of equity within the consolidated balance sheets.  SFAS No. 160 is effective as of thebeginning of the first fiscal year beginning on or after December 15,2008.  Earlier adoption is prohibited andthe Company is currently evaluating the effect, if any, that the adoption willhave on its financial position, results of operations or cash flows.

 

*SFAS No. 161*. In March 2008,the Financial Accounting Standards Board (the “FASB”) issued Statement onFinancial Accounting Standards (“SFAS”) No. 161, “Disclosures aboutDerivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133”(“SFAS 161”). SFAS 161 enhancesrequired disclosures regarding derivatives and hedging activities, includingenhanced disclosures regarding how: (*a*) anentity uses derivative instruments; (*b*) derivativeinstruments and related hedged items are accounted for under SFAS 133*;* and (*c*) derivativeinstruments and related hedged items affect an entity’s financial position,financial performance, and cash flows. Specifically, SFAS No. 161requires: disclosure of theobjectives for using derivative instruments in terms of underlying risk andaccounting designation; disclosureof the fair values of derivative instruments and their gains and losses in atabular format; disclosure ofinformation about credit-risk-related contingent features; and cross-reference from the derivative footnoteto other footnotes in which derivative-related information is disclosed. SFAS161 is effective for fiscal years and interim periods beginning after November 15,2008. The Company does not expect thatthe adoption of this standard will have a material impact on its financial position,results of operations or cash flows.

 

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

 

Property,plant and equipment at March 31, 2008 and December 31, 2007 are asfollows:

 
| ** **                     | ** ** | **March 31,  2008** | ** ** | **December  31,  2007** | ** ** |
|--------------------------------|------------|--------------------------|------------|-----------------------------------|------------|
| Computer equipment             |       | $                        | 54,052     |                              | $          | 54,052 |   |
| Office equipment               |       | 1,729                    |       | 1,729                             |       |
| Furniture and fixtures         |       | 3,586                    |       | 2,944                             |       |
| Manufacturing equipment        |       | 147,903                  |       | 147,903                           |       |
|                           |       | 207,270                  |       | 206,628                           |       |
| Less: accumulated depreciation |       | (154,381                 | )          | (151,186                          | )          |
|                           |       | $                        | 52,889     |                              | $          | 55,442 |   |

 

Duringthe three month period ended March 31, 2008 and 2007, depreciation expensecharged to operations was $3,195 and $1,490, respectively.

 

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

 

Accountspayable and accrued liabilities at March 31, 2008 and December 31,2007:

 
| ** **                            | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Accounts payable and accrued expenses |       | $                        | 44,617     |                        | $          | 38,029 |   |
|                                       |            |                          |            |                             |            |  |  |

 

14

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

**NOTE D –RELATED PARTY TRANSACTIONS**

 

TheCompany’s President has advanced funds to the Company for working capitalpurposes since the Company’s inception in February 1999.  No formal repayment terms or arrangementsexist. The net amount of outstanding at March 31, 2008 was $-0-.

 

**NOTE E –STOCKHOLDER EQUITY**

 

Preferredstock

 

TheCompany is authorized to issue 5,000,000 shares of no par or stated valuepreferred stock. From date of inception through March 31, 2008, theCompany has not issued any preferred shares.

 

Commonstock

 

TheCompany is authorized to issue 20,000,000 shares of no par or stated valuecommon stock. As of March 31, 2008 ; the Company has 10,770,987 shares ofcommon stock issued and outstanding.

 

OnApril 9, 2003, the Company affected a two-for-one (2 for 1) stock split ofit’s and outstanding shares of common stock, no par or stated value. Allreferences in the financial statements and the notes to financial statements,number of shares, and share amounts have been retroactively restated to reflectthe split.

 

InFebruary 1999, the Company issued 7,200,000 shares of common stock inexchange for intellectual property valued at $1,800,000.

 

Duringthe year ended December 31, 1999, the Company issued an aggregate of153,000 shares of common stock to consultants for services in the amount of$38,250. All valuations of common stock issued for services were based upon thevalue of the services rendered, which did not differ materially from the fairvalue of the Company’s common stock during the period the services wererendered.

 

Duringthe year ended December 31, 1999, the Company issued an aggregate of50,000 shares of common stock in conjunction with the exercise of common stockoptions at $0.50 per share and 50,000 shares of common stock at $0.25 pershare.

 

Duringthe year ended December 31, 2000, the Company issued an aggregate of20,000 shares of common stock to consultants for services in the amount of$10,000. All valuations of common stock issued for services were based upon thevalue of the services rendered, which did not differ materially from the fairvalue of the Company’s common stock during the period the services wererendered.

 

Duringthe year ended December 31, 2002, the Company issued an aggregate of20,000 shares of common stock to consultants for services in the amount of$10,000. All valuations of common stock issued for services were based upon thevalue of the services rendered, which did not differ materially from the fairvalue of the Company’s common stock during the period the services wererendered

 

Duringthe year ended December 31, 2003, the Company issued an aggregate of26,000 shares of common stock to consultants for services in the amount of$13,000. All valuations of common stock issued for services were based upon thevalue of the services rendered, which did not differ materially from the fairvalue of the Company’s common stock during the period the services wererendered.

 

Duringthe year ended December 31, 2006, the Company issued an aggregate of20,000 shares of common stock to consultants for services in the amount of$20,000. All valuations of common stock issued for services were based upon thevalue of the services rendered, which did not differ materially from the fairvalue of the Company’s common stock during the period the services wererendered.

 

Duringthe three month period ended March 31, 2008, the Company issued anaggregate of 14,222 shares of common stock to consultants for services in theamount of $32,000. All valuations of common stock issued for services werebased upon the value of the services rendered, which did not differ materiallyfrom the fair value of the Company’s common stock during the period theservices were rendered.

 

15

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

**NOTE F –WARRANTS AND OPTIONS**

 

Warrants

 

The following tablesummarizes the changes in warrants outstanding and related prices for theshares of the Company’s common stock issued to shareholders at March 31,2008:

 
| ** **              | ** ** | ** **      | ** ** | **Warrants Outstanding**  | ** ** | ** **              | ** ** | ** **      | ** ** | **Warrants Exercisable** | ** ** |
|-------------------------|------------|-----------------|------------|--------------------------------|------------|-------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **              | ** ** | ** **      | ** ** | **Weighted Average**      | ** ** | **Weighted**            | ** ** | ** **      | ** ** | **Weighted**                  | ** ** |
| ** **              | ** ** | **Number**      | ** ** | **Remaining Contractual** | ** ** | **Average**             | ** ** | **Number**      | ** ** | **Average**                   | ** ** |
| **Exercise Price** | ** ** | **Outstanding** | ** ** | **Life (years)**          | ** ** | **Exercise price** | ** ** | **Exercisable** | ** ** | **Exercise Price**       | ** ** |
| $                       | 2.00       |            | 31,400     |                           | 3.46       |                    | $          | 2.00            |       | 31,400                        |       | $ | 2.00 |   |
| 2.25                    |       | 100,000         |       | 4.62                           |       | 2.25                    |       | 3,151           |       | 2.25                          |       |
|                         |            |                 |            |                                |            |                         |            |                 |            |                               |            |  |  |  |

 

Transactions involving theCompany’s warrant issuance are summarized as follows:

 
| ** **                            | ** ** | **Number of Shares** | ** ** | **Weighted  Average  Price Per Share** | ** ** |
|---------------------------------------|------------|--------------------------------|------------|--------------------------------------------------|------------|
| Outstanding at December 31, 2006 |       | 17,500                         |       | $                                                | 2.00       |   |
| Granted                               |       | 113,900                        |       | 2.22                                             |       |
| Exercised                             |       | —                         |       | —                                           |       |
| Canceled or expired                   |       | —                         |       | —                                           |       |
| Outstanding at December 31, 2007 |       | 131,400                        |       | $                                                | 2.19       |   |
| Granted                               |       | —                         |       | —                                           |       |
| Exercised                             |       | —                         |       | —                                           |       |
| Canceled or expired                   |       | —                         |       | —                                           |       |
| Outstanding at March 31, 2008    |       | 131,400                        |       | $                                                | 2.19       |   |

 

Warrantsgranted during the year ended December 31, 2007 totaling 13,900 wereissued for services rendered. The warrants are exercisable until five yearsafter the date of issuance at a purchase price of $2.00 per share.  The fair value (determined as describedbelow) of $25,913 was charged to current period earnings.

 

Theweighted-average fair value of these stock options granted and the weighted-averagesignificant assumptions used to determine those fair values, using aBlack-Scholes option pricing model are as follows:

 
| **For the year ended December 31, 2007:** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------|------------|------------|------------|
|                                                                    |       |       |       |
| Significant assumptions (weighted-average):                             |       |       |       |
| Risk-free interest rate at grant date                                   |       | 4.81%      |       |
| Expected stock price volatility                                         |       | 158.46%    |       |
| Expected dividend payout                                                |       | —     |       |
| Expected option life-years (a)                                          |       | 5          |       |

 

----

(a)Theexpected warrant life is based on contractual expiration dates.

 

Duringthe year ended December 31, 2007, the Company granted 100,000 stockoptions with an exercise price of $2.25 vesting over four years and expiringfive years from issuance.  The fair value(as described below) of $166,290 was recorded as deferred compensation and isamortized ratably over the four years to earnings. For the year ended December 31,2007, the Company recorded amortization of $5,227 and $10,377 for the threemonths ended March 31, 2008.

 

 

16

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**IRIS BIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

**NOTE F –WARRANTS AND OPTIONS (continued)**

 

Theweighted-average fair value of these stock options granted and theweighted-average significant assumptions used to determine those fair values,using a Black-Scholes option pricing model are as follows:

 

Warrants (continued)

 
| **For the year ended December 31, 2007:** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------|------------|------------|------------|
|                                                                    |       |       |       |
| Significant assumptions (weighted-average):                             |       |       |       |
| Risk-free interest rate at grant date                                   |       | 3.71%      |       |
| Expected stock price volatility                                         |       | 95.17%     |       |
| Expected dividend payout                                                |       | —     |       |
| Expected option life-years (a)                                          |       | 5          |       |

 

----

(a)Theexpected option life is based on contractual expiration dates

 

TheCompany did not grant warrants during the three month period ended March 31,2008.

 

Options

 

Thefollowing table summarizes the changes in options outstanding and the relatedprices for the shares of the Company’s common stock issued to consultants forservices rendered and employees under a non qualified stock option plan at March 31,2008:

 
| ** **   | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|--------------|------------|------------------------------|------------|------------------------------|------------|
| ** **   | ** ** | ** **                   | ** ** | **Weighted Average**    | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **   | ** ** | ** **                   | ** ** | **Remaining**                | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| **Exercise** | ** ** | **Number**                   | ** ** | **Contractual Life**    | ** ** | **Exercise** | ** ** | **Number** | ** ** | **Exercise** | ** ** |
| **Prices**   | ** ** | **Outstanding**              | ** ** | **(Years)**                  | ** ** | **Price** | ** ** | **Exercisable** | ** ** | **Price** | ** ** |
| $            | 0.25       |                         | 460,000    |                         | 0.94       |   | $ | 0.25 |   | 460,000 |   | $ | 0.25 |   |
| 0.50         |       | 696,000                      |       | 2.22                         |       | 0.50 |   | 696,000 |   | 0.50 |   |
| 1.00         |       | 1,002,000                    |       | 7.66                         |       | 1.00 |   | 797,350 |   | 1.00 |   |
|         |       | 2,158,000                    |       |                         |       |   |   | 1,953,475 |   |   |   |
|              |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |

 

Transactionsinvolving stock options issued are summarized as follows:

 
| ** **                             | ** ** | ** **                     | ** ** | **Weighted Average**     | ** ** |
|----------------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| ** **                             | ** ** | **Number of Shares** | ** ** | **Price Per Share** | ** ** |
| Outstanding at December 31, 2006: |       | 2,158,000                      |       | $                             | 0.68       |   |
| Granted                                |       | —                         |       | —                        |       |
| Exercised                              |       | —                         |       | —                        |       |
| Canceled or expired                    |       | —                         |       | —                        |       |
| Outstanding at December 31, 2007  |       | 2,158,000                      |       | $                             | 0.68       |   |
| Granted                                |       | —                         |       | —                        |       |
| Exercised                              |       | —                         |       | —                        |       |
| Canceled or expired                    |       | —                         |       | —                        |       |
| Outstanding at March 31, 2008:    |       | 2,158,000                      |       | $                             | 0.68       |   |

 

Duringthe year ended December 31, 2006, the Company granted 910,000 stockoptions with an exercise price of $1.00 expiring ten years from issuance.  The fair value (determined as describedbelow) of $896,532 was charged to current period earnings.

 

Theweighted-average fair value of these stock options granted and theweighted-average significant assumptions used to determine those fair values,using a Black-Scholes option pricing model are as follows:

 

Forthe year ended December 31, 2006:

 
| **Significant assumptions (weighted-average):** | ** ** | ** **    | ** ** |
|-----------------------------------------------------------|------------|---------------|------------|
| Risk-free interest rate at grant date                     |       | 4.65 to 4.70% |       |
| Expected stock price volatility                           |       | 148.41%       |       |
| Expected dividend payout                                  |       | —        |       |
| Expected option life-years (a)                            |       | 10            |       |

 

----

(a)Theexpected option life is based on contractual expiration dates.

 

17

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIALSTATEMENTS**

**MARCH 31, 2008**

**(Unaudited)**

 

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

 

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

 
| ** **                                        | ** ** | **Three months  ended  March 31,  2008** | ** ** | **Three months  ended  March 31,  2007** | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|
| Net income  loss available to Common stockholders |       | $                                                  | (268,878   | )                                                  | $          | (102,856 |   |
| Basic and  diluted earning (loss) per share       |       | $                                                  | (0.00      | )                                                  | $          | (0.00 | ) |
| Weighted  average common shares outstanding       |       | 10,690,413                                         |       | 10,432,188                                         |       |

 

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

 

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

 

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

 

Forincome tax reporting purposes, the Company’s aggregate unused net operatinglosses approximate $5,300,000 which expires through 2025, subject tolimitations of Section 382 of the Internal Revenue Code, as amended. Thedeferred tax asset related to the carry forward is approximately $1,850,000.The Company has provided a valuation reserve against the full amount of the netoperating loss benefit, because in the opinion of management based upon theearning history of the Company; it is more likely than not that the benefitswill not be realized. Due to significant changes in the Company’s ownership,the Company’s future use of its existing net operating losses may be limited.

 

Componentsof deferred tax assets as of March 31, 2008 are as follows:

 
| Non current:                     |   |       |      |
|----------------------------------|--------|------------|-----------|
| Net  operating loss carryforward |   | $          | 1,850,000 |   |
| Valuation  allowance             |   | (1,850,000 | )         |
| Net deferred  tax asset          |   | $          | —    |   |

 

**NOTE I – SUBSEQUENT EVENTS**

 

InApril 2008, the Company sold an aggregate of 30,000 shares of common stockat $2.25 per share

 

InApril 2008, the Company issued 4,000 shares of common stock at $2.25 pershare for services rendered.

 

 

18

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**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS.**

 

**Forward-Looking Statements**

 

Theinformation in this report contains forward-looking statements. All statementsother than statements of historical fact made in this report are forwardlooking. In particular, the statements herein regarding industry prospects andfuture results of operations or financial position are forward-lookingstatements. These forward-looking statements can be identified by the use ofwords such as “believes,” “estimates,” “could,” “possibly,” “probably,”anticipates,” “projects,” “expects,” “may,” “will,” or “should” or othervariations or similar words. No assurances can be given that the future resultsanticipated by the forward-looking statements will be achieved. Forward-lookingstatements reflect management’s current expectations and are inherentlyuncertain. Our actual results may differ significantly from management’sexpectations.

 

Thefollowing discussion and analysis should be read in conjunction with ourfinancial statements, included herewith. This discussion should not beconstrued to imply that the results discussed herein will necessarily continueinto the future, or that any conclusion reached herein will necessarily beindicative of actual operating results in the future. Such discussionrepresents only the best present assessment of our management.

 

**Overview**

 

Sinceinception on February 16, 1999 through March 31, 2008, we havesustained cumulative net losses of $5,341,198. Our losses have resultedprimarily from research and development expenses, patent costs and legal andaccounting expenses. We have four issued patents, and we are currentlybeta-testing one of our BioWindows medical informatics system. From inceptionthrough March 31, 2008, we have not generated any revenue from operations.We expect to incur additional losses to perform further research anddevelopment activities. We have no debt and have sufficient cash to operate forone year at the current burn rate. In order to accelerate our productintroduction and to grow dynamically, we will need to raise additional funds.We do not currently have any commercial products. With additional funding, weexpect to launch our first nano-biochip product in about a year after we becomepublic. There are some risks with respect to clinical testing, regulatoryapproval and review cycles and uncertainty of the costs. Net positive cashinflows from any products developed may take several years to achieve.

 

Managementplans to continue financing operations with a combination of equity issuancesand debt arrangements. If adequate funds are not available, we may be requiredto delay, reduce the scope of, or eliminate our research or developmentprograms, or cease operations.

 

**History**

 

Wewere incorporated in the State of California on February 16, 1999 andplanned 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.

 

Beginningon March 11, 1999, Simon Chin, MBA, our founder, President and CEO,Secretary and principal shareholder, entered into Common Stock PurchaseAgreements with various companies, investment groups and private individuals.On March 1, 2003, Daniel Farnum, M.D., an owner of Humboldt Orthopedicsand a key shareholder, and Grace Osborne, MBA, President of GCO Recruiting, joinedMr. Chin on our board of directors. On April 9, 2003, the boardapproved a 2 for 1 stock split, changed the authorized shares of common stockfrom 10 million to 20 million, and the authorized preferred stock remained at 5million shares.

 

**Plan of Operation**

 

Weare a life science company focused on the development and commercialization ofa nano-biochip gene expression kit and an artificial intelligence system toassist in establishing the foundation for personalized medicine, which willinitially be utilized in the treatment of breast cancer. We are designing ourproducts to be approved by the FDA, which can then be used in any certifiedlaboratory. Starting at the point of a breast biopsy diagnosis of cancer, thenano-biochip and informatics program are designed to enable a treatingphysician to quickly prescribe a personalized treatment regimen that will havethe greatest probability of success for each patient’s particular type ofcancer. Our product platform is expected to lead to more effective diagnosisand treatment not only for patients with 

 

19

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breast cancer, but also forthose with neurological disorders, heart disease, diabetes and othergene-related metabolic problems .

 

**Product Research and Development**

 

Weanticipate spending, in order to accelerate our growth, which is contingentupon raising additional funds, approximately $1,500,000 for product researchand development activities related to our anticipated product launch during thenext twelve months.

 

**Acquisition of Plant and Equipment and Other Assets**

 

Wedo not anticipate the sale of any material property, plant or equipment duringthe next 12 months. We do not anticipate the acquisition of any materialproperty, plant or equipment during the next 12 months, unless we raiseadditional funds to accelerate our growth to fulfill the unmet needs of alarge, growing market.

 

**Number of Employees**

 

Fromour inception, we have principally relied on the services of outsideconsultants and part-time employees for services. As of May 14, 2008, wehave five full time employees and 10 part-time employees. In order for us toattract 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**

 

Asa development stage company, we have yet to earn revenues from operations. Wemay experience fluctuations in operating results in future periods due to avariety of factors, including our ability to obtain additional financing in a timelymanner and on terms favorable to us, our ability to successfully develop ourbusiness model, the amount and timing of operating costs and capitalexpenditures relating to the expansion of our business, operations andinfrastructure and the implementation of marketing programs, key agreements,and strategic alliances, and general economic conditions specific to ourindustry.

 

Asa result of limited capital resources and no revenues fromoperations since inception, we have relied on the issuance ofequity 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.

 

**ThreeMonths Ended March 31, 2008 Compared to Three Months Ended March 31,2007**

 

**Revenues**

 

Wehave generated no operating revenues from operations from our inception. Webelieve we will begin earning revenues from operations in 2008 from actualoperation as we transition from a development stage company to thatof an active growth stage company.

 

**Costs and Expenses**

 

From our inception through March 31, 2008, wehave incurred cumulative losses of $5,341,198. In addition, a significant partof the overall remaining costs are associated principally with equity-basedcompensation to employees and consultants, research and development costs andprofessional services rendered.

 

Selling,general and administrative (“SG&A”) expenses increased from $54,439for the three months ended March 31, 2007 to $233,346 for the three months ended March 31,2008, or $178,907. SG&A expenses consisted of accounting, legal,consulting, public relations, 

 

20

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startup and organizationalexpenses. SG&A expenses also included non-cash charges from the issuance ofstock, warrants and stock options in the amounts of $-0- for the three monthsended March 2007 and $32,000 for the three months ended March 31,2008, a period to period increase of $32,000. The remaining SG&A expenseswhich required cash amounted to approximately $201,346 and $54,439 for thethree months ended March 31, 2008 and 2007, respectively. We used stock inlieu of cash to conserve our cash resources.

 

Researchand development costs decreased from $46,102 for the three months ended March 31,2007 to $32,910 for the three months ended March 31, 2008.

 

Asa result of the above-mentioned expenses, net losses increased from $102,856for the three months ended March 31, 2007 to $268,878 for the three monthsended March 31, 2008.

 

**Liquidity and Capital Resources**

 

Asof March 31, 2008, we had working capital of $145,765 as compared to$141,588 as of December 31, 2007. Our cash position was $190,382 as of March 31,2008 compared to $179,617 as of December 31, 2007. From inception to March 31,2008 we have incurred an operating cash flow deficit of $2,147,289, which hasbeen principally financed through the private placement of our common stock. Asof March 31, 2008, we have no long term debt.

 

Weexpect to continue to incur additional losses and negative cash flows fromoperating activities for the next two years.

 

Ouravailable working capital and capital requirements will depend upon numerousfactors, including progress of our research and development programs, ourprogress in and the cost of pre-clinical and clinical testing, the timing andcost of obtaining regulatory approvals, the cost of filing and prosecutingpatent claims and other intellectual property rights, completing technologicaland market developments, current and future licensing relationships, the statusof our competitors, and our ability to establish collaborative arrangementswith other organizations .

 

Ourcontinued operations will depend on whether we are able to raise additionalfunds through various potential sources, such as equity and debt financing,collaborative and licensing agreements, strategic alliances, and our ability torealize the full potential of our technology in development. Such additionalfunds may not become available on acceptable terms, if at all, and there can beno assurance that any additional funding that we do obtain will be sufficientto meet our needs in the long term. Through May 14, 2008, virtually all ofour financing has been through private placements of common stock and warrants.We intend to continue to fund operations from cash on-hand and through thesimilar sources of capital previously described for the foreseeable future. Wecan give no assurances that any additional capital that we are able to obtainwill be sufficient to meet our needs. We believe that we will continue to incurnet losses and negative cash flows from operating activities for the next two years.Based on the resources available to us on May 14, 2008, we cansustain our present burn rate for one year. We will need additional equityor debt financing to accelerate the growth of our operations through 2008 andwe may need additional financing thereafter.

 

**Off-Balance Sheet Arrangements**

 

We do not have any off-balance sheet arrangements.

 

**Inflation**

 

It is our opinion that inflation has not had a material effect on ouroperations.

 

**Critical Accounting Policies**

 

Ourfinancial statements are prepared in accordance with accounting principlesgenerally accepted in the United States of America, which requires managementto make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

 

21

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Thefollowing accounting policies are critical in fully understanding andevaluating our reported financial results:

 

**Accounting for Stock-Based Compensation**

 

Weaccount for our stock options and warrants using the fair value methodpromulgated by Statement of Financial Accounting Standards No. 123R “Share-BasedCompensation” which addresses the accounting for transactions in which anentity exchanges its equity instruments for goods or services. Therefore, ourresults include non-cash compensation expense as a result of the issuance ofstock options and warrants and we expect to record additional non-cashcompensation expense in the future.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK.**

 

N/A

 

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

 

*Evaluation of Disclosure Controls and Procedures*. Under the supervision and with the participation of our management, including our President, Chief Financial Officer and Secretary, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Financial Officer and Secretary concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,  if any, within a company have been detected.

 

*Changes in Internal Control Over Financial Reporting.* During the most recent quarter ended March 31, 2008, 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 Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

**PART II**

 

**ITEM 1. LEGAL PROCEEDINGS.**

 

Weare not a party to any pending legal proceeding, nor is our property thesubject of a pending legal proceeding, that is not in the ordinary course ofbusiness or otherwise material to the financial condition of our business. Noneof our directors, officers or affiliates is involved in a proceeding adverse toour business or has a material interest adverse to our business.

 

**ITEM 1A. RISK FACTORS.**

 

N/A

 

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

 

During the three monthsended March 31, 2008, we issued 14,222 shares of common stock toconsultants for services rendered in the amount of $32,000 without registrationunder the Securities Act of 1933, as amended (the “Securities Act”). Inconnection with the issuance of such shares, we relied on the exemption fromregistration provided by Section 4(2) of the Securities Act.

 

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES.**

 

None

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

None

 

22

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**ITEM 5. OTHER INFORMATION.**

 

None

 

**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. |

 

23

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**SIGNATURES**

 

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

 
|                    | IRIS BIOTECHNOLOGIES INC.                                                                                                                                                |
|-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |                                                                                                                                                                     |
|                    | /s/ Simon Chin                                                                                                                                                           |
|  May 15, 2008 | 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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