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Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2010

 

OR

 

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

 

For the transition period from               to               

 

COMMISSION FILE NUMBER 333-142076

 

IRIS BIOTECHNOLOGIES INC.

(Exact Name of small business issuer as specified in its charter)

 

California

 

77-0506396

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

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

(Address of principal executive 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 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o   No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” 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 a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x

 

As of May 11, 2010 the issuer had 11,400,441 outstanding shares of Common Stock.

 

 

 





Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED BALANCE SHEETS

 

 

 

March 31,

 

December 31,

 

 

 

2010

 

2009

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

 

$

1,284

 

$

442

 

Total current assets

 

1,284

 

442

 

 

 

 

 

 

 

Property, plant and equipment, net of accumulated depreciation of $187,586 and $183,130 as of March 31, 2010 and December 31, 2009, respectively

 

44,432

 

48,888

 

 

 

 

 

 

 

Total assets

 

$

45,716

 

$

49,330

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

108,117

 

$

78,452

 

Notes payable, related party

 

87,550

 

98,500

 

Total current liabilities

 

195,667

 

176,952

 

 

 

 

 

 

 

Long term debt:

 

 

 

 

 

Notes payable, related party

 

63,000

 

53,000

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

Preferred stock, no par or stated value; 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2010 and December 31, 2009

 

-

 

-

 

Common stock, no par or stated value; 20,000,000 shares authorized; 11,304,526 and 11,230,526 shares issued and outstanding as of March 31, 2010 and December 31, 2009,  respectively

 

5,099,781

 

5,028,781

 

Additional paid in capital

 

1,980,855

 

1,949,838

 

Common stock subscription receivable

 

(108,750

)

(108,750

)

Deficit accumulated during development stage

 

(7,184,837

)

(7,050,491

)

Total stockholders’ equity (deficit)

 

(212,951

)

(180,622

)

 

 

 

 

 

 

Total liabilities and stockholders’ equity (deficit)

 

$

45,716

 

$

49,330

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

4



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENTS OF LOSSES

(unaudited)

 

 

 

Three months ended March 31,

 

For the period from
February 16, 1999 (date
of inception) through

 

 

 

2010

 

2009

 

March 31, 2010

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

$

128,747

 

$

112,568

 

$

3,791,370

 

Research and development (Note A)

 

 

2,727

 

1,377,538

 

Impairment of intellectual property

 

 

 

1,838,250

 

Depreciation

 

4,457

 

4,067

 

187,261

 

Total operating expenses

 

133,204

 

119,362

 

7,194,419

 

 

 

 

 

 

 

 

 

Net loss from operations

 

(133,204

)

(119,362

)

(7,194,419

)

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Interest income (expense)

 

(1,142

)

 

9,582

 

 

 

 

 

 

 

 

 

Net loss before provision for income taxes

 

(134,346

)

(119,362

)

(7,184,837

)

 

 

 

 

 

 

 

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$

(134,346

)

$

(119,362

)

$

(7,184,837

)

 

 

 

 

 

 

 

 

Loss per common share-basic and fully diluted

 

$

(0.01

)

$

(0.01

)

$

(0.75

)

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding-basic and fully diluted

 

11,268,415

 

10,937,178

 

9,635,120

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

5



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Common stock issued in February 1999 in exchange for intellectual property at $0.25 per share

 

 

$

 

7,200,000

 

$

1,800,000

 

$

 

$

 

$

 

$

 

$

1,800,000

 

Common stock issued in March 1999 in exchange for services rendered at $0.25 per share

 

 

 

120,000

 

30,000

 

 

 

 

 

30,000

 

Sale of common stock in March 1999 at $0.25 per share

 

 

 

220,000

 

55,000

 

 

 

 

 

55,000

 

Fair value of options issued in March 1999 in exchange for services rendered

 

 

 

 

 

9,240

 

 

 

 

9,240

 

Common stock issued in April 1999 in exchange for services rendered at $0.25 per share

 

 

 

33,000

 

8,250

 

 

 

 

 

8,250

 

Sale of common stock in April 1999 at $0.25 per share

 

 

 

107,000

 

26,750

 

 

 

 

 

26,750

 

Exercise of options in April  1999 at $0.25 per share

 

 

 

50,000

 

12,500

 

 

 

 

 

12,500

 

Sale of common stock in August 1999 at $0.25 per share

 

 

 

50,000

 

25,000

 

 

 

 

 

25,000

 

Fair value of options issued in September 1999 in exchange for services rendered

 

 

 

 

 

16,612

 

 

 

 

16,612

 

Sale of common stock in November 1999 at $0.25 per share

 

 

 

50,000

 

12,500

 

 

 

 

 

12,500

 

Exercise of options in November 1999 at $0.50 per share

 

 

 

50,000

 

25,000

 

 

 

 

 

25,000

 

Net loss

 

 

 

 

 

 

 

 

(2,087,103

)

(2,087,103

)

Balance at December 31, 1999

 

 

$

 

7,880,000

 

$

1,995,000

 

$

25,852

 

$

 

$

 

$

(2,087,103

)

$

(66,251

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

6



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

7,880,000

 

$

1,995,000

 

$

25,852

 

$

 

$

 

$

(2,087,103

)

$

(66,251

)

Sale of common stock in June 2000 at $0.50 per share

 

 

 

100,000

 

50,000

 

 

 

 

 

50,000

 

Sale of common stock in July 2000 at $0.50 per share

 

 

 

250,000

 

125,000

 

 

 

 

 

125,000

 

Sale of common stock in August 2000 at $0.50 per share

 

 

 

164,000

 

82,000

 

 

 

 

 

82,000

 

Common stock issued in August 2000 at $0.50 per share in exchange for services rendered

 

 

 

20,000

 

10,000

 

 

 

 

 

10,000

 

Sale of common stock in September 2000 at $0.50 per share

 

 

 

250,000

 

125,000

 

 

 

 

 

125,000

 

Sale of common stock in November 2000 at $0.50 per share

 

 

 

100,000

 

50,000

 

 

 

 

 

50,000

 

Net loss

 

 

 

 

 

 

 

 

(378,039

)

(378,039

)

Balance at December 31, 2000

 

 

 

8,764,000

 

2,437,000

 

25,852

 

 

 

(2,465,142

)

(2,290

)

Fair value of options issued in January 2000 in exchange for services rendered

 

 

 

 

 

57,852

 

 

 

 

57,852

 

Sale of common stock in January 2001 at $0.50 per share

 

 

 

244,000

 

122,000

 

 

 

 

 

 

122,000

 

Net loss

 

 

 

 

 

 

 

 

(266,224

)

(266,224

)

Balance at December 31, 2001

 

 

 

9,008,000

 

2,559,000

 

83,704

 

 

 

(2,731,366

)

(88,662

)

Common stock issued in January 2002 at $0.50 per share in exchange for services rendered

 

 

 

20,000

 

10,000

 

 

 

 

 

10,000

 

Sale of common stock in March 2002 at $0.50 per share

 

 

 

50,000

 

25,000

 

 

 

 

 

25,000

 

Sale of common stock in April 2002 at $0.50 per share

 

 

 

200,000

 

100,000

 

 

 

 

 

100,000

 

Fair value of options issued in May 2002 in exchange for services rendered

 

 

 

 

 

17,892

 

 

 

 

17,892

 

Sale of common stock in May 2002 at $0.50 per share

 

 

 

60,000

 

30,000

 

 

 

 

 

30,000

 

Sale of common stock in July 2002 at $0.50 per share

 

 

 

80,000

 

40,000

 

 

 

 

 

40,000

 

Sale of common stock in August 2002 at $0.50 per share

 

 

 

55,400

 

27,700

 

 

 

 

 

27,700

 

Sale of common stock in September 2002 at $0.50 per share

 

 

 

50,000

 

25,000

 

 

 

 

 

25,000

 

Sale of common stock in October 2002 at $0.50 per share

 

 

 

50,000

 

25,000

 

 

 

 

 

25,000

 

Sale of common stock in November 2002 at $0.50 per share

 

 

 

144,000

 

72,000

 

 

 

 

 

72,000

 

Net loss

 

 

 

 

 

 

 

 

(184,721

)

(184,721

)

Balance at December 31, 2002

 

 

$

 

9,717,400

 

$

2,913,700

 

$

101,596

 

$

 

$

 

$

(2,916,087

)

$

99,209

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

7



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

9,717,400

 

$

2,913,700

 

$

101,596

 

$

 

$

 

$

(2,916,087

)

$

99,209

 

Sale of common stock in January 2003 at $0.50 per share

 

 

 

35,378

 

17,689

 

 

 

 

 

17,689

 

Common stock issued in February 2003 at $0.50 in exchange for services rendered

 

 

 

20,000

 

10,000

 

 

 

 

 

10,000

 

Sale of common stock in March 2003 at $0.50 per share

 

 

 

100,000

 

50,000

 

 

 

 

 

50,000

 

Common stock issued in March 2003 at $0.50 per share in exchange for services rendered

 

 

 

6,000

 

3,000

 

 

 

 

 

3,000

 

Sale of common stock in July 2003 at $1.00 per share

 

 

 

63,080

 

63,080

 

 

 

 

 

63,080

 

Sale of common stock in September 2003 at $1.00 per share

 

 

 

25,000

 

25,000

 

 

 

 

 

25,000

 

Sale of common stock in December 2003 at $1.00 per share

 

 

 

32,597

 

32,597

 

 

 

 

 

32,597

 

Net loss

 

 

 

 

 

 

 

 

(216,804

)

(216,804

)

Balance at December 31, 2003

 

 

 

9,999,455

 

3,115,066

 

101,596

 

 

 

(3,132,891

)

83,771

 

Sale of common stock in August 2004 at $1.00 per share

 

 

 

2,000

 

2,000

 

 

 

 

 

2,000

 

Sale of common stock in September 2004 at $1.00 per share

 

 

 

20,000

 

20,000

 

 

 

 

 

20,000

 

Sale of common stock in November 2004 at $1.00 per share

 

 

 

30,000

 

30,000

 

 

 

 

 

30,000

 

Sale of common stock in December 2004 at $1.00 per share

 

 

 

73,500

 

73,500

 

 

 

 

 

73,500

 

Net loss

 

 

 

 

 

 

 

 

(205,640

)

(205,640

)

Balance at December 31, 2004

 

 

 

10,124,955

 

3,240,566

 

101,596

 

 

 

(3,338,531

)

3,631

 

Sale of common stock in December 2005 at $1.00 per share

 

 

 

28,900

 

28,900

 

 

 

 

 

28,900

 

Net loss

 

 

 

 

 

 

 

 

(197,277

)

(197,277

)

Balance at December 31, 2005

 

 

$

 

10,153,855

 

$

3,269,466.0

 

$

101,596.0

 

$

 

$

 

$

(3,535,808.0

)

$

(164,746.0

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

8



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

10,153,855

 

$

3,269,466

 

$

101,596

 

$

 

$

 

$

(3,535,808

)

$

(164,746

)

Sale of common stock in January 2006 at $1.00 per share

 

 

 

50,000

 

50,000

 

 

 

 

 

50,000

 

Common stock issued in March 2006 at $1.00 per share in exchange for services rendered

 

 

 

20,000

 

20,000

 

 

 

 

 

20,000

 

Fair value of options issued in March 2006 in exchange for services rendered

 

 

 

 

 

896,532

 

 

 

 

896,532

 

Sale of common stock in May 2006 at $2.00 per share

 

 

 

50,000

 

100,000

 

 

 

 

 

100,000

 

Fair value of warrants issued in May 2006 in exchange for services rendered

 

 

 

 

 

32,016

 

 

 

 

32,016

 

Sale of common stock in September 2006 at $2.00 per share

 

 

 

10,000

 

20,000

 

 

 

 

 

20,000

 

Sale of common stock in October 2006 at $2.00 per share

 

 

 

24,000

 

48,000

 

 

 

 

 

48,000

 

Sale of common stock in December 2006 at $2.00 per share

 

 

 

14,800

 

29,600

 

 

 

 

 

29,600

 

Net loss

 

 

 

 

 

 

 

 

(1,139,559

)

(1,139,559

)

Balance at December 31, 2006

 

 

 

10,322,655

 

3,537,066

 

1,030,144

 

 

 

(4,675,367

)

(108,157

)

Fair value of warrants issued in January 2007 in exchange for services rendered

 

 

 

 

 

25,913

 

 

 

 

25,913

 

Sale of common stock in January 2007 at $2.00 per share

 

 

 

13,000

 

26,000

 

 

 

 

 

26,000

 

Sale of common stock in February 2007 at $2.00 per share

 

 

 

162,500

 

325,000

 

 

 

 

 

325,000

 

Sale of common stock in March 2007 at $2.00 per share

 

 

 

122,500

 

245,000

 

 

 

 

 

245,000

 

Sale of common stock in April 2007 at $2.00 per share

 

 

 

12,500

 

25,000

 

 

 

 

 

25,000

 

Fair of options issued in November 2007 in exchange for service fees

 

 

 

 

 

166,290

 

 

(166,290

)

 

 

Sale of common stock in December 2007 at $2.25 per share

 

 

 

22,222

 

50,000

 

 

 

 

 

50,000

 

Amortization of deferred compensation

 

 

 

 

 

 

 

5,227

 

 

5,227

 

Net loss

 

 

 

 

 

 

 

 

(396,953

)

(396,953

)

Balance at December 31, 2007

 

 

$

 

10,655,377

 

$

4,208,066

 

$

1,222,347

 

$

 

$

(161,063

)

$

(5,072,320

)

$

197,030

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

9



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

10,655,377

 

$

4,208,066

 

$

1,222,347

 

$

 

$

(161,063

)

$

(5,072,320

)

$

197,030

 

Sale of common stock in January 2008 at $2.25 per share

 

 

 

22,222

 

50,000

 

 

 

 

 

50,000

 

Common stock issued in January 2008 at $2.25 per share in exchange for services rendered

 

 

 

4,000

 

9,000

 

 

 

 

 

9,000

 

Sale of common stock in February 2008 at $2.25 per share

 

 

 

11,111

 

25,000

 

 

 

 

 

25,000

 

Common stock issued in February 2008 at $2.25 per share in exchange for services rendered

 

 

 

4,000

 

9,000

 

 

 

 

 

9,000

 

Sale of common stock in March 2008 at $2.25 per share

 

 

 

68,055

 

153,125

 

 

 

 

 

 

 

 

153,125

 

Common stock issued in March 2008 at $2.25 per share in exchange for services rendered

 

 

 

6,222

 

14,000

 

 

 

 

 

14,000

 

Sale of common stock in April 2008 at $2.25 per share

 

 

 

30,000

 

67,501

 

 

 

 

 

67,501

 

Common stock issued in April 2008 at $2.25 per share in exchange for services rendered

 

 

 

4,000

 

9,000

 

 

 

 

 

9,000

 

Sale of common stock in May 2008 at $2.25 per share

 

 

 

22,222

 

50,000

 

 

 

 

 

50,000

 

Common stock issued in May 2008 at $2.25 per share in exchange for services rendered

 

 

 

4,000

 

9,000

 

 

 

 

 

9,000

 

Subtotal

 

 

$

 

10,831,209

 

$

4,603,692

 

$

1,222,347

 

$

 

$

(161,063

)

$

(5,072,320

)

$

592,656

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

10



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

10,831,209

 

$

4,603,692

 

$

1,222,347

 

$

 

$

(161,063

)

$

(5,072,320

)

$

592,656

 

Fair value of vested options issued in exchange for services rendered

 

 

 

 

 

55,016

 

 

 

 

55,016

 

Sale of common stock in June 2008 at $2.25 per share

 

 

 

22,222

 

50,000

 

 

 

 

 

50,000

 

Common stock issued in July 2008 at $2.25 per share in exchange for services rendered

 

 

 

8,000

 

18,000

 

 

 

 

 

18,000

 

Sale of common stock in July 2008 at $2.25 per share

 

 

 

35,555

 

80,000

 

 

 

 

 

80,000

 

Common stock issued in September 2008 at $2.00 per share in exchange for services rendered

 

 

 

4,000

 

8,000

 

 

 

 

 

8,000

 

Sale of common stock in September 2008 at $2.25 per share

 

 

 

4,445

 

10,000

 

 

 

 

 

10,000

 

Common stock issued in October 2008 at $1.35 per share in exchange for services rendered

 

 

 

4,000

 

5,400

 

 

 

 

 

5,400

 

Common stock issued in November 2008 at $1.95 per share in exchange for services rendered

 

 

 

8,000

 

15,600

 

 

 

 

 

15,600

 

Sale of common stock in December 2008 at $2.25 per share

 

 

 

11,110

 

25,000

 

 

 

 

 

 

 

 

25,000

 

Common stock issued in December 2008 at $1.60 per share in exchange for services rendered

 

 

 

4,000

 

6,400

 

 

 

 

 

6,400

 

Amortization of deferred compensation

 

 

 

 

 

 

 

41,699

 

 

41,699

 

Net Loss

 

 

 

 

 

 

 

 

(883,530

)

(883,530

)

Balance, December 31, 2008

 

 

$

 

10,932,541

 

$

4,822,092

 

$

1,277,363

 

$

 

$

(119,364

)

$

(5,955,850

)

$

24,241

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

11



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

10,932,541

 

$

4,822,092

 

$

1,277,363

 

$

 

$

(119,364

)

$

(5,955,850

)

$

24,241

 

Common stock issued in March 2009 at $1.03 per share in exchange for services rendered

 

 

 

18,667

 

19,227

 

 

 

 

 

19,227

 

Sale of common stock in March 2009 at $2.25 per share

 

 

 

10,066

 

22,650

 

 

 

 

 

22,650

 

Fair value of vested options for services rendered

 

 

 

 

 

739,839

 

 

 

 

739,839

 

Cancelled outstanding non vested warrants for services

 

 

 

 

 

(119,364

)

 

119,364

 

 

 

Fair value of warrants issued for services rendered

 

 

 

 

 

52,000

 

 

 

 

52,000

 

Common stock issued in April 2009 at $1.39 per share in exchange for services rendered

 

 

 

6,154

 

8,554

 

 

 

 

 

8,554

 

Common stock issued in April 2009 for options exercised

 

 

 

176,250

 

108,750

 

 

(108,750

)

 

 

 

Common stock issued in May 2009 at $1.30 per share in exchange for services rendered

 

 

 

6,154

 

8,000

 

 

 

 

 

8,000

 

Common stock issued in May 2009 for options exercised

 

 

 

20,000

 

5,000

 

 

 

 

 

5,000

 

Common stock issued in June 2009 at $1.30 per share in exchange for services rendered

 

 

 

7,273

 

9,455

 

 

 

 

 

9,455

 

Common stock issued in July 2009 at $0.46 per share in exchange for services rendered

 

 

 

8,421

 

3,873

 

 

 

 

 

3,873

 

Common stock issued in August 2009 at $1.00 per share in exchange for services rendered

 

 

 

8,000

 

8,000

 

 

 

 

 

8,000

 

Common stock issued in September 2009 at $0.21 per share in exchange for services rendered

 

 

 

8,000

 

1,680

 

 

 

 

 

1,680

 

Common stock issued in October 2009 at $0.38 per share in exchange for services rendered

 

 

 

13,000

 

4,940

 

 

 

 

 

4,940

 

Common stock issued in December 2009 at $0.41 per share in exchange for services rendered

 

 

 

16,000

 

6,560

 

 

 

 

 

6,560

 

Net Loss

 

 

 

 

 

 

 

 

(1,094,641

)

(1,094,641

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2009

 

 

$

 

11,230,526

 

$

5,028,781

 

$

1,949,838

 

$

(108,750

)

$

 

$

(7,050,491

)

$

(180,622

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

12



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit accumulated

 

 

 

 

 

Preferred shares

 

Common shares

 

Additional

 

Subscription

 

Deferred

 

during

 

 

 

 

 

Stock

 

Amount

 

Stock

 

Amount

 

Paid in Capital

 

Receivable

 

Compensation

 

Development stage

 

Total

 

Balance forward

 

 

$

 

11,230,526

 

$

5,028,781

 

$

1,949,838

 

$

(108,750

)

$

 

$

(7,050,491

)

$

(180,622

)

Common stock issued in January 2010 at $1.00 per share in exchange for accrual

 

 

 

8,000

 

8,000

 

 

 

 

 

8,000

 

Common stock issued at $0.88 per share in exchange for compensation shown as accrual

 

 

 

25,000

 

22,000

 

 

 

 

 

22,000

 

Common stock issued in February 2010 at $1.00 per share in exchange for services rendered

 

 

 

8,000

 

8,000

 

 

 

 

 

8,000

 

Common stock issued in March 2010 at $1.00 per share in exchange for services rendered

 

 

 

8,000

 

8,000

 

 

 

 

 

8,000

 

Sale of common stock in March 2010 at $1.00 per share

 

 

 

25,000

 

25,000

 

 

 

 

 

25,000

 

Fair value of vested options issued for services

 

 

 

 

 

31,017

 

 

 

 

31,017

 

Net loss

 

 

 

 

 

 

 

 

(134,346

)

(134,346

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2010

 

 

$

 

11,304,526

 

$

5,099,781

 

$

1,980,855

 

$

(108,750

)

$

 

$

(7,184,837

)

$

(212,951

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

13



Table of Contents

 

IRIS BIOTECHNOLOGIES, INC

(a development stage company)

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

 

 

For the period from

 

 

 

 

 

February 16, 1999 (date

 

 

 

For the three months ended March 31,

 

of inception) through

 

 

 

2010

 

2009

 

March 31, 2010

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

 

$

(134,346

)

$

(119,362

)

$

(7,184,837

)

Adjustments to reconcile net loss to cash (used in) operating activities:

 

 

 

 

 

 

 

Depreciation

 

4,456

 

4,067

 

187,260

 

Amortization of deferred compensation

 

 

 

46,926

 

Common stock issued in exchange for services rendered

 

16,000

 

19,227

 

280,939

 

Impairment of intellectual property

 

 

 

1,800,000

 

Options and warrants issued in exchange for services rendered

 

31,017

 

23,579

 

1,933,929

 

Increase (decrease) in:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

59,665

 

52,270

 

128,015

 

Net cash (used in) operating activities:

 

(23,208

)

(20,219

)

(2,807,768

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Acquisition of property, plant and equipment

 

 

 

(221,591

)

Net cash (used in) investing activities:

 

 

 

(221,591

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Sale of common stock

 

25,000

 

22,650

 

2,837,593

 

Exercise of common stock options

 

 

 

42,500

 

Net (payments) proceeds, related party

 

(950

)

27,500

 

150,550

 

Net cash provided by financing activities

 

24,050

 

50,150

 

3,030,643

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

842

 

29,931

 

1,284

 

Cash and cash equivalents beginning of period

 

442

 

990

 

 

Cash and cash equivalents end of period

 

$

1,284

 

$

30,921

 

$

1,284

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

 

$

 

$

277

 

Cash paid during the period for taxes

 

$

 

$

 

$

 

Common stock issued in exchange for intellectual property

 

$

 

$

 

$

1,800,000

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements

 

14



Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A summary of the significant accounting policies applied in the preparation of the accompanying unaudited condensed financial statements follows.

 

General

 

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

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three period ended March 31, 2010, are not necessarily indicative of the results that may be expected for the year ended December 31, 2010. The unaudited condensed financial statements should be read in conjunction with the December 31, 2009 financial statements and footnotes thereto included in the Company’s Form 10-K filed on March 31, 2010.

 

Business and Basis of Presentation

 

Iris BioTechnologies Inc. (the “Company”) was incorporated on February 16, 1999 under the laws of the State of California. The Company is in the development stage as defined under Accounting Standards Codification subtopic 915-10 Development Stage Entities and its efforts are principally devoted to developing solutions for the detection and monitoring of monogenic and complex genomic diseases. The Company has not generated any revenue to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. For the period from inception through March 31, 2010, the Company has accumulated losses of $7,184,837.

 

Cash and Cash Equivalents

 

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

 

Property and Equipment

 

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

 

Long-Lived Assets

 

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

 

15



Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different 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 an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.

 

Net Income (loss) Per Common Share

 

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

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

 

Reclassifications

 

Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.

 

Research and Development

 

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

 

16



Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Liquidity

 

To date the Company has generated no revenues, has incurred expenses, and has sustained losses. As shown in the accompanying unaudited condensed financial statements, the Company incurred a net loss of $134,346 during the three month period ended March 31, 2010 and $119,362 during the three month period ended March 31, 2009. For the period from inception through March 31, 2010, the Company has accumulated losses of $7,184,837. Consequently, its operations are subject to all risks inherent in the establishment of a new business enterprise.

 

Concentrations of Credit Risk

 

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and related party receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company periodically reviews its trade receivables in determining its allowance for doubtful accounts. The Company does not have accounts receivable and allowance for doubtful accounts at March 31, 2010.

 

Dependency on key management

 

The future success or failure of the Company is dependent primarily upon the continued efforts and financial support of Simon Chin, the Company’s Chief Executive Officer, Chief Financial Officer and the majority shareholder (see Note 3). He has agreed to fund the deficit for December 31, 2010 which currently is estimated at $100,000.

 

Fair Value of Financial Instruments

 

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

 

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

 

Stock Based Compensation

 

Effective January 1, 2006, the beginning of the Company’s first fiscal quarter of 2006, the Company adopted the fair value recognition provisions of Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) using the modified-prospective transition method. Under this transition method, stock-based compensation expense was recognized in the financial statements for granted, modified, or settled stock options. Compensation expense recognized included the estimated expense for stock options granted on and subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718-10, and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of ASC 718-10. Results for prior periods have not been restated, as provided for under the modified-prospective method.

 

ASC 718-10 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the Company’s pro forma information required under ASC 718-10 for the periods prior to fiscal 2006, the Company accounted for forfeitures as they occurred.

 

17



Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Upon adoption of ASC 718-10, the Company is using the Black-Scholes option-pricing model as its method of valuation for share-based awards granted beginning in fiscal 2006, which was also previously used for the Company’s pro forma information required under SFAS 123. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate.

 

For the three month period ended March 31, 2010, the Company did not grant any employee option.  The fair value of  previously issued vesting options of $23,579 was charged to current period operations.

 

Recent Accounting Pronouncements

 

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

 

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

 

In January 2010 the FASB issued Update No. 2010-06 “Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements” (“2010-06”). 2010-06 requires new disclosures regarding significant transfers between Level 1 and Level 2 fair value measurements, and disclosures regarding purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair value measurements. 2010-06 also calls for further disaggregation of all assets and liabilities 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 currently evaluating whether adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

 

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

 

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

 

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

 

In January 2010 the FASB issued Update No. 2010-01 “Accounting for Distributions to Shareholders with Components 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 to shareholders and their affect on the computation of earnings per shares. Management does not expect adoption of this standard to have any material impact on its financial position, results of operations or operating cash flows.

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 2 - PROPERTY, PLANT, AND EQUIPMENT

 

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

 

 

 

March 31, 2010

 

December 31, 2009

 

Computer equipment

 

$

61,201

 

$

61,201

 

Office equipment

 

1,728

 

1,728

 

Furniture and fixtures

 

3,586

 

3,586

 

Manufacturing equipment

 

165,503

 

165,503

 

 

 

232,018

 

232,018

 

Less: accumulated depreciation

 

(187,586

)

(183,130

)

 

 

$

44,432

 

$

48,888

 

 

NOTE 3 — RELATED PARTY TRANSACTIONS

 

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

 

NOTE 4 — LONG TERM DEBT

 

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

 

 

 

March 31, 2010

 

December 31, 2009

 

Notes payable, related party

 

$

38,000

 

$

38,000

 

Note payables, unrelated party

 

$

25,000

 

$

15,000

 

 

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

 

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

 

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

 

On January 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 from date of issuance.  The note is convertible into the Company’s common stock at a conversion rate of $2.25 per share.

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 5 — STOCKHOLDER EQUITY

 

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

 

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

 

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

 

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

 

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

 

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

 

During the year ended December 31, 2003, the Company issued an aggregate of 26,000 shares of common stock to consultants for services in the amount of $13,000. All valuations of common stock issued for services were based upon the value of the services rendered, which did not differ materially from the fair value of the Company’s common stock during the period the services were rendered.

 

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

 

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

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 5 — STOCKHOLDER EQUITY (continued)

 

Common stock (continued)

 

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

 

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

 

NOTE 6 — WARRANTS AND OPTIONS

 

Warrants

 

The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at March 31, 2010:

 

Exercise Price

 

Number
Outstanding

 

Warrants Outstanding
Weighted Average
Remaining Contractual
Life (years)

 

Weighted
Average
Exercise price

 

Number
Exercisable

 

Warrants Exercisable
Weighted
Average
Exercise Price

 

$

 0.13

 

40,000

 

4.22

 

$

0.13

 

40,000

 

$

0.13

 

$

 2.00

 

31,400

 

1.45

 

$

2.00

 

31,400

 

$

2.00

 

$

 2.25

 

23,629

 

2.89

 

$

2.25

 

23,629

 

$

2.25

 

 

 

95,029

 

 

 

 

 

95,029

 

 

 

 

Transactions involving 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 March 31, 2010

 

95,029

 

$

1.29

 

 

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

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 6 — WARRANTS AND OPTIONS (continued)

 

Warrants

 

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

 

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

 

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

 

Significant assumptions:

 

 

 

Risk-free interest rate at grant date

 

2.82

%

Expected stock price volatility

 

458.97

%

Expected dividend payout

 

 

Expected option life-years (a)

 

5

 

 


(a)The expected option life is based on contractual expiration dates

 

Options

 

Employee Options

 

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees under a stock option plan at March 31, 2010:

 

 

 

Options Outstanding

 

Options Exercisable

 

Exercise
Prices (S)

 

Number
Outstanding

 

Weighted Average
Remaining
Contractual Life
(Years)

 

Weighted
Average
Exercise
Price (S)

 

Number
Exercisable

 

Weighted
Average
Exercise
Price

 

$

 0.13

 

80,000

 

9.22

 

$

0.13

 

80,000

 

$

0.13

 

0.15

 

400,000

 

4.22

 

0.15

 

400,000

 

0.15

 

0.50

 

91,000

 

0.93

 

0.50

 

91,000

 

0.50

 

1.00

 

950,750

 

5.01

 

1.00

 

950,750

 

1.00

 

2.25

 

167,696

 

8.16

 

2.25

 

76,861

 

2.25

 

 

 

1,689,446

 

 

 

0.85

 

1,598,611

 

0.76

 

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 6 — WARRANTS AND OPTIONS (continued)

 

Employee Options (continued)

 

Transactions involving 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

 

 

 

Outstanding at March 31, 2010:

 

1,689,446

 

$

0.85

 

 

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

 

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

 

Significant assumptions :

 

 

 

Risk-free interest rate at grant date

 

2.82% - 3.79

%

Expected stock price volatility

 

458.97

%

Expected dividend payout

 

 

Expected option life-years (a)

 

5- 10

 

 


(a)The expected option life is based on contractual expiration dates

 

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

 

Non employee options

 

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to non employees under a stock option plan at March 31, 2010:

 

 

 

Options Outstanding

 

Options Exercisable

 

Exercise
Prices

 

Number
Outstanding

 

Weighted Average
Remaining
Contractual Life
(Years)

 

Weighted
Average
Exercise
Price

 

Number
Exercisable

 

Weighted
Average
Exercise
Price

 

$

0.50

 

160,000

 

1.09

 

$

0.50

 

160,000

 

$

0.50

 

1.00

 

110,000

 

5.96

 

1.00

 

110,000

 

1.00

 

1.40

 

105,000

 

8.99

 

1.40

 

34,250

 

1.40

 

 

 

375,000

 

 

 

0.90

 

304,650

 

0.77

 

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 6 — WARRANTS AND OPTIONS (continued)

 

Transactions involving 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 March 31, 2010:

 

375,000

 

$

0.90

 

 

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

 

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

 

Significant assumptions :

 

 

 

Risk-free interest rate at grant date

 

3.84

%

Expected stock price volatility

 

455.63

%

Expected dividend payout

 

 

Expected option life-years (a)

 

8.99

 

 


(a)The expected option life is based on contractual expiration dates

 

NOTE 7 - LOSSES PER SHARE

 

The following table presents the computation of basic and diluted losses per share for the three month periods ended March 31, 2010 and 2009:

 

 

 

2010

 

2009

 

Net income loss available to Common stockholders

 

$

(134,346

)

$

(119,362

)

Basic and diluted earning (loss) per share

 

$

(0.01

)

$

(0.01

)

Weighted average common shares outstanding

 

11,268,415

 

10,937,178

 

 

NOTE 8 - INCOME TAXES

 

ASC 740-10 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.

 

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Table of Contents

 

IRIS BIOTECHNOLOGIES INC.

(A development stage company)

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2010

(Unaudited)

 

NOTE 8 - INCOME TAXES (continued)

 

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

 

Components of deferred tax assets as of March 31, 2010 are as follows:

 

Noncurrent:

 

 

 

Net operating loss carry forward

 

$

2,500,000

 

Valuation allowance

 

(2,500,000

)

Net deferred tax asset

 

$

 

 

NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

 

The company doesn’t have any items recorded or measured at fair value on a recurring basis as of March 31, 2010.

 

NOTE 10 - SUBSEQUENT EVENTS

 

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

 

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

 

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

 

Subsequent events have been evaluated through May 11, 2010, the date that the financial statements were issued.

 

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Table of Contents

 

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

 

Forward-Looking Statements

 

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

 

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

 

Overview

 

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

 

During the past 18 months, hawse have spent less than $1,000 for public relations. Due to the severe recession we felt that is was prudent to spend investor dollars on designing and building an advanced chip making system, streamlining the automated patient sample processing protocols and product tracking system, and interacting with physicians and patients to demonstrate the usefulness of Iris’s BioWindows medical informatics system. As of May 1, 2010, Iris has hired an investor relations firm to access targeted investors and share the Iris story with the world.

 

There are some risks with respect to clinical testing, regulatory approval and review cycles and uncertainty of the costs. Net positive cash inflows from any products developed may take several years to achieve.

 

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

 

History

 

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

 

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

 

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Table of Contents

 

Plan of Operation

 

We are a life sciences company and the recipient of the Frost and Sullivan 2008 Technology Innovation Award in Pharmacogenomics. Without a clinically accurate tool to measure the relevant genetic/genomic malfunctions involved, cancer diagnosis is a trial and error process leading to unnecessary or ill-directed therapy with unintended risks and adverse side effects. The development of our proprietary Nano-biochips™ assists medical professionals in the diagnosis and prognosis process.  Our manufacturing system has the capability to produce a variety of chips with a choice of mRNAs, microRNAs, proteins, or other biomarker probes for the diagnosis and prognosis of breast cancer, colon cancer, and many other diseases.

 

The Iris BioWindows™ Informatics System for Personalized and Targeted Medicine handles the analysis of the Nano-biochip™ gene and protein signatures. BioWindows™ is an artificial intelligence system, which includes a powerful database with molecular data, in-depth patient demographics and lifestyle information, family medical histories and treatment-response profiles for many diseases. We launched “Health Passport” in its BioWindows™ 2.0 Informatics System a year ago.

 

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

 

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

 

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

 

Product Research and Development

 

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

 

Acquisition of Plant and Equipment and Other Assets

 

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

 

Number of Employees

 

From our inception, we have principally relied on the services of outside consultants and part-time employees for services. As of May 11, 2010, we have five full time employees and 9 part-time employees. In order for us to attract and retain quality personnel, we anticipate we will have to offer competitive salaries to future employees. We anticipate that it may become desirable to add additional full and or part time employees to discharge certain critical functions during the next 12 months. This projected increase in personnel is dependent upon our ability to generate revenues and obtain sources of financing. There is no guarantee that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the number of employees. As we continue to expand, we will incur additional cost for personnel.

 

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Table of Contents

 

Results of Operations

 

As a development stage company, we have yet to earn revenues from operations. We may experience fluctuations in operating results in future periods due to a variety of factors, including our ability to obtain additional financing in a timely manner and on terms favorable to us, our ability to successfully develop our business model, the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure and the implementation of marketing programs, key agreements, and strategic alliances, and general economic conditions specific to our industry.

 

As a result of limited capital resources and no revenues from operations since inception, we have relied on the issuance of equity securities to employees and non-employees in exchange for services. Our management enters into equity compensation agreements with non-employees if it is in our best interest under terms and conditions consistent with the requirements of Accounting Standards Codification Subtopic 718-10, “Compensation”.” In order to conserve our limited operating capital resources, we anticipate continuing to compensate non-employees with equity for services during the next twelve months. This policy may have a material effect on our results of operations during the next twelve months.

 

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

 

Revenues

 

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

 

Costs and Expenses

 

From our inception through March 31, 2010, we have incurred cumulative losses of $7,184,837. In addition, a significant part of the overall remaining costs are associated principally with equity-based compensation to employees and consultants, research and development costs and professional services rendered.

 

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

 

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

 

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

 

Liquidity and Capital Resources

 

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

 

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

 

Our available working capital and capital requirements will depend upon numerous factors, including progress of our research and development programs, our progress in and the cost of pre-clinical and clinical testing, the timing and cost of obtaining regulatory approvals, the cost of filing and prosecuting patent claims and other intellectual property rights, completing technological and market developments, current and future licensing relationships, the status of our competitors, and our ability to establish collaborative arrangements with other organizations .

 

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Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing, collaborative and licensing agreements, strategic alliances, and our ability to realize the full potential of our technology in development. Such additional funds may not become available on acceptable terms, if at all, and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term. Through May 11, 2010, virtually all of our financing has been through private placements of common stock and warrants. We intend to continue to fund operations from cash on-hand and through the similar sources of capital previously described for the foreseeable future. We can give no assurances that any additional capital that we are able to obtain will be sufficient to meet our needs. We believe that we will continue to incur net losses and negative cash flows from operating activities for the next two years. Based on the resources available to us on May 11, 2010, we can sustain our present burn rate for one year. We will need additional equity or debt financing to accelerate the growth of our operations through the remainder of 2010 and we may need additional financing thereafter.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Inflation

 

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

 

Critical Accounting Policies

 

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

 

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

 

Accounting for Stock-Based Compensation

 

We account for our stock options and warrants using the fair value method promulgated by Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services. Therefore, our results include non-cash compensation expense as a result of the issuance of stock options and warrants and we expect to record additional non-cash compensation expense in the future.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

N/A

 

ITEM 4T. CONTROLS AND PROCEDURES.

 

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

 

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended March 31, 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

 

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the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II

 

ITEM 1. LEGAL PROCEEDINGS.

 

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

 

ITEM 1A. RISK FACTORS.

 

N/A

 

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

 

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

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

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

 

 

IRIS BIOTECHNOLOGIES INC.

 

 

 

 

 

 May 12, 2010

 

/s/ Simon Chin

 

 

Simon Chin

 

 

President, Chief Executive Officer, Chief Financial

 

 

Officer and Director (Principal Executive Officer,

 

 

Principal Accounting Officer and Principal Financial Officer)

 

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