UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2008

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 0-23150

Ibis Technology Corporation

(Exact name of registrant as specified in its charter)

Massachusetts		04-2987600
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

32 Cherry Hill Drive, Danvers, MA		01923
(Address of principal executive offices)		(Zip Code)

(978) 777-4247

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o No x

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 x		Smaller reporting company o
(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

14,317,482 shares of Common Stock, par value $.008, were outstanding on July 8, 2008.

IBIS TECHNOLOGY CORPORATION

BALANCE SHEETS

(Unaudited)

	December 31,			March 31,
	2007			2008

Assets
Current Assets:
Cash and cash equivalents	$	5,770,072		$	4,970,979
Accounts receivable, trade, net	308,768			314,956
Inventories, net (note 4)	1,790,394			1,790,242
Prepaid expenses and other current assets	165,925			205,290
Total current assets	8,035,159			7,281,467
Property and equipment	19,598,897			19,598,897
Less: Accumulated depreciation and amortization	(18,026,667		)	(18,180,745		)
Net property and equipment	1,572,230			1,418,152
Patents and other assets, net	155,444			148,650
Total assets	$	9,762,833		$	8,848,269

Liabilities and Stockholders’ Equity:
Current Liabilities:
Accounts payable	$	260,372		$	251,751
Accrued liabilities (note 5)	471,219			431,035
Total current liabilities	731,591			682,786

Stockholders’ Equity:
Undesignated preferred stock, $.01 par value Authorized 2,000,000 shares; none issued	—			—
Common stock, $.008 par value Authorized 50,000,000 shares; issued and outstanding 14,317,482 shares and 14,317,482 shares at December 31, 2007 and March 31, 2008, respectively	114,540			114,540
Additional paid-in capital	99,087,089			99,173,739
Accumulated deficit	(90,170,387		)	(91,122,796		)
Total stockholders’ equity	9,031,242			8,165,483
Total liabilities and stockholders’ equity	$	9,762,833		$	8,848,269

See accompanying notes to unaudited interim financial statements.

IBIS TECHNOLOGY CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended
	March 31,
	2007			2008
Net Sales and revenue:
License and other revenue	$	84,144		$	62,908
Equipment revenue	245,919			268,106
Total net sales and revenue (notes 2 and 7)	330,063			331,014

Cost of sales and revenue:
Cost of license and other revenue	—			—
Cost of equipment revenue (includes share-based compensation expense of $7,444 and $5,225 for the three months ended March 31, 2007, and 2008, respectively)	115,838			298,057
Total cost of sales and revenue	115,838			298,057
Gross profit	214,225			32,957

Operating expenses:
General and administrative (includes share-based compensation expense of $62,294 and $39,144 for the three months ended March 31, 2007, and 2008, respectively)	561,736			529,273
Marketing and selling (includes share-based compensation expense of $15,861 and $10,562 for the three months ended March 31, 2007, and 2008, respectively)	220,487			88,249
Research and development (includes share-based compensation expense of $43,655 and $31,719 for the three months ended March 31, 2007, and 2008, respectively)	1,064,362			648,041
Total operating expenses	1,846,585			1,265,563

Loss from operations	(1,632,360		)	(1,232,606		)

Other income:
Interest income	56,890			55,085
Other income	105,712			225,112
Total other income	162,602			280,197

Loss before income taxes	(1,469,758		)	(952,409		)

Income tax expense	—			—

Net loss	$	(1,469,758	)	$	(952,409	)

Earnings (loss) per share:
Basic	$	(0.13	)	$	(0.07	)
Diluted	$	(0.13	)	$	(0.07	)

Weighted average common shares outstanding
Basic	11,537,703			14,317,482
Diluted (note 6)	11,537,703			14,317,482

See accompanying notes to unaudited interim financial statements.

IBIS TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended
	March 31,
	2007			2008

Cash flows from operating activities:

Net loss	$	(1,469,758	)	$	(952,409	)
Adjustment to reconcile net loss to net cash used in operating activities:
Share-based compensation expense	129,254			86,650
Depreciation and amortization	388,709			173,077
Changes in operating assets and liabilities:
Accounts receivable, trade	104,315			(6,188		)
Inventories	46,353			152
Prepaid expenses and other current assets	(66,285		)	(39,365		)
Accounts payable	(34,724		)	(8,621		)
Accrued liabilities	(284,968		)	(40,184		)

Net cash used in operating activities	(1,187,104		)	(786,888		)

Cash flows from investing activities:
Other assets	—			(12,205		)

Net cash used in investing activities	—			(12,205		)

Cash flows from financing activities:
Proceeds from sales of common stock, net of issuance cost	1,986,302			—

Net cash provided by financing activities	1,986,302			—

Net increase (decrease) in cash and cash equivalents	799,198			(799,093		)

Cash and cash equivalents, beginning of period	4,812,477			5,770,072

Cash and cash equivalents, end of period	$	5,611,675		$	4,970,979

See accompanying notes to unaudited interim financial statements.

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

(1) Interim Financial Statements

The accompanying financial statements are unaudited and have been prepared by Ibis Technology Corporation (the “Company” or “Ibis”) in accordance with U.S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

In the opinion of management, the interim financial statements include all adjustments, which consist only of normal and recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company as of and for the year ended December 31, 2007, which are included in the Company’s Annual Report on Form 10-K as filed on May 28, 2008.

(2) Summary of Significant Accounting Policies

(a) Revenue Recognition

The Company recognizes revenue from equipment sales and the sales of spare parts when all of the following criteria have been met: (1) evidence exists that the customer is bound to the transaction; (2) the product has been delivered to the customer and, when applicable, the product has been installed and accepted by the customer; (3) the sales price to the customer has been fixed or is determinable; and (4) collectibility of the sales price is reasonably assured. The Company recognizes revenue from implanter sales upon acceptance at the customer’s site. Revenue derived from contracts and services is recognized upon performance. Provisions for anticipated losses are made in the period in which such losses become determinable.

(b) Inventory Valuation and Reserve

The Company policy for the valuation of inventory, including the determination of obsolete or excess inventory, requires us to forecast the future demand for our products within specific time horizons, generally twelve months or less. If the Company forecasted demand for specific products is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to record additional inventory reserves, which would have a negative impact on the Company gross margin. The Company has reserved for obsolescence when engineering changes or other technological advances indicate that obsolescence has occurred.

(c) Share-Based Compensation

The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, employee stock purchases related to the 2000 Employee Stock Purchase Plan (“the ESPP”), restricted stock and other special equity awards based on grant date estimated fair values. SFAS 123(R) supersedes the Company’s previous accounting under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) for periods beginning in 2006. In March 2005, the Securities and Exchange Commission issued SAB 107 relating to SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R). In December 2007 the Securities and Exchange Commission released SAB 110, which modifies SAB 107 to extend the use of the “simplified method” regarding the calculation and use of the expected term of share options utilized in SFAS 123(R) share based payments. The Company currently utilizes the simplified method in these calculations.

(d) Valuation of Long-Lived Assets

The Company reviews the valuation of long-lived assets, including property and equipment and licenses, under the provisions of SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. Management is required to assess the recoverability of its long-lived assets or asset groups whenever events and circumstances indicate

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

that the carrying value may not be recoverable. In accordance with SFAS No. 144, when the Company determines that the carrying value of applicable long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company evaluates whether the carrying amount of the asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of that asset or asset group. If such a circumstance exists, The Company would measure an impairment loss to the extent the carrying amount of the particular long-lived asset or group exceeds its fair value. The Company would determine the fair value based on a projected discounted cash flow method using a discount rate determined by the Company’s management to be commensurate with the risk inherent in the Company’s current business model.

(e) Accounting for Uncertainty in Income Taxes

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for fiscal years beginning after December 15, 2006 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. As a result of the implementation of FIN 48, the Company recorded no adjustment for unrecognized income tax benefits. At March 31, 2008, the Company had no unrecognized tax benefits. Ibis classifies any interest and penalties related to income taxes as components of income tax expense.

The tax years 2000 to 2006 remain open to examination by the major taxing jurisdictions to which the Company is subject. Preceding years also remain open to examination by U.S. federal and state revenue authorities to the extent of future utilization of net operating losses (NOLs) and research and development (R&D) tax credits generated in each preceding year.

As of December 31, 2007, the Company had federal and state NOLs of approximately $92.7 million and $58.0 million, respectively and federal and state credit carryforwards of approximately $1.2 million and $1.2 million, respectively, which can be used to offset future federal and state income tax liabilities prior to expiration on various dates through 2027.

Utilization of NOL and R&D credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future as provided by Section 382 of the Internal Revenue Code of 1986 and similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax. In general, an ownership change, as defined in Section 382, results from transactions which increase the ownership of certain 5% or greater shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company’s formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing shareholders’ subsequent disposition of those shares, may have resulted in a change of control, as defined in Section 382, or could result in a change of control in the future upon subsequent disposition. The Company has not currently completed a study to assess whether a change of control has occurred or whether there have been multiple changes of control since the Company’s formation. If the Company has experienced a change of control at any time since formation, or if Ibis experiences a change of control in the future, utilization of the NOL and R&D credit carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in expiration of all or a portion of the NOL or R&D credit carryforwards before utilization. Until a study is completed and any limitation known, no amounts are being presented as an uncertain tax position under FIN 48.

(f) New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurement. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. SFAS No. 157 also expands financial statement disclosures about fair value measurements. On February 6,

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

2008, the FASB issued FASB Staff Position (FSP) 157-b, which delayed the effective date of SFAS No. 157 for one year for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS No. 157 and FSP 157-b are effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company has elected a partial deferral of SFAS No. 157 under the provisions of FSP 157-b related to the measurement of fair value used when evaluating goodwill, other intangible assets and other long-lived assets for impairment and valuing asset retirement obligations and liabilities for exit or disposal activities. At this time, we have adopted the FAS 157 as it relates to the Company’s financial assets and liabilities only. The impact of partially adopting SFAS No. 157 effective January 1, 2008 was not material to our financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of SFAS 115, which permits companies to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS No. 159 is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 159 on January 1, 2008 and did not elect the fair value option for any financial instruments under the provisions of SFAS No. 159.

(3) Liquidity

The Company’s financial statements for the fiscal year ended December 31, 2007 were prepared assuming the Company would continue as a going concern; however, the Company’s recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is an issue raised as a result of recurring losses from operations and net capital deficiency and is subject to the Company’s ability to secure additional orders of the Company’s implanter equipment or, in the alternative, identify and consummate a strategic transaction, including the potential a sale of the Company, or other strategic alternative.

As of March 31, 2008, the Company had cash and cash equivalents of $5.0 million, including the gross proceeds from the financing of $5.3 million from the sale of 3.4 million shares of common stock and 2.5 million common stock warrants in the year ended December 31, 2007.

During the three months ended March 31, 2008, the Company used $0.8 million of cash for operating activities as compared to $1.2 million in the three months ended March 31, 2007. To date, the Company’s working capital requirements have been funded primarily through debt (capital leases) and equity financings, including the 2007 financing discussed below. The principal uses of cash during the three months ended March 31, 2008, were to fund operations. At March 31, 2008, the Company had commitments to purchase approximately $0.1 million in material. Headcount for the quarter ended March 31, 2008 was 20 employees.

Cash flow projections developed by management indicate the Company believes it will have sufficient cash resources to support current operations through June 2009. However, since the Company began selling implanters in 1996, the Company has only sold a total of eight Ibis 1000 oxygen implanters at an average sale price of approximately $4.0 million each and four i2000 oxygen implanters at a selling price between $6.0 and $8.0 million. The most recent order received was in October 2005, for which the Company recognized revenue in the quarter ended September 30, 2006. The Company did not record implanter revenue during 2007 and, as of June 2008, does not have an order for an implanter. At present time, only one of the four major wafer manufacturers are counted as a current prospective customer. The Company currently does not have a backlog for implanters, nor does it have visibility to the timing of the next order from any customer. The Company’s failure to obtain any orders for implanters in the foreseeable future, notwithstanding management’s belief that the Company has sufficient cash for the 2008 fiscal year, or to obtain other sources of offsetting revenue, will have a material adverse impact on the Company’s business and hinder its ability to continue as a going concern. The Company’s continuing inability to generate revenue likely will result in the inability

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

to continue to invest in research development and manufacturing capabilities, hinder the ability to pursue and maintain relationships, partnerships and alliances with third parties, result in a loss of key personnel by way of workforce reduction or by voluntary termination of employment, limit its ability to secure financing on acceptable terms, if at all, and create greater volatility in the trading of the Company’s common stock.

In January 2007, the Company announced that to conserve cash it was reducing its operating expenses by approximately 40% which involved cost cutting measures consisting of headcount reductions, consulting at a neighboring business for a minimum of six months under a staffing services agreement, salary reductions and reducing consumable expenses. On February 16, 2007, the Company entered into a purchase agreement pursuant to which it agreed to sell unregistered shares of its common stock and warrants exercisable for common stock to Special Situation Funds for an aggregate purchase price of $5.3 million in a two-tranche financing. The first closing, at which the Company received approximately $2.2 million in proceeds, occurred on February 20, 2007. Pursuant to stockholder approval, received at the Company Annual Meeting on May 10, 2007, the Company sold the remainder of the securities at a second closing, at which the Company received approximately $3.1 million in proceeds. In connection with the transaction, the Company also entered into a registration rights agreement with the investors. The Company paid a placement fee to a placement agent, of approximately $0.3 million, which represents a cash fee equal to 5% of the gross proceeds and warrants exercisable for common stock with a dollar value equal to 5% of the aggregate gross proceeds received by the company in both closings of the financing. The Company also issued to the placement agent an aggregate of 179,619 warrants, exercisable for common stock, with a dollar value equal to 5% of the aggregate gross proceeds. Total transaction costs associated with the financing were approximately $0.4 million, providing net cash to the Company of $4.9 million. All of the securities were sold in a private placement pursuant to Regulation D of the Securities Act.

On December 10, 2007, the Company received a letter from the Nasdaq Stock Market advising that for the previous 30 consecutive business days, the bid price of the Company’s common stock (the “Common Stock”) had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Market pursuant to Nasdaq Marketplace Rule 4450(a)(5).

Nasdaq stated in its letter that in accordance with Nasdaq Marketplace Rule 4450(e)(2), the Company will be provided 180 calendar days, or until June 9, 2008, to regain compliance with the minimum bid price requirement. The bid price of the Common Stock must close at $1.00 per share or more for a minimum of 10 consecutive business days to achieve compliance.

If the Company did not regain compliance with the minimum bid price requirement by June 9, 2008, the Nasdaq staff would provide the Company with written notification that the Common Stock would be delisted from the Nasdaq Global Market. At that time, the Company may appeal the delisting determination to a Nasdaq Listings Qualifications Panel pursuant to applicable Nasdaq rules. Alternatively, Nasdaq Marketplace Rule 4450(i) may permit the Company to transfer the Common Stock to the Nasdaq Capital Market if the Common Stock satisfies all criteria, other than compliance with the minimum bid price requirement, for initial inclusion on such market.

On June 5, 2008, the Company participated in a hearing of the Nasdaq Listing Qualifications Panel (the “Panel”) to address the delayed filing of the Company’s Form 10-K and the Form 10-Q, as well as additional compliance concerns. The Panel is currently considering the Company’s request for continued listing.

In February 2008, the Company announced the engagement of the investment bank BlueLake Partners, LLC for the purpose of assessing strategic alternatives for Ibis, including a potential sale of the Company and/or its assets. The Company can give no assurance that it will identify an alternative that allows stockholders to realize an increase in the value of the Company’s stock. There can also be no assurance that a transaction or other strategic alternative, once identified, evaluated and consummated, will provide greater value to the stockholders than that reflected in the current stock price. In fact, if the Company is unable to recognize revenue through the sale of its products pursuant to the current operating plan, and if a viable strategic alternative is not identified, the Company may be unable to continue as a going concern. Further, in pursuit of the highest value for shareholders, the Board of Directors may also consider alternatives that include a liquidation of assets and the resulting cash distribution per share

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

after payment of outstanding liabilities. In such case, any per-share cash liquidation distribution could be less than the purchase price per share that stockholders may have paid for the Company’s securities.

The Company received a letter from the Nasdaq Stock Market dated April 16, 2008 advising that Nasdaq had not received the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as required by Nasdaq Marketplace Rule 4310(c)(14). The Company received an additional letter from Nasdaq dated May 19, 2008 informing the Company that Nasdaq had not received the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as required by Nasdaq Marketplace Rule 4310(c)(14). On May 28, 2008, the Company filed its Form 10-K for the year ended December 31, 2007 and, on June 2, 2008, filed Amendment No. 1 to correct certain inadvertent omissions. The Company believes, that as a result of the filing of this Form 10-Q, the Company is in compliance with Marketplace Rule 4310(c)(14). There can be no assurance that the Panel will grant the Company’s request for continued listing.

(4) Inventories

Inventories consist of the following:

	December 31,		March 31,
	2007		2008

Raw materials	$	328,802	$	328,650
Work in process	1,461,592		1,461,592
Total equipment inventory	$	1,790,394	$	1,790,242

(5) Accrued Liabilities

Current accrued liabilities were as follows:

	December 31,		March 31,
	2007		2008

Accrued vacation	$	129,903	$	158,700
Accrued payroll	39,401		72,236
Accrued expenses	301,915		200,099
Total accrued liabilities	$	471,219	$	431,035

(6) Net Income (Loss) Per Share

Net loss for the quarter ended March 31, 2008 of $1.0 million or a loss of $0.07 per share, included share-based compensation expense under SFAS 123(R), of $0.1 million or $0.01 per share related to employee stock options, and employee stock purchases. Net loss for the quarter ended March 31, 2007 of $1.5 million or $0.13 per share, included share-based compensation expense under SFAS 123(R) of $0.1 million or $0.01 per share, related to employee stock options, and employee stock purchases.

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

The table below provides unaudited information for the three months ended March 31, 2007 and 2008 pertaining to the Company’s two industry segments.

	SIMOX			Other Products
	Equipment			Or Services		Total
Net Revenue
Three Months Ended March 31, 2007	$	245,919		$	84,144	$	330,063
Three Months Ended March 31, 2008	$	268,106		$	62,908	$	331,014

Operating Income (Loss)
Three Months Ended March 31, 2007	(1,154,768		)	84,144		(1,070,624		)
Three Months Ended March 31, 2008	(766,241		)	62,908		(703,333		)

Assets
March 31, 2008	3,606,762			125,817		3,732,579

Capital Expenditures
Three Months Ended March 31, 2007	—			—		—
Three Months Ended March 31, 2008	—			—		—

Depreciation and Amortization of Property and Equipment
Three Months Ended March 31, 2007	368,755			—		368,755
Three Months Ended March 31, 2008	153,586			—		153,586

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

The table below provides the reconciliation of reportable segment operating loss and assets to Ibis’ totals.

	Three months ended
	March 31,
	2007			2008
Segment Reconciliation

Net Income (Loss):
Total operating loss for reportable segments	$	(1,070,624	)	$	(703,333	)
Corporate general and administrative expenses	(561,736		)	(529,273		)
Net other income	162,602			280,197
Income tax expense	$	—		$	—
Net loss	$	(1,469,758	)	$	(952,409	)

Depreciation and Amortization:
Total depreciation and amortization for reportable segments	$	368,755		$	153,586
Corporation depreciation and amortization	19,954			19,491
Total depreciation and amortization	$	388,709		$	173,077

	March 31, 2008
Assets
Total assets for reportable segments	$	3,732,579
Cash & cash equivalents not allocated to segments	4,970,979
Other unallocated assets	144,711
Total assets	$	8,848,269

(8) Employee Stock Benefit Plans

Net loss for the three months ended March 31, 2008 included share-based compensation expense under SFAS 123(R) of $0.1 million. Of this expense, fourteen percent came from options issued prior to December 31, 2005 and are valued using the accrual method, which is consistent with prior periods, while seventy eight percent came from options issued after January 1, 2006 and are valued using the straight-line prorated method, which was adopted in 2006 under the new guidance, and eight percent came from the employee stock purchase plan valuation. Net income for the three months ended March 31, 2007 included share-based compensation expense under SFAS 123(R) of $0.1 million. Of this expense, twenty seven percent came from options issued prior to December 31, 2005 and are valued using the accrual method, which is consistent with prior periods, while fifty eight percent came from options issued after January 1, 2006 and are valued using the straight-line prorated method which was adopted in 2006 under the new guidance, and fifteen percent came from the employee stock purchase plan valuation.

Employee Stock Purchase Plan

The Company maintains an employee stock purchase plan where eligible employees may purchase common stock through payroll deduction of up to 15% of compensation with a limit of $21,250. The price per share is the lower of 85% of the market price at the beginning or end of each offering period (generally 6 months). The 2000 Employee Stock Purchase Plan, as amended, provides for purchases by employees of up to an aggregate of 600,000 shares

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

through May 31, 2010. During the three months ended March 31, 2007 and March 31, 2008, the Company issued no shares under the Purchase Plan. At March 31, 2008, 146,038 shares were available for purchase under the Purchase Plan.

Employee Stock Option Plan

The Company has share-based compensation plans under which employees and directors may be granted options to purchase common stock. Options are generally granted with exercise prices at not less than the fair market value on the grant date, generally vest over 4 years and expire in 10 years after the grant date. As of March 31, 2008, a total of 4.7 million shares are authorized for grant under the Company’s share-based compensation plans. The number of common shares reserved for granting of future awards to employees and directors under these plans was 1.5 million at March 31, 2008. The remaining unrecognized compensation expense on stock options at March 31, 2008 was $0.4 million. The weighted average period over which the cost is expected to be recognized is approximately 1 year.

As of March 31, 2008, the Company had four equity compensation plans under which our equity securities have been authorized for issuance to our employees and/or directors: the 2000 Employee Stock Purchase Plan, as amended (described above), the 1993 Employee, Director and Consultant Stock Option Plan, as amended, (the 1993 Plan); the 1997 Employee, Directors and Consultant Stock Option Plan, as amended; and the 2007 Employee, Director and Consultant Equity Plan, (the 2007 Plan). The 1993 Plan has expired and there are no options available for issuance; however, the 1993 Plan continues to govern all options, awards and other grants granted and outstanding under the 1993 Plan.

Distribution and Dilutive Effect of Options

The following table illustrates the grant dilution and exercise dilution:

	Three months ended
	March 31,
	2007		2008

Shares of common stock outstanding	12,315,481		14,317,482

Granted	285,000		—
Canceled/forfeited	(50,520	)	—
Expired	—		(93,707	)
Net options granted	234,480		(93,707	)

Grant dilution (1)	1.9	%	(0.7	)%

Exercised	—		—
Exercised dilution (2)	0.0	%	0.0	%

(1) The percentage for grant dilution is computed based on net options granted as a percentage of shares of common stock outstanding.

(2) The percentage for exercise dilution is computed based on options exercised as a percentage of shares of common stock outstanding.

Basic and diluted shares outstanding for the three months ended March 31,2008 were 14,317,482 shares. During the three months ending March 31, 2008, the dilutive effect of in-the-money employee stock options were zero shares based on the Company’s average share price of $0.38.

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

A summary of stock option transactions follows:

	Options Outstanding
	Options Available				Weighted average
	for				exercise price of
	Grant		Shares		shares under plan

Balance outstanding as December 31, 2006	440,926		1,354,385		$	9.59
Granted	(612,500	)	612,500		1.47
Exercised	—		—		—
Cancelled/forfeited	614,985		(614,985	)	6.43
Expired	(443,411	)	—		—
Additional shares reserved	1,500,000		—		—
Balance outstanding as December 31, 2007	1,500,000		1,351,900		$	7.35
Granted	—		—		—
Exercised	—		—		—
Cancelled/forfeited	93,707		(93,707	)	7.68
Expired	(93,707	)	—		—
Additional shares reserved	—		—		—
Balance outstanding as March 31, 2008	1,500,000		1,258,193		$	7.33

The following table summarizes information concerning outstanding and exercisable options as of March 31, 2008:

Options Outstanding							Options Exercisable
		Weighted
		Average	Weighted					Weighted
		remaining	Average					Average
Range of	Number	contractural	exercise price		Aggregate		Options	exercise price
exercise prices	outstanding	life (years)	per shares		Intrinsic Value		Exercisable	per shares
$.01 - 6.00	871,534	7.0	$	2.52	$	0	496,859	$	2.99
$6.01 - 9.00	122,886	4.6	$	7.90			110,386	$	7.90
$9.01 - 13.50	142,673	2.5	$	10.61			142,673	$	10.61
$13.51 - 20.26	27,700	2.6	$	18.34			27,700	$	18.34
$20.27 - 30.37	8,250	1.5	$	23.35			8,250	$	23.35
$30.38 - 45.55	11,250	2.0	$	37.24			11,250	$	37.24
$45.56 - 68.32	73,900	1.8	$	46.25			73,900	$	46.25
$68.33 - 98.71	—	0.0	$	.00			—	$	.00
	1,258,193	5.8	$	7.33	$	0	871,018	$	9.65

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $0.26 as of March 31, 2008, which would have been received by the option holders had all option holders exercised their options as of that date. Since all options that were exercisable were at a price higher than this closing price the intrinsic value is $0. The fair value of stock options exercisable at March 31, 2007 and March 31, 2008 was $5.1 million and $3.4 million, respectively. The total number of in-the-money options exercisable as of March 31, 2008 was zero.

IBIS TECHNOLOGY CORPORATION

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Valuation and Expense Information under SFAS 123(R)

The following table summarizes share-based compensation expense related to employee stock options and employee stock purchases under SFAS123 (R) for the three months ended March 31, 2007 and 2008 which was allocated as follows:

	Three Months Ended		Three Months Ended
	March 31, 2007		March 31, 2008

Cost of sales	$	7,444	$	5,225
General and administration	62,294		39,144
Marketing and selling	15,861		10,562
Research and development	43,655		31,719
Share based compensation expense included in operation expense	$	129,254	$	86,650

The Company did not recognize any tax benefits on the share-based compensation recorded in the periods based on the current tax status of the Company.

The weighted-average estimated fair value of employee stock options granted during the three months ended March 31, 2007 was $1.11 per share, using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Three Months Ended
	March 31, 2007

Expected Volatility	100.12	%
Risk Free Interest Rate	4.78	%
Dividend yield	0.00
Expected option life (10 year contractual life option)	6.25

The Company did not grant any stock options during the three months ended March 31, 2008.

The expected life of employee stock options is the anticipated average time that an option will be outstanding. The Company chose to use the simplified method provided under SAB107, as updated by SAB 110, to estimate the expected term for “plain vanilla” stock options. The expected term as calculated under the simplified method is 6.25 years.

The Company determined the expected volatility of the stock price by using a period equal to the expected life of the stock options, 6.25 years. Volatility was measured as the standard deviation of the difference in the natural logarithms of the stock over the expected life of the options using the daily closing stock price. This resulted in the volatility of 100.12%, for the three months ended March 31, 2007.

The risk-free interest rate assumption is based upon observed treasury bill interest rates (risk free) appropriate for the expected term of the Company’s employee stock options.

As share-based compensation expense recognized in the Statement of Operations for the three months ended March 31, 2007 and March 31, 2008 is actually based on awards ultimately expected to vest, it has been reduced for annualized estimated forfeitures of 14.18% and 33.26%, respectively. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.

IBIS TECHNOLOGY CORPORATION

PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Ibis Technology Corporation (“Ibis”) was formed in October 1987 and commenced operations in January 1988. Ibis’ initial activities consisted of producing and selling SIMOX-SOI wafers and conducting research and development activities. This effort led to the development of proprietary oxygen implanters, the Ibis 1000, which we began selling in 1996, the next generation implanter, the i2000ä, which we began selling in 2002, and also to other proprietary process technology.

Initially, much of our revenue was derived from research and development contracts and sales of wafers for military applications. Over the years, the Company decided to focus its business operations and sales strategy on the manufacture and sale of our implanter equipment products and de-emphasized the sale of wafers given that, among other things, we believed that the wafer manufacturing companies were in the best position to manufacture SIMOX-SOI wafers using our implanter equipment in light of their expertise and operating efficiencies. As we announced on July 21, 2004, we exited the wafer manufacturing business. Wafer product sales, as well as wafer revenue reported in subsequent periods, are reported net of associated costs, as loss from discontinued operations or other income after 2005 on our income statement. The Company believes that its decision to discontinue the wafer business permits broader strategic collaboration efforts between Ibis and the wafer manufacturers. We reach this conclusion for a number of reasons. First, we believe that tremendous price pressure exists on commodity type products, such as silicon wafers, and this pressure is already eroding future price expectations of SOI wafers. Because the starting wafer represents a significant component of the SOI wafer cost, we believe that silicon wafer manufacturers should have a natural cost structure advantage leading to a higher gross margin in large volume production, and therefore should be able to manage such price pressure better than stand-alone SOI producers that do not also produce the silicon wafer itself. Second, we expect that the price pressure will encourage silicon wafer manufacturers to seek out higher margin products, like SOI wafers, to increase their margins. Third, we believe that silicon wafer manufacturers have traditionally developed proprietary intellectual property in silicon materials science, which can be applied to designing optimal starting wafers for SOI production. We believe that this should give them an advantage in both minimizing wafer cost and maximizing SOI wafer quality and yield. Fourth, our experience suggests that silicon wafer manufacturers already have a well-developed infrastructure for manufacturing, sale and marketing of large volumes of substrates. Lastly, we believe that there is greater efficiency in producing the SOI wafer as part of the wafer manufacturers existing product flow, specifically avoiding the need to repackage, re-clean, re-inspect and re-ship substrates twice, once as starting silicon wafers, and a second time as SOI wafers. Therefore, as a result of these trends, we expect our ultimate customers will be drawn from these silicon wafer manufacturers and we plan to focus a majority of our technical and marketing resources on the sale of implanters to the leading silicon wafer manufacturers and our key customers in the semiconductor industry who we believe are the leaders in the adoption of SOI technology. We expect that implanter sales to chipmakers should be minimal, and that these sales will be focused on SOI processes that the chipmaker wishes to keep proprietary, such as selective (or patterned) SIMOX, or other specialty substrates.

Our fundamental SIMOX-SOI technology has been developed, refined, and tested over the last dozen years. In 2002, we introduced the current generation of SIMOX-SOI technology, that included our second-generation oxygen implanter (i2000ä), and the MLD wafer process which was licensed to us by IBM. We believe that the i2000’s flexibility, automation and operator-friendly controls allow this tool to produce a wide range of SIMOX-SOI wafer products using a range of manufacturing processes, including Advantox^® MLD and Advantox MLD-UT wafers. We also believe the ability of the i2000 implanter to produce twelve-inch (or 300 mm) SIMOX-SOI wafers coupled with the MLD process positions us to capitalize on the growing SOI market. In 1999, we commenced a program to design and develop the i2000, introduced it in March 2002, and began shipping 300 mm wafers implanted from this machine shortly thereafter. Customers who purchase the i2000 can utilize more than one SIMOX wafer manufacturing process on the implanter including the IBM MLD process, when licensed, as well as other SIMOX-SOI wafer manufacturing processes that do not require the IBM license.

The Company’s financial statements for the fiscal year ended December 31, 2007 were prepared assuming the Company would continue as a going concern; however, the Company’s recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is an issue raised as a result of recurring losses from operations and net capital deficiency and is subject to the Company’s ability to secure additional orders of our implanter equipment or, in the alternative, identify and consummate a strategic transaction, including the potential a sale of the Company, or other strategic alternative.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that have a significant impact on the results we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates on matters that are inherently uncertain. Our most critical accounting policies include: revenue recognition, inventory valuation and reserves, and the assessment of long-lived asset impairment. Actual results may differ from these estimates under different assumptions or conditions. Below, we discuss these policies further, as well as the estimates and judgments involved.

Revenue Recognition. We recognize revenue from equipment sales and the sales of spare parts when all of the following criteria have been met: (1) evidence exists that the customer is bound to the transaction; (2) the product has been delivered to the customer and, when applicable, the product has been installed and accepted by the customer; (3) the sales price to the customer has been fixed or is determinable; and (4) collectibility of the sales price is reasonably assured. We recognize revenue from implanter sales upon final customer acceptance at the customer’s site. Revenue derived from contracts and services is recognized upon performance. Significant management judgments and estimates must be made and used in connection with revenue recognized in any period. Management analyzes various factors, including a review of specific transactions, historical experience, credit worthiness of customers and current market and economic conditions. Changes in judgment based upon these factors could impact the timing and amount of revenue and cost recognized.

Inventory Valuation and Reserves. Our policy for the valuation of inventory, including the determination of obsolete or excess inventory, requires us to forecast the future demand for our products within specific time horizons, generally twelve months or less. If our forecasted demand for specific products is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to record additional inventory reserves, which would have a negative impact on our gross margin. We have reserved for obsolescence when engineering changes or other technological advances indicate that obsolescence has occurred.

Valuation of Long-Lived Assets. Ibis reviews the valuation of long-lived assets, including property and equipment and licenses, under the provisions of SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.” Management is required to assess the recoverability of its long-lived assets or asset groups whenever events and circumstances indicate that the carrying value may not be recoverable. Based on current conditions, factors we consider important and that could trigger an impairment review include the following:

Significant underperformance relative to expected historical or projected future operating results,

Significant changes in the manner of our use of the acquired assets or the strategy of our overall business,

Significant negative industry or economic trends,

Significant decline in our stock price for a sustained period, and

Our market capitalization relative to book value.

In accordance with SFAS No. 144, when we determine that the carrying value of applicable long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we evaluate whether the

Results of Operations

First Quarter Ended March 31, 2008 Compared to First Quarter Ended March 31, 2007

License and Other Revenue. License and other revenue includes revenue derived from license agreements, characterization and other services. License and other revenue decreased for the first quarter ended March 31, 2008 to $63 thousand from $84 thousand for the first quarter ended March 31, 2007, a decrease of $21 thousand or 25%. This decrease is attributable to decreased license revenue from royalty fees related to equipment technology.

Equipment Revenue. Equipment revenue represents revenue recognized from sales of implanters, spare parts and field service revenue. Equipment revenue increased to $268 thousand for the first quarter ended March 31, 2008 from $246 thousand for the first quarter ended March 31, 2007, representing an increase of $22 thousand or 9%. Sales of spare parts accounted for $255 thousand of equipment revenue and service revenue accounted for $13 thousand for the first quarter ended March 31, 2008. This compares to $96 thousand in sales of spare parts for the first quarter ended March 31, 2007 and $150 thousand in service revenue for the first quarter ended March 31, 2007. Sales of spare parts fluctuate depending on customer demand and when warranties expire on individual pieces of equipment.

Total Cost of Sales and Revenue. Cost of equipment revenue represents the cost of equipment, the cost for spare parts, and the costs of labor incurred for field service. Cost of equipment revenue for the first quarter ended March 31, 2008 was $298 thousand, as compared to $116 thousand for the first quarter ended March 31, 2007. This increase of $182 thousand was primarily due to the expiration of the warranty on the implanter in the first quarter ended March 31, 2007.

The gross margin for all sales was 10% for the first quarter ended March 31, 2008 as compared to a gross margin of 65% for the first quarter ended March 31, 2007. The decrease in the gross margin for all sales is primarily attributable to the reduced cost in the quarter ended March 31, 2007 from the expiration of the warranty on the implanter.

General and Administrative Expenses. General and administrative expenses for the first quarter ended March 31, 2008 were $0.5 million as compared to $0.6 million for the first quarter ended March 31, 2007. This was due to decreased payroll and payroll related expenses of $0.1 million from reduced salaries and headcount.

Marketing and Selling Expenses. Marketing and selling expenses for the first quarter ended March 31, 2008 were $0.1 million as compared to $0.2 million for the first quarter ended March 31, 2007. This was due to decreased payroll and payroll related expenses of $0.1 million due to headcount reductions and labor costs charged out for consulting at a neighboring business in the quarter ended March 31, 2007.

Research and Development Expenses. Internally funded research and development expenses decreased by $0.5 million or 39% to $0.6 million for the first quarter ended March 31, 2008, as compared to $1.1 million for the first quarter ended March 31, 2007. This was due to a reduction in payroll and payroll related expenses of $0.1 million from headcount reductions and labor costs charged out for consulting at a neighboring business in the quarter ended March 31, 2007, along with reduced R&D material of $0.1 million and reduced depreciation and amortization of $0.3 million.

Other Income (Expense). Total other income for the first quarter ended March 31, 2008 was $0.3 million as compared to $0.2 million for the first quarter ended March 31, 2007. Other income increased in the quarter ended March 31, 2008, as a result of the sale of three Ibis 1000 implanters previously written off.

Liquidity and Capital Resources

The Company’s financial statements for the fiscal year ended December 31, 2007 were prepared assuming the Company would continue as a going concern; however, the Company’s recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is an issue raised as a result of recurring losses from operations and net capital deficiency and is subject to the Company’s ability to secure additional orders of our implanter equipment or, in the alternative, identify and consummate a strategic transaction, including the potential a sale of the Company, or other strategic alternative.

During the three months ended March 31, 2008, the Company used $0.8 million of cash for operating activities of continuing operations as compared to $1.2 million in the three months ended March 31, 2007. To date, the Company’s working capital requirements have been funded primarily through debt (capital leases) and equity financings, including the 2007 financing discussed below. The principal uses of cash during the three months ended March 31, 2008, were to fund operations. At March 31, 2008, the Company had commitments to purchase approximately $0.1 million in material. Headcount for the quarter ended March 31, 2008 was 20 employees.

Cash flow projections developed by management indicate the Company believes it will have sufficient cash resources to support current operations through June 2009. However, since the Company began selling implanters in 1996, the Company has only sold a total of eight Ibis 1000 oxygen implanters at an average sale price of approximately $4.0 million each and four i2000 oxygen implanters at a selling price between $6.0 and $8.0 million. The most recent order received was in October 2005, for which the Company recognized revenue in the quarter ended September 30, 2006. The Company did not record implanter revenue during 2007 and as of July 7, 2008, does not have an order for an implanter. At present time, only one of the four major wafer manufacturers are counted as a current prospective customer. The Company currently does not have a backlog for implanters, nor does it have visibility to the timing of the next order from any customer. The Company’s failure to obtain any orders for implanters in the foreseeable future, notwithstanding the belief that the Company has sufficient cash for the 2008 fiscal year, or to obtain other sources of offsetting revenue, will have a material adverse impact on the Company’s business and hinder its ability to continue as a going concern. The Company’s continuing inability to generate revenue likely will result in the inability to continue to invest in research development and manufacturing capabilities, hinder the ability to pursue and maintain relationships, partnerships and alliances with third parties, result in a loss of key personnel by way of workforce reduction or by voluntary termination of employment, limit its ability to secure financing on acceptable terms, if at all, and create greater volatility in the trading of the Company’s common stock.

aggregate of 179,619 warrants, exercisable for common stock, with a dollar value equal to 5% of the aggregate gross proceeds. Total transaction costs associated with the financing were approximately $0.4 million, providing net cash to the Company of $4.9 million. All of the securities were sold in a private placement pursuant to Regulation D of the Securities Act.

The Company received a letter from the Nasdaq Stock Market dated April 16, 2008 advising that Nasdaq had not received the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as required by Nasdaq Marketplace Rule 4310(c)(14). The Company received an additional letter from Nasdaq dated May 19, 2008 informing the Company that Nasdaq had not received the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as required by Nasdaq Marketplace Rule 4310(c)(14). On May 28, 2008, the Company filed its Form 10-K for the year ended December 31, 2008 and, on June 2, 2008, filed Amendment No. 1 to correct certain inadvertent omissions. The Company believes, that as a result of the filing of this Form 10-Q, the Company is in compliance with Marketplace Rule 4310(c)(14). There can be no assurance that the Panel will grant the Company’s request for continued listing.

Business Risk Factors

This Form 10-Q contains express or implied forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology, such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “intend,” “potential” or “continue” or the negative of such terms or other comparable terminology, although not all forward-looking statements contain such terms. In addition, these forward-looking statements include, but are not limited to, statements regarding, among other things: (i) the Company’s ability to conduct its operations in a manner consistent with its current plan and to obtain additional implanter orders to continue as a going concern, (ii) regaining compliance with the minimum bid price, stockholders’ equity and market value of publicly held shares requirements and the continued inclusion of the Company’s Common Stock on the Nasdaq Global Market, (iii) the Company’s expectations regarding future orders for i2000 implanters, (iv) the Company’s expectations regarding it’s strategic alternatives, including the potential sale of the Company, (v) the continued employment of key management and technical personnel, and attaining implanter improvements to the degree and in the timeframe necessary to meet our customer’s expectations, (vi) the timing of our major customer’s ramping to production quantities on the i2000 implanter and the sustained production worthiness of the i2000 implanter, (vii) the reliance on a single or small number of large customers, interest in and demand for, and market acceptance of, the Company’s SIMOX-SOI technology including the Company’s implanters, (viii) the involvement generally of the silicon wafer manufacturing industry in the SOI wafer market and the ability of the wafer manufacturer’s to produce sufficiently low cost SIMOX-SOI wafers utilizing both our SIMOX equipment and technology, as well as other equipment manufacturer’s tools, (ix) the timing and likelihood of revenue recognition on orders for the Company’s implanters, (x) the Company’s belief that wafer manufacturers will become the primary suppliers of SIMOX-SOI wafers to the chipmaking industry, (xi) the throughput and production capacity of the i2000 implanter for manufacturing 300-mm SIMOX-SOI wafers, attaining implanter improvements to the degree and in the timeframe necessary to meet customer expectations, and the ability of the i2000 implanter to achieve acceptable production yields, (xii) the Company’s plan to focus on supplying implanters to wafer manufacturers, (xiii) the ability to operate with existing capital resources or to secure financing and to continue as a going concern and (xiv) the Company’s expectation of having sufficient cash for operations. Such statements are neither promises nor guarantees but rather are subject to risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such risks and uncertainties include, but are not limited to: future continued migration to SOI technology and market acceptance of SIMOX; the level of demand for the Company’s products; limited customers and products; lack of order backlog and visibility to the timing of new orders; the Company’s ability to pursue and maintain further strategic relationships, partnerships and alliances with third parties; loss of key personnel; the Company’s ability to protect its proprietary technology; the potential trends in the semiconductor industry generally; the ease with which the i2000 can be installed and qualified in fabrication facilities; the likelihood that implanters, if ordered, will be qualified and accepted by customers without substantial delay, modification, or cancellation, in whole or in part; the likelihood and timing of revenue recognition on such transactions; the impact of rapidly changing technology; the possibility of the impact of competitive products, technologies and pricing; the impact of rapidly changing technology; the possibility of further asset impairment and resulting charges; equipment capacity and supply constraints or difficulties; the Company’s limited history in selling implanters; general economic conditions; and other risks and uncertainties described elsewhere in this Form 10-Q and in the Company’s Securities and Exchange Commission filings from time to time, including but not limited to those set forth in the Company’s annual report on Form 10-K for the year ended December 31, 2007. All information set forth in this Form 10-Q is as of the date of this Form 10-Q, and Ibis undertakes no duty to update this information, unless required by law.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Regulation S-K Section 303(a)(4)(ii).

IBIS TECHNOLOGY CORPORATION

PART II

OTHER INFORMATION

Item 1 - Legal Proceedings

On April 26, 2007, the United States District Court in the District of Massachusetts approved a settlement agreement in the consolidated securities class action captioned In re Ibis Technology Securities Litigation, Civil Action No. 04-10446 RCL (D. Mass.). The Company and its Chairman of the Board, Martin J. Reid, and the plaintiffs reached an agreement in principle to settle the securities class action, which the Company announced on October 2, 2006. Thereafter, the parties executed a formal settlement agreement and submitted it for Court approval. The settlement provides for a payment to the plaintiffs of $1.9 million. The Court’s April 26, 2007 Order, certified the proposed class for settlement purposes only, approved the parties’ settlement agreement, and dismissed the securities class action with prejudice and in its entirety. The settlement was funded entirely by the Company’s insurance carrier and did not have a material adverse affect on our business, results of operations and financial condition.

On April 10, 2007, the Company announced that the shareholder derivative action filed in February 2004 against certain of the Company’s directors and officers: Louis F. Matheson, Jr. v. Martin J. Reid et al., Civ. Act. No. 04-10341 (RCL) (D. Mass) has been voluntarily dismissed by the plaintiff. The notice of dismissal filed by the plaintiff dismissed the action with prejudice. As set forth in the notice, the plaintiff will receive a $55,000 payment following the dismissal in consideration of plaintiff’s analysis of information provided by the Company regarding, among other things, the Company’s contention that the litigation should be dismissed for failure to make a demand on the Board of Directors before filing suit as required by Massachusetts law. The payment will be funded entirely by the Company’s insurance carrier.

Item 1A. Risk Factors

Except as described in this Item 1A, there are no material changes to the risk factors described in the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

The Company Received Notice from the Nasdaq Stock Market that Nasdaq had not received the Company’s Form 10-Q for the quarter year ended March 31, 2008, as required by Marketplace Rule 4310(c)(14).

On May 19, 2008, the Company received a letter from the Nasdaq Stock Market informing the Company that Nasdaq had not received the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as required by Nasdaq Marketplace Rule 4310(c)(14). Accordingly, Nasdaq notified the Company that the Nasdaq Listing Qualifications Panel (the “Panel”) will consider the matter in rendering a determination regarding the Company’s continued listing on the Nasdaq Global Market. On June 5, 2008, the Company participated in a hearing of the Panel to address the delayed filing of the Company’s Form 10-K and the Form 10-Q, as well as additional compliance concerns. The Panel is currently considering the Company’s request for continued listing.

On May 28, 2008, the Company filed its Form 10-K for the year ended December 31, 2008 and, on June 2, 2008, filed Amendment No. 1 to correct certain inadvertent omissions. The Company believes, that as a result of the filing of this Form 10-Q, the Company is in compliance with Marketplace Rule 4310(c)(14).

The Company Received Notices from the Nasdaq Stock Market that it Has Not Maintained the Minimum Bid Price, Stockholders’ Equity and Market Value of Publicly Held Shares Requirds for Continued Inclusion on the Nasdaq Global Market.

On June 11, 2008, the Company received a letter from the Nasdaq Stock Market notifying the Company that the bid price of the Company’s Common Stock had closed less than $1.00 per share over the previous 30 consecutive business days and, as a result, the Company does not comply with Nasdaq Marketplace Rule 4450(a)(5). The Company previously announced that it received a letter on December 10, 2007 from Nasdaq advising that, for the previous 30 consecutive business days, the bid price of the Common Stock had closed below the minimum $1.00 per

share requirement. The Company was provided 180 calendar days from the letter date, or until June 9, 2008, to regain compliance.

On June 3, 2008, the Company announced that it received a letter from Nasdaq dated May 29, 2008 informing the Company that it does not comply does not comply with the minimum $10,000,000 stockholders’ equity requirement, as required by Marketplace Rule 4450(a)(3).

On April 28, 2008, the Company announced that it had received a Nasdaq letter dated April 23, 2008 notifying the Company that for the last 30 consecutive trading days, the Company’s Common Stock had not maintained the minimum market value of publicly held shares (“MVPHS”) of $5,000,000, as required for continued inclusion by Nasdaq Marketplace Rule 4450(a)(2). The Company has been provided 90 calendar days, or until July 22, 2008, to regain compliance. The MVPHS of common stock must be $5,000,000 or greater for a minimum of 10 consecutive trading days to comply.

On June 5, 2008, the Company participated in a hearing of the Panel to address the delayed filing of the Company’s Form 10-K and the Form 10-Q, as well as additional compliance concerns. The Panel is currently considering the Company’s request for continued listing. There can be no assurance that the Panel will grant the Company’s request for continued listing. If the Company’s common stock does not qualify for, or is subsequently delisted from the Nasdaq Global Market and is unable to transfer to the Nasdaq Capital Market, investors may have difficulty converting their investment into cash efficiently. The price of our common stock and the ability of holders to sell such stock would be adversely affected, and we would be required to comply with the initial listing requirements to be re-listed on Nasdaq.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 - Defaults upon Senior Securities

None

Item 4 - Submission of Matters to a Vote of Security Holders

None

Item 5 - Other Information

None

Item 6 - Exhibits

(a) Exhibits furnished as Exhibits hereto:

Exhibit No.		Description

31.1		Certification of Martin J. Reid pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of William J. Schmidt pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	Ibis Technology Corporation


Date: July 8, 2008	By:	/s/William J. Schmidt
		William J. Schmidt
		Chief Financial Officer, Treasurer and Clerk
		(principal financial and accounting officer)

Date: July 8, 2008	By:	/s/Martin J. Reid
		Martin J. Reid
		President and Chief Executive Officer

	Page
	Number
PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements:

Balance Sheets December 31, 2007 and March 31, 2008 (unaudited)	3

Statements of Operations Three Months Ended March 31, 2007 and 2008 (unaudited)	4

Statements of Cash Flows Three months Ended March 31, 2007 and 2008 (unaudited)	5

Notes to Unaudited Interim Financial Statements	6

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3 – Quantitative and Qualitative Disclosure About Market Risk	26

Item 4 – Controls and Procedures	27

PART II – OTHER INFORMATION

Item 1 - Legal Proceedings	28

Item 1A – Risk Factors	28

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3 - Defaults upon Senior Securities	29

Item 4 – Submission of Matters to a Vote of Security Holders	29

Item 5 - Other Information	29

Item 6 – Exhibits	29

Signatures	30