**SECURITIES      AND EXCHANGE COMMISSION **

**Washington,      D.C. 20549 **

**Form      10-QSB **

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

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

**Commission      File Number 001-12465**

**CLEVELAND      BIOLABS, INC. **

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

|                                                                              |   |                                                    |
|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------|
| **DELAWARE**                                                                      |   | **20-0077155**                                          |
| **(State                or other jurisdiction of incorporation or organization)** |   | **(I.R.S.                Employer Identification No.)** |

**11000      Cedar Ave., Suite 290 **

**CLEVELAND,      OHIO 44106 **

**(Address      of principal executive offices and zip code) **

**(216) 229-2251**

**(Issuer’s      telephone number)**
** **

----

|                                          |                                                                                                                       |   |                     | PAGE   |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|
| PART                I - FINANCIAL INFORMATION |                                                                                                                       |   |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                1:                        | Financial                Statements                                                                                        |   |                     |
|                                          |                                                                                                                       |   |                     |   |
|                                          | Balance              Sheets as of September 30, 2006 and December 31, 2005                                                 |   | 3-4                      |
|                                          |                                                                                                                       |   |                     |   |
|                                          | Statements                of Operations For Three and Nine Months Ended September 30, 2006                and 2005         |   |  5                  |
|                                          |                                                                                                                       |   |                     |   |
|                                          | Statements              of Cash Flows For Nine Months Ended September 30, 2006 and 2005                                    |   | 6                        |
|                                          |                                                                                                                       |   |                     |   |
|                                          | Statement              of Stockholders' Equity January 1, 2005 to September              30, 2006                          |   | 7                        |
|                                          |                                                                                                                       |   |                     |   |
|                                          | Notes              to Condensed Consolidated Financial Statements                                                          |   | 9                        |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                2:                        | Management’s                Discussion and Analysis of Financial Conditions                and Results of Operations |   | 16                       |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                3:                        | Controls                and Procedures                                                                                     |   | 24                       |
|                                          |                                                                                                                       |   |                     |   |
| PART                II - OTHER INFORMATION    |                                                                                                                       |   |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                1:                        | Legal                Proceedings                                                                                           |   | 25                       |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                2:                        | Unregistered                Sales of Equity Securities and Use of                Proceeds                                  |   | 25                       |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                3:                        | Defaults                Upon Senior Securities                                                                             |   | 25                       |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                4:                        | Submission                of Matters to a Vote of Securities Holders                                                       | 25     |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                5:                   | Other                Information                                                                                      |   |                  25 |
|                                          |                                                                                                                       |   |                     |   |
| ITEM                6:                        | Exhibits                                                                                                                   |   | 25                       |
|                                          |                                                                                                                       |   |                     |   |
| Signatures                                    |                                                                                                                       |   | 26                       |

----

|                                           |   | September                    302006 |      | December                    312005 |   |
|------------------------------------------------|--------|-------------------------------------|-----------|------------------------------------|--------|
|                                           |   | (unaudited)                         |      |                               |   |
| ASSETS                                         |   |                                |      |                               |   |   |   |
|                                           |   |                                |      |                               |   |   |   |
| CURRENT                  ASSETS                |   |                                |      |                               |   |   |   |
| Cash                  and equivalents          |   | $                                   | 5,441,611 |                               | $      | 1,206,462 |   |
| Short-term                  investments        |   |                                | 2,892,447 |                               |   | 2,382,190 |   |
| Accounts                  receivable:          |   |                                |      |                               |   |   |   |
| Trade                                          |   |                                | 76,644    |                               |   | - |   |
| Interest                                       |   |                                | 42,205    |                               |   | 37,035 |   |
| Prepaid                  expenses - IPO        |   |                                | -         |                               |   | 210,987 |   |
| Other                  prepaid expenses        |   |                                | 144,978   |                               |   | 12,249 |   |
| Deferred                  compensation         |   |                                | 846       |                               |   | 5,134 |   |
| Total                  current assets          |   |                                | 8,598,731 |                               |   | 3,854,057 |   |
|                                           |   |                                |      |                               |   |   |   |
| EQUIPMENT                                      |   |                                |      |                               |   |   |   |
| Computer                  equipment            |   |                                | 118,465   |                               |   | 91,788 |   |
| Lab                  equipment                 |   |                                | 318,083   |                               |   | 225,997 |   |
| Furniture                                      |   |                                | 65,087    |                               |   | 40,158 |   |
|                                           |   |                                | 501,635   |                               |   | 357,943 |   |
| Less                  accumulated depreciation |   |                                | 115,284   |                               |   | 47,080 |   |
|                                           |   |                                | 386,351   |                               |   | 310,863 |   |
| OTHER                  ASSETS                  |   |                                |      |                               |   |   |   |
| Deferred                  compensation         |   |                                | 188       |                               |   | 752 |   |
| Intellectual                  Property         |   |                                | 182,416   |                               |   | 76,357 |   |
| Deposits                                       |   |                                | 14,360    |                               |   | 11,304 |   |
|                                           |   |                                | 196,964   |                               |   | 88,413 |   |
| TOTAL                  ASSETS                  |   | $                                   | 9,182,046 |                               | $      | 4,253,333 |   |

----

|                                                                                 |   | September                    302006 |         | December                    312005 |   |
|--------------------------------------------------------------------------------------|--------|-------------------------------------|--------------|------------------------------------|--------|
|                                                                                 |   | (unaudited)                         |         |                               |   |
| LIABILITIES                  AND STOCKHOLDERS' DEFICIT                               |   |                                |         |                               |   |   |   |
|                                                                                 |   |                                |         |                               |   |   |   |
| CURRENT                  LIABILITIES                                                 |   |                                |         |                               |   |   |   |
| Accounts                  payable:                                                   |   |                                |         |                               |   |   |   |
| Trade                                                                                |   | $                                   | 573,581      |                               | $      | 264,783 |   |
| Deferred                  revenue                                                    |   |                                | -            |                               |   | 100,293 |   |
| Accrued                  expenses                                                    |   |                                | 44,175       |                               |   | 28,579 |   |
| Total                  current liabilities                                           |   |                                | 617,756      |                               |   | 393,655 |   |
|                                                                                 |   |                                |         |                               |   |   |   |
| LONG-TERM                  LIABILITIES                                               |   |                                |         |                               |   |   |   |
| Convertible                  notes payable                                           |   |                                | -            |                               |   | 303,074 |   |
| Milestone                  payables                                                  |   |                                | 50,000       |                               |   | - |   |
| Total                  long-term liabilities                                         |   |                                | 50,000       |                               |   | 303,074 |   |
|                                                                                 |   |                                |         |                               |   |   |   |
| STOCKHOLDERS'                  EQUITY                                                |   |                                |         |                               |   |   |   |
| Series                  A convertible preferred stock, $.005 par value               |   |                                |         |                               |   |   |   |
| Authorized                  - 10,000,000 and 4,000,000 shares at September 30, 2006  |   |                                |         |                               |   |   |   |
| and                  December 31, 2005, respectively                                 |   |                                |         |                               |   |   |   |
| Issued                  and outstanding -0- and 3,051,219                            |   |                                | -            |                               |   | 15,256 |   |
| shares                  at September 30, 2006 and December 31, 2005, respectively    |   |                                |         |                               |   |   |   |
| Additional                  paid-in capital                                          |   |                                | -            |                               |   | 4,932,885 |   |
| Unissued                  shares - preferred stock                                   |   |                                | -            |                               |   | 360,000 |   |
| Common                  stock, $.005 par value                                       |   |                                |         |                               |   |   |   |
| Authorized                  - 40,000,000 and 12,000,000 shares at September 30, 2006 |   |                                |         |                               |   |   |   |
| and                  December 31, 2005, respectively                                 |   |                                |         |                               |   |   |   |
| Issued                  and outstanding 11,826,389 and 6,396,801                     |   |                                |  59,132 |                               |   |  31,984 |   |
| shares                  at September 30, 2006 and December 31, 2005, respectively    |   |                                |         |                               |   |   |   |
| Additional                  paid-in capital                                          |   |                                | 18,133,661   |                               |   | 3,338,020 |   |
| Unissued                  shares - common stock                                      |   |                                | -            |                               |   | 81,125 |   |
| Accumulated                  other comprehensive income (loss)                       |   |                                | (7,553       | )                                  |   | (17,810 | ) |
| Accumulated                  deficit                                                 |   |                                | (9,670,950   | )                                  |   | (5,184,856 | ) |
| Total                  stockholders' equity                                          |   |                                | 8,514,290    |                               |   | 3,556,604 |   |
|                                                                                 |   |                                |         |                               |   |   |   |
|                                                                                 |   |                                |         |                               |   |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY                          |   | $                                   | 9,182,046    |                               | $      | 4,253,333 |   |

----

|                                                          |   | Three                  Months Ended  |       | Nine                  Months Ended   |   |
|---------------------------------------------------------------|--------|--------------------------------------|------------|--------------------------------------|--------|
|                                                          |   | September                    30 2006 |       | September                    30 2005 |   | September                    30 2006 |   | September                    30 2005 |   |
|                                                          |   | (unaudited)                          |       | (unaudited)                          |   | (unaudited) |   | (unaudited) |   |
| REVENUES                                                      |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| Grant                                                         |   | $                                    | 263,368    |                                 | $      | 446,194 |   | $ | 1,271,787 |   | $ | 624,850 |   |
| Service                                                       |   |                                 | 60,000     |                                 |   | 120,000 |   |   | 205,000 |   |   | 139,275 |   |
|                                                          |   |                                 | 323,368    |                                 |   | 566,194 |   |   | 1,476,787 |   |   | 764,125 |   |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| OPERATING                  EXPENSES                           |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| Research                  and Development                     |   |                                 | 1,281,055  |                                 |   | 846,454 |   |   | 4,341,535 |   |   | 1,507,040 |   |
| Selling,                  general and administrative          |   |                                 | 708,776    |                                 |   | 406,958 |   |   | 1,367,457 |   |   | 778,638 |   |
| Total                  operating expenses                     |   |                                 | 1,989,831  |                                 |   | 1,253,412 |   |   | 5,708,992 |   |   | 2,285,678 |   |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| LOSS                  FROM OPERATIONS                         |   |                                 | (1,666,463 | )                                    |   | (687,218 | ) |   | (4,232,205 | ) |   | (1,521,553 | ) |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| OTHER                  INCOME                                 |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| Interest                  Income                              |   |                                 | 81,189     |                                 |   | 37,315 |   |   | 125,719 |   |   | 83,952 |   |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| OTHER                  EXPENSE                                |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| Interest                  Expense                             |   |                                 | 2,257      |                                 |   | 4,287 |   |   | 11,198 |   |   | 13,558 |   |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| NET                  LOSS                                     |   | $                                    | (1,587,530 | )                                    | $      | (654,190 | ) | $ | (4,117,684 | ) | $ | (1,451,159 | ) |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| DIVIDENDS                  ON CONVERTIBLE PREFERRED STOCK     |   |                                 | (22,035    | )                                    |   | (92,289 | ) |   | (215,933 | ) |   | (199,625 | ) |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| NET                  LOSS AVAILABLE TO COMMON SHAREHOLDERS    |   | $                                    | (1,609,565 | )                                    | $      | (746,479 | ) | $ | (4,333,617 | ) | $ | (1,650,784 | ) |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| NET                  LOSS AVAILABLE TO COMMON SHAREHOLDERS    |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| PER                  SHARE OF COMMON STOCK - BASIC AND        |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| DILUTED                                                       |   | $                                    | (0.15      | )                                    | $      | (0.12 | ) | $ | (0.55 | ) | $ | (0.27 | ) |
|                                                          |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| WEIGHTED                  AVERAGE NUMBER OF SHARES USED       |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| IN                  CALCULATING NET LOSS PER SHARE, BASIC AND |   |                                 |       |                                 |   |   |   |   |   |   |   |   |   |
| DILUTED                                                       |   |                                 | 10,681,032 |                                 |   | 6,314,531 |   |   | 7,922,195 |   |   | 6,201,126 |   |

----

|                                                                 |   | September                    302006 |       | September                    302005 |   |
|----------------------------------------------------------------------|--------|-------------------------------------|------------|-------------------------------------|--------|
|                                                                 |   | (unaudited)                         |       | (unaudited)                         |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES                |   |                                |       |                                |   |   |   |
| Net                  loss                                            |   | $                                   | (4,117,684 | )                                   | $      | (1,451,159 | ) |
| Adjustments                  to reconcile net loss to net cash       |   |                                |       |                                |   |   |   |
| used                  by operating activities:                       |   |                                |       |                                |   |   |   |
| Depreciation                                                         |   |                                | 68,204     |                                |   | 27,720 |   |
| Noncash                  interest expense                            |   |                                | 9,929      |                                |   | 11,120 |   |
| Noncash                  salaries and consulting expense             |   |                                | 439,684    |                                |   | 225,944 |   |
| Deferred                  compensation                               |   |                                | 4,852      |                                |   | (165,000 | ) |
| Changes                  in operating assets and liabilities:        |   |                                |       |                                |   |   |   |
| Accounts                  receivable - trade                         |   |                                | (76,644    | )                                   |   | 20,485 |   |
| Accounts                  receivable - interest                      |   |                                | (5,170     | )                                   |   | - |   |
| Other                  prepaid expenses                              |   |                                | (132,729   | )                                   |   | 6,616 |   |
| Deposits                                                             |   |                                | (3,055     | )                                   |   | (4,551 | ) |
| Accounts                  payable                                    |   |                                | 308,797    |                                |   | (60,821 | ) |
| Deferred                  revenue                                    |   |                                | (100,293   | )                                   |   | - |   |
| Accrued                  expenses                                    |   |                                | 15,596     |                                |   | (33,011 | ) |
| Milestone                  payments                                  |   |                                | 50,000     |                                |   | - |   |
| Total                  adjustments                                   |   |                                | 579,172    |                                |   | 28,502 |   |
| Net                  cash used in operating activities               |   | $                                   | (3,538,512 | )                                   | $      | (1,422,657 | ) |
|                                                                 |   |                                |       |                                |   |   |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES                |   |                                |       |                                |   |   |   |
| Sale                  (purchase) of short-term investments           |   |                                | (500,000   | )                                   |   | (1,600,000 | ) |
| Purchase                  of equipment                               |   |                                | (143,693   | )                                   |   | (293,145 | ) |
| Costs                  of patents pending                            |   |                                | (106,059   | )                                   |   | - |   |
| Net                  cash provided by (used in) investing activities |   | $                                   | (749,752   | )                                   | $      | (1,893,145 | ) |
|                                                                 |   |                                |       |                                |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES                |   |                                |       |                                |   |   |   |
| Issuance                  of preferred stock                         |   |                                | -          |                                |   | 6,000,000 |   |
| Financing                  costs                                     |   |                                | (1,679,456 | )                                   |   | (48,939 | ) |
| Dividends                                                            |   |                                | (43        | )                                   |   | (31 | ) |
| Issuance                  of common stock - IPO                      |   |                                | 10,200,000 |                                |   | - |   |
| Exercise                  of stock options                           |   |                                | 2,813      |                                |   |   |   |
| Issuance                  of warrants                                |   |                                | 100        |                                |   |   |   |
| Proceeds                  from convertible notes payable             |   |                                | -          |                                |   | (50,000 | ) |
| Net                  cash provided by (used in) financing activities |   |                                | 8,523,413  |                                |   | 5,901,030 |   |
|                                                                 |   |                                |       |                                |   |   |   |
| NET                  INCREASE IN CASH AND EQUIVALENTS                |   |                                | 4,235,149  |                                |   | 2,585,228 |   |
|                                                                 |   |                                |       |                                |   |   |   |
| CASH                  AND EQUIVALENTS AT BEGINNING OF PERIOD         |   |                                | 1,206,462  |                                |   | 94,741 |   |
| CASH                  AND EQUIVALENTS AT END OF PERIOD               |   | $                                   | 5,441,611  |                                | $      | 2,679,969 |   |

|                                                                                                        |   | September                      302006 |      | September                      302005 |   |
|-------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|---------------------------------------|--------|
|                                                                                                        |   | (unaudited)                           |      | (unaudited)                           |   |
| Supplemental                    disclosures of cash flow information:                                       |   |                                  |      |                                  |   |   |   |
| Cash                    paid during the period for interest                                                 |   | $                                     | 1,269     |                                  | $      | - |   |
| Cash                    paid during the year for income taxes                                               |   | $                                     | -         |                                  | $      | - |   |
|                                                                                                        |   |                                  |      |                                  |   |   |   |
| Supplemental                    schedule of noncash financing activities:                                   |   |                                  |      |                                  |   |   |   |
| Issuance                    of stock options to employees and consultants                                   |   | $                                     | 439,684   |                                  | $      | 345,144 |   |
| Conversion                    of notes payable and accrued interest to common stock                         |   | $                                     | 313,003   |                                  |   |  - |   |
| Conversion                    of preferred stock to common stock                                            |   | $                                     | 5,308,142 |                                  |   |  - |   |
| Issuance                    of common stock dividend to preferred shareholders                              |   | $                                     | 368,366   |                                  | $      | 138,402 |   |
| Common                    stock issued as financing fees on issuance of preferred                    shares |   | $                                     | -         |                                  | $      | 589,662 |   |
| Conversion                    of notes payable and accrued interest to preferred stock                      |   | $                                     | -         |                                  | $      | 102,438 |   |
| Exercise                    of stock options into 59,600 common shares by consultant                        |   | $                                     | -         |                                  | $      | 119,200 |   |

----

|                                                                                |   |  Common                  Stock |       |
|-------------------------------------------------------------------------------------|--------|-------------------------------------|------------|
|                                                                                |   | Shares                              |       | Amount |   | Additional                  Paid-in Capital |   | Penalty                  Shares |   |
| Balance                  at January 1, 2005                                         |   |                                | 5,960,000  |   |   | 29,800 |   |   | 2,255,954 |   |   | - |   |
| Issuance                  of shares - Series A financing                            |   |                                | 308,000    |   |   | 1,540 |   |   | 588,122 |   |   | - |   |
| Issuance                  of shares - stock dividend                                |   |                                | 69,201     |   |   | 346 |   |   | 138,056 |   |   | - |   |
| Issuance                  of options (383,840 options issued,                       |   |                                |       |   |   |   |   |   | 318,111 |   |   |   |   |
| 324,240                  outstanding)                                               |   |                                |       |   |   |   |   |   |   |   |   |   |   |
| Exercise                  of options (59,600 options exercised)                     |   |                                | 59,600     |   |   | 298 |   |   | 118,902 |   |   | - |   |
| Unrealized                  loss on investments                                     |   |                                |       |   |   |   |   |   | - |   |   | - |   |
| Accrue                  unissued shares                                             |   |                                | -          |   |   | - |   |   | (81,125 | ) |   | 81,125 |   |
| Net                  loss                                                           |   |                                | -          |   |   | - |   |   | - |   |   | - |   |
| Balance                  at December 31, 2005                                       |   |                                | 6,396,801  |   |   | 31,984 |   |   | 3,338,020 |   |   | 81,125 |   |
| Issuance                  of shares - previously accrued penalty shares (unaudited) |   |                                | 54,060     |   |   | 270 |   |   | 80,855 |   |   | (81,125 | ) |
| Issuance                  of shares - stock dividend (unaudited)                    |   |                                | 184,183    |   |   | 922 |   |   | 367,445 |   |   | - |   |
| Issue                  penalty shares (unaudited)                                   |   |                                | 15,295     |   |   | 76 |   |   | (76 | ) |   | - |   |
| Issuance                  of shares - initial public offering (unaudited)           |   |                                | 1,700,000  |   |   | 8,500 |   |   | 10,191,500 |   |   |   |   |
| Fees                  associated with initital public offering (unaudited)          |   |                                |       |   |   |   |   |   | (1,890,444 | ) |   |   |   |
| Conversion                  of preferred stock to common stock (unaudited)          |   |                                | 3,351,219  |   |   | 16,756 |   |   | 5,291,385 |   |   |   |   |
| Conversion                  of notes payable to common stock (unaudited)            |   |                                | 124,206    |   |   | 621 |   |   | 312,382 |   |   |   |   |
| Issuance                  of options (unaudited)                               |   |                                | -          |   |   | - |   |   | 439,684 |   |   | - |   |
| Exercise                  of options (unaudited)                                    |   |                                | 625        |   |   | 3 |   |   | 2,810 |   |   |   |   |
| Issuance                  of warrants (unaudited)                                   |   |                                |       |   |   |   |   |   | 100 |   |   |   |   |
| Unrealized                  gain/(loss) on investments (unaudited)                  |   |                                | -          |   |   | - |   |   | - |   |   | - |   |
| Net                  loss (unaudited)                                               |   |                                | -          |   |   | - |   |   | - |   |   | - |   |
| Balance                  at September 30, 2006 (unaudited)                          |   |                                | 11,826,389 |   | $ | 59,132 |   | $ | 18,133,661 |   | $ | - |   |

----

|                                                                                |   | Preferred                  Stock |       |   |   |                     |   |          |       |
|-------------------------------------------------------------------------------------|--------|----------------------------------|------------|--------|--------|--------------------------|--------|---------------|------------|
|                                                                                |   | Shares                           |       | Amount |   | AdditionalPaid-inCapital |   | PenaltyShares |       | OtherComprehensiveLoss |   | Accumulated                      Deficit |   | Total |   |
| Balance                  at January 1, 2005                                         |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | (2,659,968 | ) |   | (374,214 | ) |
| Issuance                  of shares - Series A financing                            |   |                             | 3,051,219  |   |   | 15,256                   |   |          | 5,292,885  |   |   | - |   |   | - |   |   | - |   |   | 5,897,803 |   |
| Issuance                  of shares - stock dividend                                |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | (138,433 | ) |   | (31 | ) |
| Issuance                  of options (383,840 options issued,                       |   |                             |  -    |   |   |  -                  |   |          |  -    |   |   |  - |   |   |  - |   |   |  - |   |   | 318,111 |   |
| 324,240                  outstanding)                                               |   |                             |       |   |   |                     |   |          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercise                  of options (59,600 options exercised)                     |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | - |   |   | 119,200 |   |
| Unrealized                  loss on investments                                     |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | (17,810 | ) |   | - |   |   | (17,810 | ) |
| Accrue                  unissued shares                                             |   |                             |  -    |   |   |  -                  |   |          | (360,000   | ) |   | 360,000 |   |   | - |   |   | - |   |   | - |   |
| Net                  loss                                                           |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | (2,386,455 | ) |   | (2,386,455 | ) |
| Balance                  at December 31, 2005                                       |   |                             | 3,051,219  |   |   | 15,256                   |   |          | 4,932,885  |   |   | 360,000 |   |   | (17,810 | ) |   | (5,184,856 | ) |   | 3,556,604 |   |
| Issuance                  of shares - previously accrued penalty shares (unaudited) |   |                             | 240,000    |   |   | 1,200                    |   |          | 358,800    |   |   | (360,000 | ) |   | - |   |   | - |   |   | - |   |
| Issuance                  of shares - stock dividend (unaudited)                    |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | (368,410 | ) |   | (43 | ) |
| Issue                  penalty shares (unaudited)                                   |   |                             | 60,000     |   |   | 300                      |   |          | (300       | ) |   | - |   |   | - |   |   | - |   |   | - |   |
| Issuance                  of shares - initial public offering (unaudited)           |   |                             |  -    |   |   |  -                  |   |          |  -    |   |   |  - |   |   |  - |   |   |  - |   |   | 10,200,000 |   |
| Fees                  associated with initital public offering (unaudited)          |   |                             |  -    |   |   |  -                  |   |          |  -    |   |   |  - |   |   |  - |   |   |  - |   |   | (1,890,444 | ) |
| Conversion                  of preferred stock to common stock (unaudited)          |   |                             | (3,351,219 | )      |   | (16,756                  | )      |          | (5,291,385 | ) |   |  - |   |   |  - |   |   | - |   |   | - |   |
| Conversion                  of notes payable to common stock (unaudited)            |   |                             |       |   |   |                     |   |          |       |   |   |   |   |   |   |   |   |   |   |   | 313,003 |   |
| Compensation                  for stock options (unaudited)                         |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | - |   |   | 439,684 |   |
| Exercise                  of stock options (unaudited)                              |   |                             |  -    |   |   |  -                  |   |          |  -    |   |   |  - |   |   |  - |   |   |  - |   |   | 2,813 |   |
| Issuance                  of warrants (unaudited)                                   |   |                             |  -    |   |   |  -                  |   |          |  -    |   |   |  - |   |   |  - |   |   |  - |   |   | 100 |   |
| Unrealized                  gain/(loss) on investments (unaudited)                  |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | 10,257 |   |   | - |   |   | 10,257 |   |
| Net                  loss (unaudited)                                               |   |                             | -          |   |   | -                        |   |          | -          |   |   | - |   |   | - |   |   | (4,117,684 | ) |   | (4,117,684 | ) |
| Balance                  at September 30, 2006 (unaudited)                          |   |                             | -          |   | $      | -                        |   | $             | -          |   | $ | - |   | $ | (7,553 | ) | $ | (9,670,950 | ) | $ | 8,514,290 |   |

----

**CLEVELAND      BIOLABS, INC.**

**NOTES      TO UNAUDITED FINANCIAL STATEMENTS**

**Note      1. Summary of Significant Accounting Policies**

|   | A. | Basis                of Presentation - The information at September 30, 2006 and September                30,                2005, and for the three and nine-month periods ended September 30,                2006                and September 30, 2005, is unaudited. In the opinion of management,                these                financial statements include all adjustments, consisting of normal                recurring adjustments, necessary for a fair presentation of the results                for the interim periods presented. Interim results are not necessarily                indicative of results for a full year. These financial statements                should                be read in conjunction with Cleveland BioLabs, Inc.’s (“CBL” or the                “Company”) audited financial statements for the year ended December 31,                2005, which was contained in the Company’s Form SB-2 registration                statement filed with the United States Securities and Exchange Commission. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Use                of Estimates - The preparation of the unaudited financial statements                in                conformity with accounting principles generally accepted in the United                States of America 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. The Company bases its estimates on historical experience                and on various other assumptions that the Company believes to be                reasonable under these circumstances. Actual results could differ                from                those estimates. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | C. | Equipment                - Equipment is stated at cost and depreciated over the estimated                useful                lives of the assets (generally five years) using the straight-line                method.                Leasehold improvements are depreciated on the straight-line method                over                the shorter of the lease term or the estimated useful lives of the                assets.                Expenditures for maintenance and repairs are charged to expense as                incurred. Major expenditures for renewals and betterments are capitalized                and depreciated. Depreciation expense was $24,514 and $16,055 for                the                quarters ended September 30, 2006 and 2005, respectively. Depreciation                expense was $68,206 and $27,720 for the nine months ended September                30,                2006 and 2005, respectively. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | Intellectual                Property - As a result of ongoing research and development efforts,                there                have been additional capitalized costs since December 31, 2005 associated                with the preparation, filing, and maintenance of certain intellectual                property rights. Gross capitalized patents pending costs are $173,031                on                behalf of the Cleveland Clinic Foundation (“CCF”) for 12 patent                applications as of September 30, 2006. All of the 12 CCF patent                applications are still pending approval. The Company also has submitted                two patent applications as a result of intellectual property exclusively                developed and owned by the Company. Gross capitalized patents pending                costs were $9,385 for the two patent applications as of September                30,                2006. These patent applications are still pending approval. If these                patent applications are approved, costs paid by the Company associated                with the preparation, filing, and maintenance of the patents will                be                amortized on a straight-line basis over the shorter of 17 years or                the                anticipated useful life of the patent. If the patent applications                are not                approved, the costs associated with the preparation and filing of                the                patent application will be expensed as part of selling, general and                administrative expenses at that time. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | Working                Capital Line of Credit - To more effectively match short-term investment                maturities with cash flow requirements, the Company has obtained                a working                capital line of credit which is fully-secured by the short-term                investments. This fully-secured, working capital line of credit has                a rate                of Prime minus 1%, a borrowing limit of $500,000, and an expiration                date                of July 1, 2007. At September 30, 2006, there were no outstanding                borrowings under this credit facility. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | F. | Stock-Based                Compensation - The FASB issued SFAS No. 123 (revised December 2004),                Share                Based Payment, which is a revision of SFAS No. 123 Accounting for                Stock-Based Compensation. SFAS 123(R) requires all share-based payments                to                employees, including grants of employee stock options, to be recognized                in                the statement of operations based on their fair values. The Company                values                employee stock based compensation under the provisions of SFAS 123(R)                and                related interpretations. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                fair value of each stock option granted is estimated on the grant                date                using the Black-Scholes option valuation model. The assumptions used                to                calculate the fair value of options granted are evaluated and revised,                as                necessary, to reflect the Company’s experience. The Company uses a                risk-free rate based on published rates from the St. Louis Federal                Reserve                at the time of the option grant; assumes an expected dividend yield                rate                of zero based on the Company’s intent not to issue a dividend in the                foreseeable future; uses an expected life based on the safe-harbor                method                as described in SEC Staff Accounting Bulletin No. 107; and computes                an expected volatility based on similar high-growth, publicly-traded,                biotechnology companies. Compensation expense is recognized using                the                straight-line amortization method for all stock-based awards. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On                March 1, 2006, the Company granted 116,750 options pursuant to stock                award                agreements to certain employees and key consultants. On July 20,                2006 the                Company granted 45,000 fully-vested, stock options to independent                board                members pursuant to stock award agreements. The assumptions used                to value                these option grants using the Black-Scholes option valuation model                are as                follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | **March 1, 2006** |                     | **July                  20, 2006** |   |
|------------------------------------------|--------|-----------------------------|--------------------------|-----------------------------------------|--------|
| Risk-free                  interest rate |   |                        | 4.66                     | %                                       |   | 5.04 | % |
| Expected                  dividend yield |   |                        | 0                        | %                                       |   | 0 | % |
| Expected                  life           |   |                        | 5                  years |                                    |   | 5                  years |   |
| Expected                  volatility     |   |                        | 75.11                    | %                                       |   | 71.43 | % |

|   | For                the quarter ended September 30, 2006, the Company recognized $72,489                in                expense for stock based compensation under SFAS No. 123 (R). The                Company                recognized a total of $439,684 and $345,144 in expense for options                for the                nine-months ended September 30, 2006, and 2005, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                weighted average, estimated fair values of stock options granted                during                the nine-month period ended September 30, 2006 was                $3.14. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The                following tables summarize the stock option activity for the nine-months                ended September 30, 2006 and 2005. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | **Shares** |    | **Weighted****Average****Exercise****Price                          per****Share** |   | **Weighted****Average****Remaining****Contractual                          Term****(in                          Years)** |   |
|------------------------------------------------|--------|------------|---------|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|
| Outstanding,                December 31, 2005  |   |       | 324,240 |                                                                               | $      | 0.82                                                                                                                     |   |   |   |   |
| Granted,                March 1, 2006          |   |       | 116,750 |                                                                               |   | 4.50                                                                                                                     |   |   |   |   |
| Granted,                July 20, 2006          |   |       | 45,000  |                                                                               |   | 6.00                                                                                                                     |   |   |   |   |
| Exercised                                      |   |       | 625     |                                                                               |   | 4.50                                                                                                                     |   |   |   |   |
| Forfeited,                Canceled             |   |       | 1,875   |                                                                               |   | 4.50                                                                                                                     |   |   |   |   |
| Outstanding,                September 30, 2006 |   |       | 483,490 |                                                                               | $      | 2.17                                                                                                                     |   |   | 9.02 |   |
| Exercisable,                September 30, 2006 |   |       | 239,433 |                                                                               | $      | 2.27                                                                                                                     |   |   | 9.03 |   |

|                                           |   | **Options** |    | **Weighted****Average****Exercise****Price                          per****Share** |   | **Weighted****Average****Remaining****Contractual                          Term****(in                          Years)** |   |
|------------------------------------------------|--------|-------------|---------|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|
| Outstanding,                December 31, 2004  |   |        | -       |                                                                               | $      | -                                                                                                                        |   |   |   |   |
| Granted,                March 1, 2005          |   |        | 10,000  |                                                                               |   | 3.00                                                                                                                     |   |   |   |   |
| Granted,                July 1, 2005           |   |        | 294,240 |                                                                               |   | 0.66                                                                                                                     |   |   |   |   |
| Exercised                                      |   |        | -       |                                                                               |   | -                                                                                                                        |   |   |   |   |
| Forfeited,                Canceled             |   |        | -       |                                                                               |   | -                                                                                                                        |   |   |   |   |
| Outstanding,                September 30, 2005 |   |        | 304,240 |                                                                               | $      | 0.74                                                                                                                     |   |   | 9.74 |   |
| Exercisable,                September 30, 2005 |   |        | 83,560  |                                                                               | $      | 3.00                                                                                                                     |   |   | 9.71 |   |

**Note      2. Stock Transactions**

----

**Note      3. **
**Net      Loss per Share**

|                                                                                                                                       |   | Three                  Months Ended  |       | Nine                  Months Ended  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|------------|------------------------------------------|--------|
|                                                                                                                                       |   |                                      |       |                                     |   |   |   |   |   |
|                                                                                                                                       |   |  September                  30 2006  |       |  September                  30 2005 |   |  September                  30 2006 |   |  September                  30 2005 |   |
|                                                                                                                                       |   |  (unaudited)                         |       | (unaudited)                              |   | (unaudited) |   |  (unaudited) |   |
| NET                  LOSS AVAILABLE TO COMMON SHAREHOLDERS                                                                                 |   | $                                         | (1,609,565 | )                                        | $      | (746,479 | ) | $ | (4,333,617 | ) | $ | (1,650,784 | ) |
| NET                  LOSS AVAILABLE TO COMMON SHAREHOLDERS PER SHARE OF COMMON STOCK                  - BASIC                  AND DILUTED |   | $                                         | (0.15      | )                                        | $      | (0.12 | ) | $ | (0.55 | ) | $ | (0.27 | ) |
| WEIGHTED                  AVERAGE NUMBER OF SHARES USED                                                                                    |   |                                      |       |                                     |   |   |   |   |   |   |   |   |   |
| IN                  CALCULATING NET LOSS PER SHARE, BASIC AND DILUTED                                                                      |   |                                      | 10,681,032 |                                     |   | 6,314,531 |   |   | 7,922,195 |   |   | 6,201,126 |   |

----

**Note      4.**
**Commitments      and Contingencies **

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **Operating****Leases** |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|
| 2006                balance of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                       | 43,745  |   |
| 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    | 155,997 |   |
| 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                    | 53,137  |   |
| 2009                and                Beyond                                                                             |   |                    | 1,935   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $                       | 254,814 |   |

|                                                                                                                                                                                                                      |   | **Number of****Options** |    | **Weighted Average****Exercise                Price** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|------------------------------------------------------------|--------|
| Outstanding                at December 31,                2003                          |   |                          | — |                                                       |   | N/A |   |
| Granted                                                                                                                                                                                                                   |   |                          | — |                                                       |   | N/A |   |
| Exercised                                                                                                                                                                                                                 |   |                          | — |                                                       |   | N/A |   |
| Forfeited                                                                                                                                                                                                                 |   |                          | — |                                                       |   | N/A |   |
| Outstanding                at December 31, 2004                                                                                                                                                                      |   |                          | — |                                                       |   | N/A |   |
| Granted                                                                                                                                                                                                                   |   |                          | 383,840 |                                                       | $      | 0.69 |   |
| Exercised                                                                                                                                                                                                                 |   |                          | 59,600  |                                                       | $      | — |   |
| Forfeited                                                                                                                                                                                                                 |   |                          | — |                                                       |   | N/A |   |
| Outstanding                at December 31, 2005                                                                                                                                                                      |   |                          | 324,240 |                                                       | $      | 0.82 |   |
| Granted                                                                                                                                                                                                                   |   |                          | 161,750 |                                                       | $      | 4.92 |   |
| Exercised                                                                                                                                                                                                                 |   |                          | 625     |                                                       | $      | 4.50 |   |
| Forfeited                                                                                                                                                                                                                 |   |                          | 1,875   |                                                       | $      | 4.50 |   |
| Outstanding                at September 30, 2006                                                                                                                                                                          |   |                          | 483,490 |                                                       | $      | 2.17 |   |

|                                    |       |                                    | **Outstanding** |                                                                         | **Exercisable** |                                    |
|-----------------------------------------|------------|-----------------------------------------|-----------------|------------------------------------------------------------------------------|-----------------|-----------------------------------------|
|  **Exercise                Price** |       | **Number                of****Options** |            | **Weighted                Average****Years                to****Expiration** |            | **Number                of****Options** |   |
| $                                       | 0.66       |                                    |            | 190,000                                                                      |            |                                    | 8.75 |   |   | 95,000 |   |
|                                    |  0.67 |                                    |            | 104,240                                                                      |            |                                    | 8.75 |   |   | 52,120 |   |
|                                    |  2.00 |                                    |            | 20,000                                                                       |            |                                    | 9.17 |   |   | 8,750 |   |
|                                    |  3.00 |                                    |            | 10,000                                                                       |            |                                    | 8.42 |   |   | 10,000 |   |
|                                    | 4.50       |                                    |            | 114,250                                                                      |            |                                    | 9.42 |   |   | 28,563 |   |
|                                    | 6.00       |                                    |            | 45,000                                                                       |            |                                    | 9.80 |   |   | 45,000 |   |
|                                    | Total      |                                    |            | 483,490                                                                      |            |                                    | 9.02 |   |   | 239,433 |   |

----

**Note      5.**
**Subsequent      Events **

----

**Item      2:**
** **
**Management’s      Discussion and Analysis of Financial Condition and Results of      Operations**

*This      management’s discussion and analysis of financial condition and results of      operations and other portions of this filing contain forward-looking information      that involves risks and uncertainties. Our actual results could differ      materially from those anticipated by the forward-looking information. Factors      that may cause such differences include, but are not limited to, availability      and cost of financial resources, results of our R&D efforts and clinical      trials, product demand, market acceptance and other factors discussed in the      Company’s other SEC filings under the heading “Risk Factors”. This management’s      discussion and analysis of financial condition and results of operations should      be read in conjunction with our financial statements and the related notes      included elsewhere in this filing.*

**Overview      **

|  | · | Protectans                (CBLB500 and CBLB600 series) are modified proteins of microbes and                tumors                that protect cells from apoptosis, and, as a result, have a broad                spectrum                of potential applications. These potential applications include both                non-medical applications such as protection from exposure to radiation,                whether as a result of military or terrorist action or as a result                of a                nuclear accident, as well as medical applications such as reducing                cancer                treatment side effects. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | Curaxins                (CBLC100 series) are small molecules designed to kill tumor cells                by                simultaneously targeting two regulators of apoptosis. Initial test                results                indicate that curaxins can be effective against a number of malignancies,                including renal cell carcinoma, or RCC (a highly fatal form of kidney                cancer), soft-tissue sarcoma and hormone refractory prostate                cancer. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Critical      Accounting Policies**

----

***Revenue      Recognition***

***R&D      Expenses***

***Intellectual      Property Related Costs***

----

***Stock-based      Compensation***

**Results      of Operations**

|                                                                                                                                                                               |   | **Quarter                Ended Sept. 30,****2006** |       | **Quarter                Ended Sept. 30,****2005** |   | **Nine                Months Ended Sept. 30,****2006** |   | **Nine                Months Ended Sept. 30,****2005** |       | **Year                Ended****December 31,****2005** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|----------------------------------------------------|--------|--------------------------------------------------------|--------|--------------------------------------------------------|------------|------------------------------------------------------------|--------|
| **                             ** |   | **(unaudited)**                                    |       | **(unaudited)**                                    |   | **(unaudited)**                                        |   | **(unaudited)**                                        |       |                                                       |   |
| Revenues                                                                                                                                                                           |   | $                                                  | 323,368    |                                               | $      | 566,194                                                |   | $                                                      | 1,476,787  |                                                       | $      | 764,125 |   | $ | 1,138,831 |   |
| Operating                expenses                                                                                                                                                  |   |                                               | 1,989,831  |                                               |   | 1,253,412                                              |   |                                                   | 5,708,992  |                                                       |   | 2,285,678 |   |   | 3,626,664 |   |
| Net                interest expense (income)                                                                                                                                       |   |                                               | (78,933    | )                                                  |   | (33,028                                                | )      |                                                   | (114,521   | )                                                          |   | (70,394 | ) |   | (101,378 | ) |
| Net                income (loss)                                                                                                                                                   |   | $                                                  | (1,587,530 | )                                                  | $      | (654,190                                               | )      | $                                                      | (4,117,684 | )                                                          | $      | (1,451,159 | ) | $ | (2,386,455 | ) |

**Nine      Months Ended September 30, 2006 Compared to Nine Months Ended September 30,      2005**

***Revenue***

| **Agency** |   | **Program** |                                        | **Amount** |   | **Period                of****Performance** |   | **Revenue****2006****(thru****Sept.                30)** |            | **Revenue****2005****(thru****Sept.                30)** |   | **Revenue****2005** |   |
|------------|--------|-------------|---------------------------------------------|------------|--------|---------------------------------------------|--------|----------------------------------------------------------|-----------------|----------------------------------------------------------|--------|---------------------|--------|
|       |   |        |                                        |       |   |                                        |   | **(unaudited)**                                          |            | **(unaudited)**                                          |   |                |   |
| **NIH**    |   |        | Phase                I NIH SBIR program     |       | $      | 100,000                                     |   |                                                     | 08/2004-04/2005 |                                                     |   | —             |   | $ | 49,999 |   | $ | 49,998 |   |
| **NIH**    |   |        | NIH                SBIR Contract, Topic 186 |       | $      | 100,000                                     |   |                                                     | 09/2004-03/2005 |                                                     |   | —             |   |   | — |   |   | — |   |
| **NIH**    |   |        | Phase                I NIH STTR program     |       | $      | 100,000                                     |   |                                                     | 08/2004-04/2005 |                                                     |   | —             |   |   | — |   |   | — |   |
| **DARPA**  |   |        | DARPA,                program BAA04-12      |       | $      | 475,000                                     |   |                                                     | 11/2004-08/2005 |                                                     |   | —             |   | $ | 283,185 |   | $ | 283,185 |   |
| **NIH**    |   |        | Phase                I NIH SBIR program     |       | $      | 100,000                                     |   |                                                     | 06/2005-01/2006 |                                                     |   | —             |   | $ | 100,000 |   | $ | 100,000 |   |
| **NIH**    |   |        | BioShield                program (NIAID)    |       | $      | 1,500,000                                   |   |                                                     | 07/2005-01/2007 |                                                     | $      | 1,100,293           |   | $ | 150,000 |   | $ | 399,707 |   |
| **NIH**    |   |        | Phase                I NIH SBIR program     |       | $      | 100,000                                     |   |                                                     | 08/2005-01/2006 |                                                     | $      | 33,334              |   | $ | 16,666 |   | $ | 66,666 |   |
| **NIH**    |   |        | Phase                I NIH SBIR program     |       | $      | 100,000                                     |   |                                                     | 09/2005-02/2006 |                                                     |   | —             |   | $ | 25,000 |   | $ | 100,000 |   |
| **NASA**   |   |        | Phase                I NASA STTR program    |       | $      | 100,000                                     |   |                                                     | 01/2006-01/2007 |                                                     | $      | 33,197              |   | $ | — |   | $ | — |   |
| **NIH**    |   |        | Phase                II NIH SBIR program    |       | $      | 750,000                                     |   |                                                     | 07/2006-06/2008 |                                                     | $      | 88,320              |   | $ | — |   | $ | — |   |
| **NIH**    |   |        | NCI                Contract                 |       | $      | 750,000                                     |   |                                                     | 09/2006-08/2008 |                                                     | $      | 16,643              |   |   |   |   |   |   |   |
| Totals     |   |        |                                             |       |   |                                             |   |                                                     |            |                                                     | $      | 1,271,787           |   | $ | 624,850 |   | $ | 999,556 |   |

----

***Operating      Expenses***

**Year      Ended December 31, 2005 Compared to Year Ended December 31,      2004**

***Revenue***

----

***Operating      Expenses***

**Liquidity      and Capital Resources**

----

| File                IND application for Protectan CBLB502                    |   | $ | 50,000    |   |
|------------------------------------------------------------------------------|--------|---|-----------|--------|
| Complete                Phase I studies for Protectan CBLB502                |   | $ | 100,000   |   |
| File                NDA application for Protectan CBLB502                    |   | $ | 350,000   |   |
| Receive                regulatory approval to sell Protectan CBLB502         |   | $ | 1,000,000 |   |
| File                IND application for Curaxin CBLC102 (completed May 2006) |   | $ | 50,000    |   |
| Commence                Phase II clinical trials for Curaxin CBLC102         |   | $ | 250,000   |   |
| Commence                Phase III clinical trials for Curaxin CBLC102        |   | $ | 700,000   |   |
| File                NDA application for Curaxin CBLC102                      |   | $ | 1,500,000 |   |
| Receive                regulatory approval to sell Curaxin CBLC102           |   | $ | 4,000,000 |   |

----

***Impact      of Inflation***

***Off-Balance      Sheet Arrangements***

----

**Item      3: **
**Controls      and Procedures **

**Effectiveness      of Disclosure**

**Changes      in Internal Control over Financial Reporting**

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**PART        **II        Other Information****

| **Item 1.****Legal                Proceedings** |
|------------------------------------------------------|

| **Item 2.****Unregistered                Sales of Equity Securities and Use of Proceeds** |
|------------------------------------------------------------------------------------------------|

| **Item 3.****Defaults                Upon Senior Securities** |
|--------------------------------------------------------------------|

| **Item 4.****Submission                of Matters to a Vote of Securities Holders** |
|------------------------------------------------------------------------------------------|

**Item      5. Other Information**

**Item      6. Exhibits**

(a)      The      following exhibits are included as part of this report:   

| **Exhibit****Number** |    | **Description                of Document**                                                                                                                               |
|-----------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |         |                                                                                                                                                                     |
| 31.1                  |         | Certification                of Michael Fonstein, Chief Executive Officer, pursuant to Section                302 of                the Sarbanes Oxley Act of 2002.      |
|                  |         |                                                                                                                                                                     |
| 31.2                  |         | Certification                of John A. Marhofer, Jr., Chief Financial Officer, pursuant to Section                302                of the Sarbanes Oxley Act of 2002. |
|                  |         |                                                                                                                                                                     |
| 32.1                  |         | Certification                Pursuant To 18 U.S.C. Section 1350                                                                                                          |

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**Signatures      **

|                                  |                                                                                                                         |                                                     |
|---------------------------------------|------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|
|                                  | CLEVELAND                BIOLABS, INC.                                                                                       |
|                             |                                                                                                                    |                                                |
| Dated:              November 13, 2006 | By:                                                                                                                | /s/ JOHN              A.              MARHOFER, JR. |
|                                  | John                A. Marhofer, Jr. Chief                  Financial Officer (Principal                  Financial Officer) |

|                                    |                                                                                                                         |                                    |
|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
|                                    | CLEVELAND                BIOLABS, INC.                                                                                       |
|                               |                                                                                                                    |                               |
| Dated:                November 13, 2006 | By:                                                                                                                | /s/ MICHAEL              FONSTEIN. |
|                                    | Michael                Fonstein Chief                  Executive Officer (Principal                  Executive Officer) |

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