Table ofContents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**Form 10-Q**

 

**(Mark One)**

 

**x****      QUARTERLY REPORT UNDER SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended June 30, 2010**

 

**OR**

 

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

 

**For thetransition period from              to              **

 

**COMMISSION****FILE NUMBER 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.) |

 

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

(Address of principalexecutive offices) (Zip Code)

 

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

 

Indicate by check mark whether the issuer(1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days. Yesx   No o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant toRule 405 of Regulation S-T (§232.405 of this chapter) during the preceding12 months (or for such shorter period that the registrant was required tosubmit and post such files). Yes o   No o

 

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

 

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

 

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

 

As of August 1, 2010the issuer had 11,584,173 outstanding shares of Common Stock.

 

 

 

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Table ofContents

 

TABLE OF CONTENTS

 
| ** **   | ** **                                                                                 | **Page** |
|--------------|--------------------------------------------------------------------------------------------|----------|
| PART I  |
| Item 1.      | Financial Statements                                                                       | 3        |
| Item  2.     | Management’s  Discussion and Analysis of Financial Condition and Results of Operation | 21       |
| Item  3.     | Quantitative  and Qualitative Disclosures About Market Risk                                | 26       |
| Item 4T      | Controls  and Procedures                                                                   | 26       |
|         |                                                                                       |     |
| PART II |
| Item 1.      | Legal Proceedings                                                                          | 26       |
| Item 1A.     | Risk Factors                                                                               | 26       |
| Item  2.     | Unregistered  Sales of Equity Securities and Use of Proceeds                               | 26       |
| Item  3.     | Defaults  Upon Senior Securities                                                           | 26       |
| Item 4.      | Reserved                                                                                   | 26       |
| Item 5.      | Other Information                                                                          | 26       |
| Item 6.      | Exhibits                                                                                   | 27       |

 

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Table of Contents

** **

**PART I**

 

**ITEM 1. FINANCIAL STATEMENTS.**

 

**INDEX TOFINANCIAL STATEMENTS**

 
| ** **                                                                                                                                                                                    | ** ** | **Page** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| Condensed  Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009                                                                                                     |       | 4        |
|                                                                                                                                                                                          |       |     |
| Unaudited  Condensed Statements of Losses for the three and six months ended  June 30, 2010 and 2009 and the period February 16, 1999 (date of  inception) to June 30, 2010    |       | 5        |
|                                                                                                                                                                                          |       |     |
| Unaudited Condensed Statement of Stockholders’ Equity  from January 1, 2010 to June 30, 2010                                                                                   |       | 6        |
|                                                                                                                                                                                          |       |     |
| Unaudited Condensed Statements of Cash Flows for the  three and six months ended June 30, 2010 and 2009 and the period  February 16, 1999 (date of inception) to June 30, 2010 |       | 7        |
|                                                                                                                                                                                          |       |     |
| Notes to the Unaudited Condensed Financial Statements                                                                                                                                         |       | 8        |

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSEDBALANCE SHEETS**

 
| ** **                                                                                                                                                                                      | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                      | ** ** | **2010**          | ** ** | **2009**              | ** ** |
| ** **                                                                                                                                                                                      | ** ** | **(unaudited)**   | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                                                                          |       |              |       |                  |       |
| Current assets:                                                                                                                                                                                 |       |              |       |                  |       |
| Cash                                                                                                                                                                                            |       | $                 | 6,268      |                  | $          | 442 |   |
| Total current assets                                                                                                                                                                            |       | 6,268             |       | 442                   |       |
|                                                                                                                                                                                            |       |              |       |                  |       |
| Property, plant and equipment, net of accumulated  depreciation of $192,043 and $183,130 as of June 30, 2010 and  December 31, 2009, respectively                                     |       | 39,975            |       | 48,888                |       |
|                                                                                                                                                                                            |       |              |       |                  |       |
| Total assets                                                                                                                                                                                    |       | $                 | 46,243     |                  | $          | 49,330 |   |
|                                                                                                                                                                                            |       |              |       |                  |       |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                             |       |              |       |                  |       |
| Current liabilities:                                                                                                                                                                            |       |              |       |                  |       |
| Accounts payable and accrued liabilities                                                                                                                                                        |       | $                 | 26,656     |                  | $          | 78,452 |   |
| Current maturities of long term debt                                                                                                                                                            |       | 8,310             |       | —                |       |
| Notes payable, related party                                                                                                                                                                    |       | 72,050            |       | 98,500                |       |
| Total current liabilities                                                                                                                                                                       |       | 107,016           |       | 176,952               |       |
|                                                                                                                                                                                            |       |              |       |                  |       |
| Long term debt:                                                                                                                                                                                 |       |              |       |                  |       |
| Notes payable, related party                                                                                                                                                                    |       | 38,000            |       | 38,000                |       |
| Note payable, net of debt discount of $15,176 and  $0 as of June 30, 2010 and December 31, 2009, respectively                                                                         |       | 72,968            |       | 15,000                |       |
| Total long term debt                                                                                                                                                                            |       | 110,968           |       | 53,000                |       |
| Total liabilities                                                                                                                                                                               |       | 217,984           |       | 229,952               |       |
|                                                                                                                                                                                            |       |              |       |                  |       |
| STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                             |       |              |       |                  |       |
| Preferred stock, no par or stated value; 5,000,000  shares authorized; no shares issued and outstanding as of June 30, 2010  and December 31, 2009                                    |       | —            |       | —                |       |
| Common stock, no par or stated value; 20,000,000  shares authorized; 11,449,298 and 11,230,526 shares issued and outstanding as  of June 30, 2010 and December 31, 2009, respectively |       | 5,291,963         |       | 5,028,781             |       |
| Additional paid in capital                                                                                                                                                                      |       | 2,035,709         |       | 1,949,838             |       |
| Common stock subscription receivable                                                                                                                                                            |       | (108,750          | )          | (108,750              | )          |
| Deficit accumulated during development stage                                                                                                                                                    |       | (7,390,663        | )          | (7,050,491            | )          |
| Total stockholders’ equity (deficit)                                                                                                                                                       |       | (171,741          | )          | (180,622              | )          |
|                                                                                                                                                                                            |       |              |       |                  |       |
| Total liabilities and stockholders’ equity  (deficit)                                                                                                                                      |       | $                 | 46,243     |                  | $          | 49,330 |   |

 

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

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSEDSTATEMENTS OF LOSSES**

**(unaudited)**

 
| ** **                                                                    | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** | **For the period from  February 16, 1999 (date  of inception) through** | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **2010**                                            | ** ** | **2009**                                          | ** ** | **2010**                                                                                                        | ** ** | **2009** | ** ** | **June 30, 2010** | ** ** |
| Operating expenses:                                                           |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Selling, general and administrative                                           |       | $                                                   | 150,391    |                                              | $          | 797,891                                                                                                         |       | $ | 279,138 |   | $ | 910,458 |   | $ | 3,941,761 |   |
| Research and development (Note 1)                                             |       | 49,096                                              |       | 27,895                                            |       | 49,096                                                                                                          |       | 30,622 |   | 1,426,634 |   |
| Impairment of intellectual property                                           |       | —                                              |       | —                                            |       | —                                                                                                          |       | — |   | 1,838,250 |   |
| Depreciation                                                                  |       | 4,456                                               |       | 4,816                                             |       | 8,913                                                                                                           |       | 8,883 |   | 191,717 |   |
| Total operating expenses                                                      |       | 203,943                                             |       | 830,602                                           |       | 337,147                                                                                                         |       | 949,963 |   | 7,398,362 |   |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Net loss from operations                                                      |       | (203,943                                            | )          | (830,602                                          | )          | (337,147                                                                                                        | )          | (949,963 | ) | (7,398,362 | ) |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Other income (expense)                                                        |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Interest income (expense)                                                     |       | (1,883                                              | )          | —                                            |       | (3,025                                                                                                          | )          | — |   | 7,699 |   |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Net loss before provision for income taxes                                    |       | (205,826                                            | )          | (830,602                                          | )          | (340,172                                                                                                        | )          | (949,963 | ) | (7,390,663 | ) |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Income taxes                                                                  |       | —                                              |       | —                                            |       | —                                                                                                          |       | — |   | — |   |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Net Loss                                                                      |       | $                                                   | (205,826   | )                                                 | $          | (830,602                                                                                                        | )          | $ | (340,172 | ) | $ | (949,963 | ) | $ | (7,390,663 | ) |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Loss per common share-basic and fully diluted                                 |       | $                                                   | (0.02      | )                                                 | $          | (0.07                                                                                                           | )          | $ | (0.03 | ) | $ | (0.09 | ) | $ | (0.77 | ) |
|                                                                          |       |                                                |       |                                              |       |                                                                                                            |       |   |   |   |   |
| Weighted average number of common shares  outstanding-basic and fully diluted |       | 11,380,726                                          |       | 11,142,855                                        |       | 11,325,289                                                                                                      |       | 11,040,585 |   | 9,641,264 |   |

 

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

 

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**IRIS BIOTECHNOLOGIES, INC**

** **

**(a development stage company)**

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

**FROM JANUARY 1, 2010 THROUGH JUNE 30, 2010**

**(Unaudited)**

 
| ** **                                                                                      | ** ** | ** **                | ** ** | ** **             | ** ** | ** **     | ** ** | ** **       | ** ** | ** **                    | ** ** | ** **     | ** ** | ** **       | ** ** | **Deficit accumulated** | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------|------------|------------------|------------|-------------------------------|------------|----------------|------------|------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                      | ** ** | **Preferred shares** | ** ** | **Common shares** | ** ** | **Additional** | ** ** | **Subscription** | ** ** | **Deferred**                  | ** ** | **during**     | ** ** | ** **       | ** ** |
| ** **                                                                                      | ** ** | **Stock**                 | ** ** | **Amount**             | ** ** | **Stock**      | ** ** | **Amount**       | ** ** | **Paid in Capital** | ** ** | **Receivable** | ** ** | **Compensation** | ** ** | **Development stage**   | ** ** | **Total**  | ** ** |
| Balance, January 1, 2010                                                                   |       | —                    |       | $                      | —     |           | 11,230,526 |             | $          | 5,028,781                     |       | $              | 1,949,838  |             | $          | (108,750                     | )          | $          | —     |   | $ | (7,050,491 | ) | $ | (180,622 | ) |
| Common stock issued in January 2010 at $1.00  per share in exchange for accrual            |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Common stock issued at $0.88 per share in exchange  for compensation shown as accrual           |       | —                    |       | —                 |       | 25,000         |       | 22,000           |       | —                        |       | —         |       | —           |       | —                       |       | 22,000     |       |
| Common stock issued in February 2010 at $1.00  per share in exchange for services rendered |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Common stock issued in March 2010 at $1.00  per share in exchange for services rendered    |       | —                    |       | —                 |       | 8,000          |       | 8,000            |       | —                        |       | —         |       | —           |       | —                       |       | 8,000      |       |
| Sale of common stock in March 2010 at $1.00  per share                                     |       | —                    |       | —                 |       | 25,000         |       | 25,000           |       | —                        |       | —         |       | —           |       | —                       |       | 25,000     |       |
| Common stock issued in April 2010 at $1.13  per share in exchange for services rendered    |       | —                    |       | —                 |       | 8,000          |       | 9,040            |       | —                        |       | —         |       | —           |       | —                       |       | 9,040      |       |
| Sale of common stock in April 2010 at $1.00  per share                                     |       | —                    |       | —                 |       | 5,000          |       | 5,000            |       | —                        |       | —         |       | —           |       | —                       |       | 5,000      |       |
| Sale of common stock in April 2010 at $1.16  per share                                     |       | —                    |       | —                 |       | 53,100         |       | 60,002           |       | —                        |       | —         |       | —           |       | —                       |       | 60,002     |       |
| Common stock issued in April 2010 at $0.85  per share in exchange for services rendered    |       | —                    |       | —                 |       | 25,000         |       | 21,250           |       | —                        |       | —         |       | —           |       | —                       |       | 21,250     |       |
| Sale of common stock in May 2010 at $1.35 per  share                                       |       | —                    |       | —                 |       | 9,815          |       | 13,250           |       | —                        |       | —         |       | —           |       | —                       |       | 13,250     |       |
| Sale of common stock in May 2010 at $1.75 per  share                                       |       | —                    |       | —                 |       | 2,857          |       | 5,000            |       | —                        |       | —         |       | —           |       | —                       |       | 5,000      |       |
| Common stock issued in May 2010 at $2.19 per  share in exchange for services rendered      |       | —                    |       | —                 |       | 8,000          |       | 17,520           |       | —                        |       | —         |       | —           |       | —                       |       | 17,520     |       |
| Common stock issued in May 2010 at $1.89 per  share in exchange for services rendered      |       | —                    |       | —                 |       | 8,000          |       | 15,120           |       | —                        |       | —         |       | —           |       | —                       |       | 15,120     |       |
| Common stock issued in June 2010 at $1.84 per  share in exchange for services rendered     |       | —                    |       | —                 |       | 25,000         |       | 46,000           |       | —                        |       | —         |       | —           |       | —                       |       | 46,000     |       |
| Beneficial conversion feature attributable to  convertible debt                                 |       | —                    |       | —                 |       | —         |       | —           |       | 15,176                        |       | —         |       | —           |       | —                       |       | 15,176     |       |
| Fair value of vested options issued for services                                                |       | —                    |       | —                 |       | —         |       | —           |       | 70,695                        |       | —         |       | —           |       | —                       |       | 70,695     |       |
| Net loss                                                                                        |       | —                    |       | —                 |       | —         |       | —           |       | —                        |       | —         |       | —           |       | (340,172                     | )          | (340,172   | )          |
| Balance, June 30, 2010                                                                     |       | —                    |       | $                      | —     |           | 11,449,298 |             | $          | 5,291,963                     |       | $              | 2,035,709  |             | $          | (108,750                     | )          | $          | —     |   | $ | (7,390,663 | ) | $ | (171,741 | ) |

 

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

 

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**IRIS BIOTECHNOLOGIES, INC**

**(a development stage company)**

**CONDENSEDSTATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                 | ** ** | **For the six months ended June 30,** | ** ** | **For the period from  February 16, 1999 (date of  inception) through June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2010**                                                            | ** ** | **2009**                                                                                                                           | ** ** | **2010** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                      |       |                                                                |       |                                                                                                                               |       |   |   |
| Net loss                                                                   |       | $                                                                   | (340,172   | )                                                                                                                                  | $          | (949,963 | ) | $ | (7,390,663 | ) |
| Adjustments to reconcile net loss to cash (used  in) operating activities: |       |                                                                |       |                                                                                                                               |       |   |   |
| Depreciation                                                               |       | 8,913                                                               |       | 8,883                                                                                                                              |       | 191,717 |   |
| Amortization of deferred compensation                                      |       | —                                                              |       | —                                                                                                                             |       | 46,926 |   |
| Common stock issued in exchange for services  rendered                     |       | 124,930                                                             |       | 45,236                                                                                                                             |       | 389,869 |   |
| Common stock issued in exchange for intellectual  property                 |       | —                                                              |       | —                                                                                                                             |       | 1,800,000 |   |
| Options and warrants issued in exchange for  services rendered             |       | 70,695                                                              |       | 732,782                                                                                                                            |       | 1,973,607 |   |
| Increase (decrease) in:                                                    |       |                                                                |       |                                                                                                                               |       |   |   |
| Accounts payable and accrued liabilities                                   |       | (21,796                                                             | )          | 65,994                                                                                                                             |       | 46,554 |   |
| Net cash (used in) operating activities:                                   |       | (157,430                                                            | )          | (97,068                                                                                                                            | )          | (2,941,990 | ) |
|                                                                       |       |                                                                |       |                                                                                                                               |       |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                      |       |                                                                |       |                                                                                                                               |       |   |   |
| Acquisition of property, plant and equipment                               |       | —                                                              |       | (7,303                                                                                                                             | )          | (221,591 | ) |
| Net cash (used in) investing activities:                                   |       | —                                                              |       | (7,303                                                                                                                             | )          | (221,591 | ) |
|                                                                       |       |                                                                |       |                                                                                                                               |       |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                      |       |                                                                |       |                                                                                                                               |       |   |   |
| Net proceeds from issuance of note payable                                 |       | 81,454                                                              |       | —                                                                                                                             |       | 81,454 |   |
| Proceeds from sale of common stock                                         |       | 108,252                                                             |       | 22,650                                                                                                                             |       | 2,920,845 |   |
| Exercise of common stock options                                           |       | —                                                              |       | 5,000                                                                                                                              |       | 42,500 |   |
| Net (payments) proceeds, related party                                     |       | (26,450                                                             | )          | 78,700                                                                                                                             |       | 125,050 |   |
| Net cash provided by financing activities                                  |       | 163,256                                                             |       | 106,350                                                                                                                            |       | 3,169,849 |   |
|                                                                       |       |                                                                |       |                                                                                                                               |       |   |   |
| Increase in cash and cash equivalents                                      |       | 5,826                                                               |       | 1,979                                                                                                                              |       | 6,268 |   |
| Cash and cash equivalents beginning of period                              |       | 442                                                                 |       | 990                                                                                                                                |       | — |   |
| Cash and cash equivalents end of period                                    |       | $                                                                   | 6,268      |                                                                                                                               | $          | 2,969 |   | $ | 6,268 |   |
|                                                                       |       |                                                                |       |                                                                                                                               |       |   |   |
| Supplemental disclosures of cash flow information:                         |       |                                                                |       |                                                                                                                               |       |   |   |
| Cash paid during the period for interest                                   |       | $                                                                   | —     |                                                                                                                               | $          | — |   | $ | 277 |   |
| Cash paid during the period for taxes                                      |       | $                                                                   | —     |                                                                                                                               | $          | — |   | $ | — |   |
| Common stock issued in exchange for intellectual  property                 |       | $                                                                   | —     |                                                                                                                               | $          | — |   | $ | 1,800,000 |   |

 

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

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TOTHE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

**NOTE 1 — 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 inaccordance with accounting principles generally accepted in the United Statesof America for interim financial information and with the instructions toForm 10-Q. Accordingly, they do not include all of the information andfootnotes required by generally accepted accounting principles for completefinancial 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 six month period ended June 30,2010, are not necessarily indicative of the results that may be expected forthe year ended December 31, 2010. The unaudited condensed financialstatements should be read in conjunction with the December 31, 2009financial statements and footnotes thereto included in the Company’sForm 10-K filed on March 31, 2010.

 

Business and 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 Accounting Standards Codification subtopic 915-10Development Stage Entities and its efforts are principally devoted todeveloping solutions for the detection and monitoring of monogenic and complexgenomic diseases. The Company has not generated any revenue to date and consequentlyits operations are subject to all risks inherent in the establishment of a newbusiness enterprise. For the period from inception through June 30, 2010,the Company has accumulated losses of $7,390,663.

 

Cash and 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.

 

Property and 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.

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Long-Lived Assets

 

TheCompany has adopted Accounting Standards Codification subtopic 360-10,Property, plant and equipment (“ASC 360-10”). The Statement requires thatlong-lived assets and certain identifiable intangibles held and used by theCompany be reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. Eventsrelating to recoverability may include significant unfavorable changes inbusiness conditions, recurring losses, or a forecasted inability to achievebreak-even operating results over an extended period. The Company evaluates therecoverability of long-lived assets based upon forecasted undiscounted cashflows. Should impairment in value be indicated, the carrying value ofintangible assets will be adjusted, based on estimates of future discountedcash flows resulting from the use and ultimate disposition of the asset. ASC360-10 also requires assets to be disposed of be reported at the lower of thecarrying amount or the fair value less costs to sell.

 

Income Taxes

 

TheCompany follows Accounting Standards Codification subtopic 740-10, IncomeTaxes (“ASC 740-10”) for recording the provision for income taxes. Deferred taxassets and liabilities are computed based upon the difference between thefinancial statement and income tax basis of assets and liabilities using theenacted marginal tax rate applicable when the related asset or liability isexpected to be realized or settled. Deferred income tax expenses or benefitsare based on the changes in the asset or liability during each period. Ifavailable evidence suggests that it is more likely than not that some portionor all of the deferred tax assets will not be realized, a valuation allowanceis required to reduce the deferred tax assets to the amount that is more likelythan not to be realized. Future changes in such valuation allowance areincluded in the provision for deferred income taxes in the period of change.Deferred income taxes may arise from temporary differences resulting fromincome and expense items reported for financial accounting and tax purposes indifferent periods. Deferred taxes are classified as current or non-current,depending on the classification of assets and liabilities to which they relate.Deferred taxes arising from temporary differences that are not related to anasset or liability are classified as current or non-current depending on theperiods in which the temporary differences are expected to reverse and areconsidered immaterial.

 

Net Income (loss) Per Common Share

 

TheCompany computes earnings per share under Accounting Standards Codificationsubtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common shareis computed by dividing net loss by the weighted average number of shares ofcommon stock outstanding during the year.  For the three and six monthperiods ended June 30, 2010 and 2009 common stock equivalents derived fromshares issuable in the exercise of options and warrants are not consideredin the calculation of the weighted average number of common shares outstandingbecause they would be anti-dilutive, thereby decreasing the net loss per share.

 

Use of Estimates

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions thataffect certain reported amounts and disclosures. Accordingly, actual resultscould differ from those estimates.

 

9

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Reclassifications

 

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

 

Research and Development

 

TheCompany accounts for research and development costs in accordance with theAccounting Standards Codification subtopic 730-10, Research and Development (“ASC730-10”). Under ASC 730-10, all research and development costs must be chargedto expense as incurred. Accordingly, internal research and development costsare expensed as incurred. Third-party research and developments costs areexpensed when the contracted work has been performed or as milestone resultshave been achieved. Company-sponsored research and development costs related toboth present and future products are expensed in the period incurred. TheCompany incurred research and development expenditures of $49,096 and $27,895for the three month periods ended June 30, 2010 and 2009, respectively;$49,096 and $30,622 for the six month periods ended June 30, 2010 and2009, respectively and $1,426,634 from the period from February 16, 1999(date of inception) to June 30, 2010.

 

Liquidity

 

Todate the Company has generated no revenues, has incurred expenses, and hassustained losses. As shown in the accompanying unaudited condensed****financial statements, the Company incurreda net loss of $340,172 during the six month period ended June 30, 2010 and$949,963 during the six month period ended June 30, 2009. For the periodfrom inception through June 30, 2010, the Company has accumulated lossesof $7,390,663. Consequently, its operations are subject to all risks inherentin the establishment of a new business enterprise.

 

Concentrations of 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 its tradereceivables in determining its allowance for doubtful accounts. The Companydoes not have accounts receivable and allowance for doubtful accounts at June 30,2010.

 

Dependency on key management

 

Thefuture success or failure of the Company is dependent primarily upon thecontinued efforts and financial support of Simon Chin, the Company’s ChiefExecutive Officer, Chief Financial Officer and the majority sharehold**e**r****(seeNote 3). He has agreed to fund any cash shortage in financing forDecember 31, 2010 currently estimated at less than $100,000.

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Fair Value of Financial Instruments

 

AccountingStandards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”)requires disclosure of the fair value of certain financial instruments. Thecarrying value of cash and cash equivalents, accounts payable and accruedliabilities, and short-term borrowings, as reflected in the balance sheets,approximate fair value because of the short-term maturity of theseinstruments.  All other significant financial assets, financialliabilities and equity instruments of the Company are either recognized ordisclosed in the financial statements together with other informationrelevant for making a reasonable assessment of future cash flows, interest raterisk and credit risk. Where practicable the fair values of financial assets andfinancial liabilities have been determined and disclosed; otherwise onlyavailable information pertinent to fair value has been disclosed.

 

EffectiveJanuary 1, 2008, the company adopted Accounting Standards Codificationsubtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) andAccounting Standards Codification subtopic 825-10, Financial Instruments (“ASC825-10”), which permits entities to choose to measure many financialinstruments and certain other items at fair value. Neither of these statementshad an impact on the Company’s financial position, results of operations orcash flows.

 

Stock Based Compensation

 

EffectiveJanuary 1, 2006, the beginning of the Company’s first fiscal quarter of2006, the Company adopted the fair value recognition provisions of AccountingStandards Codification subtopic 718-10, Compensation (“ASC 718-10”) using the modified-prospectivetransition method. Under this transition method, stock-based compensationexpense was recognized in the financial statements for granted, modified, orsettled stock options. Compensation expense recognized included the estimatedexpense for stock options granted on and subsequent to January 1, 2006,based on the grant date fair value estimated in accordance with the provisionsof ASC 718-10, and the estimated expense for the portion vesting in the periodfor options granted prior to, but not vested as of January 1, 2006, basedon the grant date fair value estimated in accordance with the originalprovisions of ASC 718-10. Results for prior periods have not been restated, asprovided for under the modified-prospective method.

 

ASC718-10 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 ASC718-10 for the periods prior to fiscal 2006, the Company accounted forforfeitures as they occurred.

 

Uponadoption of ASC 718-10, 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-pricingmodel is affected by the Company’s stock price as well as assumptions regardinga number of highly complex and subjective variables. These variables include,but are not limited to the Company’s expected stock price volatility over theterm of the awards, and certain other market variables such as the risk freeinterest rate.

 

Forthe three and six months period ended June 30, 2010, the Company did notgrant any employee option.  The fair value of previously issued vestingoptions of $23,579 and $47,158 was charged to current period operations,respectively.

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Recent Accounting Pronouncements

 

InMarch 2010, the FASB issued new accounting guidance, under ASC Topic 605on *Revenue Recognition*.  Thisstandard provides that the milestone method is a valid application of theproportional performance model for revenue recognition if the milestones aresubstantive and there is substantive uncertainty about whether the milestoneswill be achieved.  Determining whether a milestone is substantiverequires judgment that should be made at the inception of thearrangement.  To meet the definition of a substantive milestone, theconsideration earned by achieving the milestone (1) would have to becommensurate with either the level of effort required to achieve the milestoneor the enhancement in the value of the item delivered, (2) would have torelate solely to past performance, and (3) should be reasonable relativeto all deliverables and payment terms in the arrangement.  Nobifurcation of an individual milestone is allowed and there can be more thanone milestone in an arrangement.  The standard is effective forinterim and annual periods beginning on or after June 15,2010.  The Company is currently evaluating the impact the adoption ofthis guidance will have on its financial statements.

 

InFebruary 2010, the FASB issued ASU No. 2010-09, which updates theguidance in ASC 855, *Subsequent Events*,such that companies that file with the SEC will no longer be required toindicate the date through which they have analyzed subsequent events. Thisupdated guidance became effective immediately upon issuance and was adopted asof the first quarter of 2010.

 

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

 

InJanuary 2010 the FASB issued Update No. 2010-06 *Fair Value Measurements and Disclosures—ImprovingDisclosures about Fair Value Measurements* (“2010-06”). 2010-06requires new disclosures regarding significant transfers between Level 1 andLevel 2 fair value measurements, and disclosures regarding purchases, sales,issuances and settlements, on a gross basis, for Level 3 fair valuemeasurements. 2010-06 also calls for further disaggregation of all assets andliabilities based on line items shown in the statement of financial position.This amendment is effective for fiscal years beginning after December 15,2010 and interim periods within those fiscal years. The Company is currentlyevaluating whether adoption of this standard will have a material impact on itsfinancial position, results of operations or cash flows.

 

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

 

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

 

12

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Recent Accounting Pronouncements (Continued)

 

InJanuary 2010 the FASB issued Update No. 2010-02 *Accounting and Reporting for Decreases in Ownershipof a Subsidiary—a Scope Clarification* (“2010-02”) an update of ASC810 *Consolidation*. 2010-02clarifies the scope of ASC 810 with respect to decreases in ownership in asubsidiary to those of a subsidiary or group of assets that are a business ornonprofit, a subsidiary that is transferred to an equity method investee orjoint venture, and an exchange of a group of assets that constitutes a businessor nonprofit activity to a non-controlling interest including an equity methodinvestee or a joint venture. Management does not expect adoption of thisstandard to have any material impact on its financial position, results ofoperations or operating cash flows. Management does not intend to decrease itsownership in any of its wholly-owned subsidiaries.

 

InJanuary 2010 the FASB issued Update No. 2010-01 *Accounting for Distributions to Shareholders withComponents of Stock and Cash—a consensus of the FASB Emerging Issues Task Force*(“2010-03”) an update of ASC 505 *Equity*.2010-03 clarifies the treatment of stock distributions as dividends toshareholders and their affect on the computation of earnings per shares.Management does not expect adoption of this standard to have any materialimpact on its financial position, results of operations or operating cashflows.

 

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

 

Property,plant and equipment at June 30, 2010 and December 31, 2009 are asfollows:

 
| ** **                     | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|--------------------------------|------------|------------------------|------------|---------------------------------|------------|
| Computer equipment             |       | $                      | 61,201     |                            | $          | 61,201 |   |
| Office equipment               |       | 1,728                  |       | 1,728                           |       |
| Furniture and fixtures         |       | 3,586                  |       | 3,586                           |       |
| Manufacturing equipment        |       | 165,503                |       | 165,503                         |       |
|                           |       | 232,018                |       | 232,018                         |       |
| Less: accumulated depreciation |       | (192,043               | )          | (183,130                        | )          |
|                           |       | $                      | 39,975     |                            | $          | 48,888 |   |

 

**NOTE 3 — RELATED PARTY TRANSACTIONS**

 

OnSeptember 24, 2009, the Company issued a note totaling $38,000 to ashareholder/director, unsecured and bearing an interest rate of 7.5% per annum,due five years from date of issuance.  The notes are convertible into theCompany’s common stock at a conversion rate of $2.25 per share.

 

TheCompany’s President and shareholders have advanced funds to the Company forworking capital purposes since the Company’s inception inFebruary 1999.  No formal repayment terms or arrangements exist. Thenet amount outstanding at June 30, 2010 and December 31,2009 was $72,050 and $98,500, respectively.

 

One of our board members owns 40% of an entity thatentered into a 5-year, 7.5% interest, and convertible note agreement with theCompany for the amount of $71,454 in May 2010 (Note 4).

 

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Table of Contents

 

**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

**NOTE 4 — LONG TERM DEBT**

 

Longterm debt at June 30, 2010 and December 31, 2009 are as follows:

 
| ** **                                    | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|---------------------------------|------------|
| Notes payable, related party (see Note 3)     |       | $                      | 38,000     |                            | $          | 38,000 |   |
| Note payables, unrelated party                |       | 25,000                 |       | 15,000                          |       |
| Note payable, net of debt discount of $15,176 |       | 56,278                 |       | —                          |       |
| Total                                         |       | 119,278                |       | 53,000                          |       |
| Less: current portion                         |       | 8,310                  |       | —                          |       |
| Long term portion                             |       | $                      | 110,968    |                            | $          | 53,000 |   |

 

OnOctober 9, 2009, the Company issued a $5,000 note to an unrelated party,unsecured and bearing an interest rate of 7.5% per annum, due five years fromdate of issuance.  The note is convertible into the Company’s common stockat a conversion rate of $2.25 per share.

 

OnDecember 23, 2009, the Company issued a $10,000 note to an unrelatedparty, unsecured and bearing an interest rate of 7.5% per annum, due five yearsfrom date of issuance.  The note is convertible into the Company’s commonstock at a conversion rate of $2.25 per share.

 

OnJanuary 10, 2010, the Company issued a $10,000 note to an unrelated party,unsecured and bearing an interest rate of 7.5% per annum, due five years fromdate of issuance.  The note is convertible into the Company’s common stockat a conversion rate of $2.25 per share.

 

OnMay 13, 2010, the Company issued a $71,454 convertible promissory notewith monthly payments of $1,431.79, due in five years with interest at 7.5% perannum. The note is convertible at any time prior to maturity, at the holder’soption, into shares of our common stock at $1.13 per share.

 

Inaccordance with ASC 470-20, the Company recognized an embedded beneficialconversion feature present in the note. The Company allocated a portion of theproceeds equal to the intrinsic value of that feature to additional paid-incapital. The Company recognized and measured an aggregate of $15,176 of theproceeds, which is equal to the intrinsic value of the embedded beneficialconversion feature, to additional paid-in capital and a discount against thenote. The debt discount attributed to the beneficial conversion feature ischarged to current period operations as interest expense using the effectiveinterest method over the term of the note.

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

**NOTE 5 — STOCKHOLDER EQUITY**

 

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

 

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 year ended December 31, 2008, the Company issued an aggregate of50,222 shares of common stock to consultants for services in the amount of$103,400. All valuations of common stock issued for services were based uponthe value of the services rendered, which did not differ materially from thefair value of the Company’s common stock during the period the services wererendered.

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Common stock (continued)

 

Duringthe year ended December 31, 2009, the Company issued 91,669 shares ofcommon stock for services in the amount of $70,289. All valuations of commonstock issued for services were based upon the fair value of the Company’scommon stock during the period the services were rendered.

 

Duringthe six month period ended June 30, 2010, the Company issued an aggregateof 123,000 shares of common stock for services in the amount of $154,930 out ofwhich $30,000 related to prior accruals.  All valuations of common stockissued for services were based upon the fair value of the Company’s commonstock during the period the services were rendered.

 

**NOTE 6 — WARRANTS AND OPTIONS**

 

Warrants

 

Thefollowing table summarizes the changes in warrants outstanding and relatedprices for the shares of the Company’s common stock issued to shareholders at June 30,2010:

 
| **Exercise Price** | ** ** | **Number  Outstanding** | ** ** | **Warrants Outstanding  Weighted Average  Remaining Contractual  Life (years)** | ** ** | **Weighted  Average  Exercise price** | ** ** | **Number  Exercisable** | ** ** | **Warrants Exercisable  Weighted  Average  Exercise Price** | ** ** |
|-------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------|------------|
| $                       | 0.13       |                    | 40,000     |                                                                                                | 3.97       |                                       | $          | 0.13                    |       | 40,000                                                                |       | $ | 0.13 |   |
| $                       | 2.00       |                    | 31,400     |                                                                                                | 1.20       |                                       | $          | 2.00                    |       | 31,400                                                                |       | $ | 2.00 |   |
| $                       | 2.25       |                    | 23,629     |                                                                                                | 2.64       |                                       | $          | 2.25                    |       | 23,629                                                                |       | $ | 2.25 |   |
|                    |       | 95,029                  |       |                                                                                                |       |                                       |       | 95,029                  |       |                                                                  |       |

 

Transactionsinvolving the Company’s warrant issuance are summarized as follows:

 
| ** **                            | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Price Per Share** | ** ** |
|---------------------------------------|------------|----------------------------|------------|--------------------------------------------------|------------|
| Outstanding at December 31, 2008 |       | 134,178                    |       | $                                                | 2.20       |   |
| Issued                                |       | 42,517                     |       | 0.26                                             |       |
| Exercised                             |       | —                     |       | —                                           |       |
| Canceled or expired                   |       | (81,666                    | )          | 2.25                                             |       |
| Outstanding at December 31, 2009 |       | 95,029                     |       | $                                                | 1.29       |   |
| Issued                                |       | —                     |       | —                                           |       |
| Exercised                             |       | —                     |       | —                                           |       |
| Canceled or expired                   |       | —                     |       | —                                           |       |
| Outstanding at June 30, 2010     |       | 95,029                     |       | $                                                | 1.29       |   |

 

Duringthe year ended December 31, 2009, in connection with the sale of theCompany’s common stock, the Company issued an aggregate of 2,517 warrants topurchase the Company’s common stock at an exercise price of $2.25 per share forfive years.

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Warrants (continued)

 

Duringthe year ended December 31, 2009, 81,666 non-vested warrants previouslyissued in connection with services were returned and canceled. The balanceunamortized fair value of the warrant of $119,364 recognized as contra equitywhich was transferred to Additional paid in capital during the year 2009.

 

OnJune 19, 2009, the Company issued 40,000 warrants to purchase the Company’scommon stock at an exercise price of $0.13 over five years, vesting immediatelyfor services rendered.  Accordingly, the Company recorded fair value ofthe warrants of $52,000 for year 2009.

 

Thefair value of the warrants issued and the significant assumptions used todetermine those fair values, using a Black-Scholes option pricing model are asfollows:

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

 

----

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

 

Options

 

Employee Options

 

Thefollowing table summarizes the changes in options outstanding and the relatedprices for the shares of the Company’s common stock issued to employees under astock option plan at June 30, 2010:

 
| ** **               | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                         | ** ** |
|--------------------------|------------|------------------------------|------------|----------------------------------------------------------------------|------------|
| **Exercise  Prices (S)** | ** ** | **Number  Outstanding**      | ** ** | **Weighted Average  Remaining  Contractual Life  (Years)** | ** ** | **Weighted  Average  Exercise  Price (S)** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $                        | 0.13       |                         | 80,000     |                                                                 | 8.97       |   | $ | 0.13 |   | 80,000 |   | $ | 0.13 |   |
| 0.15                     |       | 400,000                      |       | 3.97                                                                 |       | 0.15 |   | 400,000 |   | 0.15 |   |
| 0.50                     |       | 91,000                       |       | 0.68                                                                 |       | 0.50 |   | 91,000 |   | 0.50 |   |
| 1.00                     |       | 850,750                      |       | 5.35                                                                 |       | 1.00 |   | 850,750 |   | 1.00 |   |
| 2.25                     |       | 167,696                      |       | 7.91                                                                 |       | 2.25 |   | 87,342 |   | 2.25 |   |
|                     |       | 1,589,446                    |       |                                                                 |       | 0.85 |   | 1,509,092 |   | 0.76 |   |
|                          |            |                              |            |                                                                      |            |  |  |  |  |  |  |  |  |  |

 

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Table ofContents

 

**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Employee Options (continued)

 

Transactionsinvolving employee stock options issued are summarized as follows:

 
| ** **                             | ** ** | **Number of Shares** | ** ** | **Weighted Average  Price Per Share** | ** ** |
|----------------------------------------|------------|--------------------------------|------------|------------------------------------------------------|------------|
| Outstanding at December 31, 2008: |       | 1,915,696                      |       | $                                                    | 0.86       |   |
| Granted                                |       | 480,000                        |       | 0.15                                                 |       |
| Exercised                              |       | (176,250                       | )          | 0.62                                                 |       |
| Canceled or expired                    |       | (530,000                       | )          | 0.33                                                 |       |
| Outstanding at December 31, 2009  |       | 1,689,446                      |       | $                                                    | 0.85       |   |
| Granted                                |       | —                         |       | —                                               |       |
| Exercised                              |       | —                         |       | —                                               |       |
| Canceled or expired                    |       | (100,000                       | )          | (1.00                                                | )          |
| Outstanding at June 30, 2010:     |       | 1,589,446                      |       | $                                                    | 0.85       |   |

 

OnJune 19, 2009, the Company granted 480,000 employee stock options withexercise prices of $0.13 and $0.15 vesting immediately and expiring five to tenyears from issuance.  The fair value of the vested portion (determined asdescribed below) of $624,000 was charged to expenses for year 2009.

 

Thefair value of these stock options granted and the significant assumptions usedto determine those fair values, using a Black-Scholes option pricing model areas follows:

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

 

----

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

 

Thefair value of the vested portion previously granted options of $47,158 and$47,158 was charged during the six month period June 30, 2010 and2009, respectively.

 

Non employee options

 

Thefollowing table summarizes the changes in options outstanding and the relatedprices for the shares of the Company’s common stock issued to non employeesunder a stock option plan at June 30, 2010:

 

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**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

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

 

Nonemployee options (continued)

 
| ** **           | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                         | ** ** |
|----------------------|------------|------------------------------|------------|----------------------------------------------------------------------|------------|
| **Exercise  Prices** | ** ** | **Number  Outstanding**      | ** ** | **Weighted Average  Remaining  Contractual Life  (Years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| $                    | 0.50       |                         | 160,000    |                                                                 | 0.85       |   | $ | 0.50 |   | 160,000 |   | $ | 0.50 |   |
| 1.00                 |       | 110,000                      |       | 5.71                                                                 |       | 1.00 |   | 110,000 |   | 1.00 |   |
| 1.40                 |       | 105,000                      |       | 8.74                                                                 |       | 1.40 |   | 43,750 |   | 1.40 |   |
|                 |       | 375,000                      |       |                                                                 |       | 0.90 |   | 313,750 |   | 0.77 |   |
|                      |            |                              |            |                                                                      |            |  |  |  |  |  |  |  |  |  |

 

Transactionsinvolving non employee stock options issued are summarized as follows:

 
| ** **                             | ** ** | **Number of Shares** | ** ** | **Weighted Average  Price Per Share** | ** ** |
|----------------------------------------|------------|--------------------------------|------------|------------------------------------------------------|------------|
| Outstanding at December 31, 2008: |       | 410,000                        |       | $                                                    | 0.60       |   |
| Granted                                |       | 105,000                        |       | 1.40                                                 |       |
| Exercised                              |       | (20,000                        | )          | (0.25                                                |       |
| Canceled or expired                    |       | (120,000                       | )          | (0.38                                                |       |
| Outstanding at December 31, 2009  |       | 375,000                        |       | $                                                    | 0.90       |   |
| Granted                                |       | —                         |       | —                                               |       |
| Exercised                              |       | —                         |       | —                                               |       |
| Canceled or expired                    |       | —                         |       | —                                               |       |
| Outstanding at June 30, 2010:     |       | 375,000                        |       | $                                                    | 0.90       |   |

 

Duringthe year ended December 31, 2009, the Company granted 105,000 non employeestock options with an exercise price of $1.40 vesting over three years andexpiring ten years from issuance.  The fair value of the vested portion(determined as described below) of $23,538 was charged to current periodearnings.

 

Thefair value of these stock options granted and the significant assumptions usedto determine those fair values, using a Black-Scholes option pricing model areas follows:

 
| **Significant assumptions :** | ** ** | ** **        | ** ** |
|-----------------------------------------|------------|-------------------|------------|
| Risk-free interest rate at grant date   |       | 2.97% to 3.84     | %          |
| Expected stock price volatility         |       | 404.29% to 455.63 | %          |
| Expected dividend payout                |       | —            |       |
| Expected option life-years (a)          |       | 8.74 to 8.99      |       |

 

----

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

 

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** **

**IRISBIOTECHNOLOGIES INC.**

**(A development stage company)**

**NOTES TO THE CONDENSED FINANCIAL STATEMENTS**

**JUNE 30, 2010**

**(Unaudited)**

 

**NOTE 7 - INCOME TAXES**

 

ASC740-10 requires the recognition of deferred tax liabilities and assets for theexpected future tax consequences of events that have been included in thefinancial statement or tax returns. Under this method, deferred tax liabilitiesand assets are determined based on the difference between financial statementsand tax bases of assets and liabilities using enacted tax rates in effect forthe year in which the differences are expected to reverse. Temporarydifferences between taxable income reported for financial reporting purposesand income tax purposes are insignificant.

 

**NOTE 8 - SUBSEQUENT EVENTS**

 

In the month of July 2010,the Company issued an aggregate of 48,000 shares of its common stock forservices rendered.

 

In the month of July 2010,the Company issued an aggregate of 86,875 shares of its common stock foroptions exercised.

 

Subsequentevents have been evaluated through August 1, 2010, the date that thefinancial statements were issued.

 

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**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

**Forward-Looking Statements**

 

The information in this report containsforward-looking statements. All statements other than statements of historicalfact made in this report are forward looking. In particular, the statementsherein regarding industry prospects and future results of operations orfinancial position are forward-looking statements. These forward-lookingstatements can be identified by the use of words such as “believes,” “estimates,”“could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,”or “should” or other variations or similar words. No assurances can be giventhat the future results anticipated by the forward-looking statements will beachieved. Forward-looking statements reflect management’s current expectationsand are inherently uncertain. Our actual results may differ significantly frommanagement’s expectations.

 

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

 

**Overview**

 

Since inception on February 16, 1999 through June 30,2010, we have sustained cumulative net losses of $7,390,663. Our losses haveresulted primarily from research and development expenses, patent costs andlegal and accounting expenses. From inception through June 30, 2010, wehave not generated any revenue from operations. We expect to incur additionallosses to perform further research and development activities. We havesufficient cash to operate for one year at the current burn rate. In order toaccelerate our product introduction and to grow dynamically, we will need toraise additional funds. We do not currently have any commercial products. Withadditional funding, we expect to launch our nano-biochip products in less thana year.

 

During the past 18 months, we have spent less than$10,000 for public relations. Due to the severe recession we felt that it wasprudent to spend investor dollars on designing and building an advancedNano-Biochip making system, streamlining the automated patient sampleprocessing protocols and product tracking system, and interacting withphysicians and patients to demonstrate the usefulness of Iris’s BioWindowsmedical informatics system. Wehave an extensive pipeline of disease chips including aBreastCancerChipä,ColonCancerChipä, NeuroChipä, CardioChipä,ComprehensiveCancerChipä, and MetabolicChipä.

 

We have been in discussionswith various entities in regard to launching our products in the US and abroad.As of July 21, 2010, we have applied for $5 million in TherapeuticDiscovery grant from the US government, which has stated that it is awarding $1billion to small research companies by October 29, 2010.

 

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

 

Management plans to continuefinancing operations with a combination of equity issuances and debtarrangements. If adequate funds are not available, we may be required to delay,reduce the scope of, or eliminate our research or development programs, orcease operations. On an ongoing basis since the Company was founded in 1999,Simon Chin, our President, Chief Executive Officer, Chief Financial Officer andChairman of our Board of Directors, has been providing us with interimfinancing, which we repay when funds are available.

 

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** **

**History**

 

We were incorporated in the State of California onFebruary 16, 1999 and planned to sell theranostic (choosing therapy basedupon personalized diagnostic results) products and services in the medicalfield. In an effort to develop that business, we set up operations in twolocations in California - Headquarters in Santa Clara and Laboratory in SanLeandro.

 

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

 

**Plan of Operation**

 

We are a life sciences company and the recipient ofthe Frost and Sullivan 2008 Technology Innovation Award in Pharmacogenomics.Without a clinically accurate tool to measure the relevant genetic/genomicmalfunctions involved, cancer diagnosis is a trial and error process leading tounnecessary or ill-directed therapy with unintended risks and adverse sideeffects. The development of our proprietary Nano-biochipsTM assists medicalprofessionals in the diagnosis and prognosis process.  Our manufacturingsystem has the capability to produce a variety of chips with a choice of mRNAs,microRNAs, proteins, or other biomarker probes for the diagnosis and prognosisof breast cancer, colon cancer, and many other diseases.

 

The Iris BioWindowsTM Informatics System forPersonalized and Targeted Medicine handles the analysis of the Nano-biochipTMgene and protein signatures. BioWindowsTM is an artificial intelligence system,which includes a powerful database with molecular data, in-depth patientdemographics and lifestyle information, family medical histories andtreatment-response profiles for many diseases. We launched “Health Passport” inits BioWindowsTM 2.0 Informatics System a year ago.

 

Health Passport is a HIPAA compliant, web based,medical information storage system that allows participants to grant selectiveor full sharing capabilities of their confidential medical and lifestyleinformation to physicians and/or family members anywhere in the world. Thisallows families to build multi-generational medical family trees that will helpassure that they receive more personalized care now and in the future — theright medical treatment for the right patient at the right time.

 

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

 

**Product Research and Development**

 

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

 

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

 

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

 

**Number of Employees**

 

As of August 1, 2010, we have five full timeemployees and 10 part-time employees. In order for us to attract and retainquality personnel, we anticipate we will have to offer competitive salaries tofuture employees. We anticipate that it may become desirable to add additionalfull and or part time employees to discharge certain critical functions duringthe next 12 months. This projected increase in personnel is dependent upon ourability to generate revenues and obtain sources of financing. There is noguarantee that we will be successful in raising the funds required orgenerating revenues sufficient to fund the projected increase in the number ofemployees. As we continue to expand, we will incur additional cost forpersonnel.

 

**Results of Operations**

 

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

 

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

 

**Three Months Ended June 30,2010 Compared to Three Months Ended June 30, 2009**

 

**Revenues**

 

We have generated no operating revenues fromoperations from our inception. We believe we will begin earning revenues fromoperations in 2011 from actual operation as we transition from adevelopment stage company to that of an active growth stage company.

 

**Costs and Expenses**

 

From our inception through June 30, 2010, wehave incurred cumulative losses of $7,390,663. 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.

 

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Selling, general and administrative (“SG&A”)expenses decreased by $647,500 from $797,891 for the three months ended June 30,2009 to $150,391 for the three months ended June 30, 2010. SG&Aexpenses consisted of accounting, legal, consulting, public relations, startupand organizational expenses. SG&A expenses also included non-cash chargesfrom the issuance of stock, warrants and stock options in the amounts of $119,359for the three months ended June 30, 2010 and $735,213 for the three monthsended June 30, 2009, a period to period decrease of $615,854. Theremaining SG&A expenses which required cash amounted to approximately$31,032 and $62,678 for the three months ended June 30, 2010 and 2009,respectively. We used stock in lieu of cash to conserve our cash resources.

 

Research and development costs increased from$27,895 for the three months ended June 30, 2009 to $49,096 for the threemonths ended June 30, 2010.

 

As a result of the above-mentioned expenses, netlosses decreased from $830,602 for the three months ended June 30, 2009 to$205,826 for the three months ended June 30, 2010.

 

**Six Months Ended June 30, 2010Compared to Six Months Ended June 30, 2009**

 

**Revenues**

 

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

 

**Costs and Expenses**

 

Selling, general and administrative (“SG&A”)expenses decreased by $631,320 from $910,458 for the six months ended June 30,2009 to $279,138 for the six months ended June 30, 2010. SG&A expensesconsisted of accounting, legal, consulting, public relations, startup andorganizational expenses. SG&A expenses also included non-cash charges fromthe issuance of stock, warrants and stock options in the amounts of $195,625for the six months ended June 30, 2010 and $778,018 for the six monthsended June 30, 2009, a period to period decrease of $582,393. Theremaining SG&A expenses which required cash amounted to approximately$83,513 and $132,440 for the six months ended June 30, 2010 and 2009,respectively. We used stock in lieu of cash to conserve our cash resources.

 

Research and development costs increased from$30,622 for the six months ended June 30, 2009 to $49,096 for the sixmonths ended June 30, 2010.

 

As a result of the above-mentioned expenses, netlosses decreased from $949,963 for the six months ended June 30, 2009 to$340,172 for the six months ended June 30, 2010.

 

**Liquidity and Capital Resources**

 

As of June 30, 2010, we had a working capitaldeficit of $100,748 as compared to a working capital deficit of $176,510 as of December 31,2009. Our cash position was $6,268 as of June 30, 2010 compared to $442 asof December 31, 2009. From inception to June 30, 2010 we haveincurred an operating cash flow deficit of $2,941,990, which has beenprincipally financed through the private placement of our common stock,advances from related parties and issuance of notes payable. As of June 30,2010, we have long term debt of $110,968.

 

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

 

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Our available working capital and capitalrequirements will depend upon numerous factors, including progress of ourresearch and development programs, our progress in and the cost of pre-clinicaland clinical testing, the timing and cost of obtaining regulatory approvals,the cost of filing and prosecuting patent claims and other intellectualproperty rights, completing technological and market developments, current andfuture licensing relationships, the status of our competitors, and our abilityto establish collaborative arrangements with other organizations .

 

Our continued operations will depend on whether weare able to raise additional funds through various potential sources, such asequity and debt financing, collaborative and licensing agreements, strategicalliances, and our ability to realize the full potential of our technology indevelopment. Such additional funds may not become available on acceptableterms, if at all, and there can be no assurance that any additional fundingthat we do obtain will be sufficient to meet our needs in the long term.Through August 1, 2010, virtually all of our financing has been throughprivate placements of common stock and warrants. We intend to continue to fundoperations from cash on-hand and through the similar sources of capitalpreviously described for the foreseeable future. We can give no assurances thatany additional capital that we are able to obtain will be sufficient to meetour needs. We believe that we will continue to incur net losses and negativecash flows from operating activities for the next two years. Based on theresources available to us on August 1, 2010, we can sustain ourpresent burn rate for one year. We will need additional equity or debtfinancing to accelerate the growth of our operations through the remainder of2010 and we may need additional financing thereafter.

 

The future success or failure of the Company isdependent primarily upon the continued efforts and financial support of SimonChin, the Company’s Chief Executive Officer, Chief Financial Officer and themajority sharehold**e**r****(see Note 3). He has agreed to fund anycash shortage in financing for December 31, 2010 currently estimated atless than $100,000.

 

**Off-Balance Sheet Arrangements**

 

We do not have anyoff-balance sheet arrangements.

 

**Inflation**

 

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

 

**Critical Accounting Policies**

 

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

 

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

 

**Accounting for Stock-BasedCompensation**

 

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

 

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**ITEM 3. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

 

N/A

 

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

 

*Evaluation of Disclosure Controlsand Procedures*. Under the supervision and with the participationof our management, including our President, Chief Financial Officer andSecretary, we evaluated the effectiveness of the design and operation of ourdisclosure controls and procedures (as defined in Rule 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”))as of the end of the period covered by this report. Based upon that evaluation,our President, Chief Financial Officer and Secretary concluded that ourdisclosure controls and procedures as of the end of the period covered by thisreport were effective such that the information required to be disclosed by usin reports filed under the Securities Exchange Act of 1934 is(i) recorded, processed, summarized and reported within the time periodsspecified in the SEC’s rules and forms and (ii) accumulated andcommunicated to our management to allow timely decisions regarding disclosure.A controls system cannot provide absolute assurance, however, that theobjectives of the controls system are met, and no evaluation of controls canprovide absolute assurance that all control issues and instances offraud, if any, within a company have been detected.

 

*Changes in Internal Control OverFinancial Reporting.* During the most recent quarter ended June 30,2010, there has been no change in our internal control over financial reporting(as defined in Rule 13a-15(f) and 15d-15(f) under the ExchangeAct)) that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II**

 

**ITEM 1. LEGAL PROCEEDINGS.**

 

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

 

**ITEM 1A. RISK FACTORS.**

 

N/A

 

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

 

Duringthe three months ended June 30, 2010, we issued and sold 70,772 shares ofcommon stock for proceeds of $83,252.  In addition, we issued 74,000shares of common stock to consultants for services rendered in the amount of$108,930 out of which $21,250 relates to accruals. In connection with theissuance of such shares, we relied on the exemption from registration providedby Section 4(2) of the Securities Act of 1933, as amended.

 

**ITEM 3. DEFAULTS UPON SENIORSECURITIES.**

 

None

 

**ITEM 4. RESERVED.**

 

**ITEM 5. OTHER INFORMATION.**

 

None

 

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**ITEM 6. EXHIBITS.**

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

 

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**SIGNATURES**

 

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

 
|                | IRIS BIOTECHNOLOGIES INC.                                     |
|---------------------|---------------------------------------------------------------|
|                |                                                          |
|                |                                                          |
| August 2, 2010 | /s/ Simon Chin                                                |
|                | Simon Chin                                                    |
|                | President, Chief Executive Officer, Chief Financial           |
|                | Officer and Director (Principal Executive Officer,            |
|                | Principal Accounting Officer and Principal Financial Officer) |
|                     |                                                               |  |

 

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