**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.)** |

**73      High Street**

**BUFFALO,      NEW YORK 14203**

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

**(716) 849-6810**

**(Issuer's      telephone number)**
** **

----

|                                          |                                                                                                                                                                 |   |                     | PAGE   |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|
| PART                I - FINANCIAL INFORMATION |                                                                                                                                                                 |   |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                1:                        | Financial                Statements                                                                                                                                  |   |                     |
|                                          |                                                                                                                                                                 |   |                     |   |
|                                          | Balance                Sheets as of September 30, 2007 and December 31, 2006                                                                                         |   | 3-4                      |
|                                          |                                                                                                                                                                 |   |                     |   |
|                                          | Statements                of Operations For Three and Nine Months Ended September 30, 2007                and                2006                                    |   |  5                  |
|                                          |                                                                                                                                                                 |   |                     |   |
|                                          | Statement                  of Stockholders' Equity January 1, 2006 to December 31, 2006 and                  to                  September                  30, 2007 |   | 6                        |
|                                          |                                                                                                                                                                 |   |                     |   |
|                                          | Statements              of Cash Flows For Nine Months Ended September 30, 2007 and 2006                                                                              |   | 9                        |
|                                          |                                                                                                                                                                 |   |                     |   |
|                                          | Notes                to Financial Statements                                                                                                                         |   | 10                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                2:                        | Management's                Discussion and Analysis of Financial Condition and Results of                Operations                                                  |   | 20                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                3:                        | Controls                and Procedures                                                                                                                               |   | 33                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| PART                II - OTHER INFORMATION    |                                                                                                                                                                 |   |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                1:                        | Legal                Proceedings                                                                                                                                     |   | 34                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                2:                        | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                           |   | 34                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                3:                        | Defaults                Upon Senior Securities                                                                                                                       |   | 34                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                4:                        | Submission                of Matters to a Vote of Securities Holders                                                                                                 |   | 34                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                5:                   | Other                Information                                                                                                                                |   |                  34 |
|                                          |                                                                                                                                                                 |   |                     |   |
| ITEM                6:                        | Exhibits                                                                                                                                                             |   | 34                       |
|                                          |                                                                                                                                                                 |   |                     |   |
| Signatures                                    |                                                                                                                                                                 |   | 35                       |

----

| CLEVELAND                  BIOLABS, INC.                              |   |
|-----------------------------------------------------------------------|--------|
|                                                                  |   |    |   |   |   |
| BALANCE                  SHEETS                                       |   |
|                                                                  |   |    |   |   |   |
| September                  30, 2007 (unaudited) and December 31, 2006 |   |
|                                                                  |   |    |   |   |   |
|                                                                  |   |  September                  30 |   | December                  31 |   |
|                                                                  |   |  2007 |   | 2006 |   |
| ASSETS                                                                |   |  (unaudited) |   |   |   |
|                                                                  |   |    |   |   |   |
| CURRENT                  ASSETS                                       |   |    |   |   |   |
| Cash                  and equivalents                                 |   | $ | 20,278,556 |   | $ | 3,061,993 |   |
| Short-term                  investments                               |   |   | 1,003,869 |   |   | 1,995,836 |   |
| Accounts                  receivable:                                 |   |   |   |   |   |   |   |
| Trade                                                                 |   |   | 644,539 |   |   | 159,750 |   |
| Interest                                                              |   |   | 44,179 |   |   | 42,479 |   |
| Notes                  receivable - Orbit Brands                      |   |   | - |   |   | 50,171 |   |
| Prepaid                  expenses                                     |   |   | 266,769 |   |   | 434,675 |   |
| Total                  current assets                                 |   |   | 22,237,912 |   |   | 5,744,904 |   |
|                                                                  |   |   |   |   |   |   |   |
| EQUIPMENT                                                             |   |   |   |   |   |   |   |
| Computer                  equipment                                   |   |   | 250,527 |   |   | 132,572 |   |
| Lab                  equipment                                        |   |   | 886,731 |   |   | 347,944 |   |
| Furniture                                                             |   |   | 91,885 |   |   | 65,087 |   |
|                                                                  |   |   | 1,229,143 |   |   | 545,603 |   |
| Less                  accumulated depreciation                        |   |   | 252,990 |   |   | 142,011 |   |
| Construction                  in progress                             |   |   | 147,889 |   |   | - |   |
|                                                                  |   |   | 1,124,042 |   |   | 403,592 |   |
|                                                                  |   |   |   |   |   |   |   |
| OTHER                  ASSETS                                         |   |   |   |   |   |   |   |
| Intellectual                  property                                |   |   | 406,395 |   |   | 252,978 |   |
| Deposits                                                              |   |   | 27,447 |   |   | 15,055 |   |
|                                                                  |   |   | 433,842 |   |   | 268,033 |   |
|                                                                  |   |   |   |   |   |   |   |
| TOTAL                  ASSETS                                         |   | $ | 23,795,796 |   | $ | 6,416,529 |   |

----

| CLEVELAND                  BIOLABS, INC.                                          |   |
|-----------------------------------------------------------------------------------|--------|
|                                                                              |   |    |   |   |   |
| BALANCE                  SHEETS                                                   |   |
|                                                                              |   |    |   |   |   |
| September                  30, 2007 (unaudited) and December 31, 2006             |   |
|                                                                              |   |    |   |   |   |
|                                                                              |   |  September                  30 |   | December                  31 |   |
|                                                                              |   |  2007 |   | 2006 |   |
| LIABILITIES                  AND STOCKHOLDERS' EQUITY                             |   |  (unaudited) |   |   |   |
|                                                                              |   |    |   |   |   |
| CURRENT                  LIABILITIES                                              |   |    |   |   |   |
| Accounts                  payable                                                 |   | $ | 965,369 |   | $ | 644,806 |   |
| Deferred                  revenue                                                 |   |   | 1,846,763 |   |   | - |   |
| Accrued                  expenses                                                 |   |   | 397,991 |   |   | 128,569 |   |
| Total                  current liabilities                                        |   |   | 3,210,123 |   |   | 773,375 |   |
|                                                                              |   |   |   |   |   |   |   |
| LONG-TERM                  LIABILITIES                                            |   |   |   |   |   |   |   |
| Milestone                  payable (long-term)                                    |   |   | - |   |   | 50,000 |   |
| Total                  long-term liabilities                                      |   |   | - |   |   | 50,000 |   |
|                                                                              |   |   |   |   |   |   |   |
| STOCKHOLDERS'                  EQUITY                                             |   |   |   |   |   |   |   |
| Series                  B convertible preferred stock, $.005 par value            |   |   |   |   |   |   |   |
| Authorized                  - 10,000,000 shares at September 30, 2007             |   |   |   |   |   |   |   |
| and                  December 31, 2006                                            |   |   |   |   |   |   |   |
| Issued                  and outstanding 4,579,010 and 0                           |   |   |   |   |   |   |   |
| shares                  at September 30, 2007 and December 31, 2006, respectively |   |   | 22,895 |   |   | - |   |
| Additional                  paid-in capital                                       |   |   | 28,845,232 |   |   | - |   |
| Common                  stock, $.005 par value                                    |   |   |   |   |   |   |   |
| Authorized                  - 40,000,000 shares at September 30, 2007             |   |   |   |   |   |   |   |
| and                  December 31, 2006                                            |   |   |   |   |   |   |   |
| Issued                  and outstanding 12,182,748 and 11,826,389                 |   |   |   |   |   |   |   |
| shares                  at September 30, 2007 and December 31, 2006, respectively |   |   | 60,914 |   |   | 59,132 |   |
| Additional                  paid-in capital                                       |   |   | 22,949,868 |   |   | 18,314,097 |   |
| Accumulated                  other comprehensive income (loss)                    |   |   | - |   |   | (4,165 | ) |
| Accumulated                  deficit                                              |   |   | (31,293,236 | ) |   | (12,775,910 | ) |
| Total                  stockholders' equity                                       |   |   | 20,585,673 |   |   | 5,593,154 |   |
|                                                                              |   |   |   |   |   |   |   |
|                                                                              |   |   |   |   |   |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY                       |   | $ | 23,795,796 |   | $ | 6,416,529 |   |

----

| CLEVELAND                  BIOLABS, INC.                                                                      |   |
|---------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                          |   |    |   |   |   |   |   |   |   |
| STATEMENT                  OF OPERATIONS                                                                      |   |
|                                                                                                          |   |    |   |   |   |   |   |   |   |
| Three                  Months and Nine Months Ending September 30, 2007 and 2006                  (unaudited) |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                                          |   | Three                  Months Ended |   | Nine                  Months Ended |   |
|                                                                                                          |   |  September                  30 |   | September                  30 |   | September                  30 |   | September                  30 |   |
|                                                                                                          |   |  2007 |   | 2006 |   | 2007 |   | 2006 |   |
|                                                                                                          |   |  (unaudited) |   | (unaudited) |   | (unaudited) |   | (unaudited) |   |
| REVENUES                                                                                                      |   |    |   |   |   |   |   |   |   |
| Grant                                                                                                         |   | $ | 540,544 |   | $ | 263,368 |   | $ | 1,327,996 |   | $ | 1,271,787 |   |
| Service                                                                                                       |   |   | 120,000 |   |   | 60,000 |   |   | 290,000 |   |   | 205,000 |   |
|                                                                                                          |   |   | 660,544 |   |   | 323,368 |   |   | 1,617,996 |   |   | 1,476,787 |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                  EXPENSES                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Research                  and development                                                                     |   |   | 4,105,480 |   |   | 1,281,055 |   |   | 11,663,054 |   |   | 4,341,535 |   |
| Selling,                  general and administrative                                                          |   |   | 1,442,669 |   |   | 708,776 |   |   | 6,968,565 |   |   | 1,367,457 |   |
| Total                  operating expenses                                                                     |   |   | 5,548,149 |   |   | 1,989,831 |   |   | 18,631,619 |   |   | 5,708,992 |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS                  FROM OPERATIONS                                                                         |   |   | (4,887,605 | ) |   | (1,666,463 | ) |   | (17,013,623 | ) |   | (4,232,205 | ) |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                  INCOME                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                                                                              |   |   | 305,568 |   |   | 81,189 |   |   | 761,648 |   |   | 125,719 |   |
| Sublease                  revenue                                                                             |   |   | 1,771 |   |   | - |   |   | 1,771 |   |   | - |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                  EXPENSE                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                                                             |   |   | - |   |   | 2,257 |   |   | 1,087 |   |   | 11,198 |   |
| Corporate                  relocation                                                                         |   |   | 901,964 |   |   |   |   |   | 1,152,643 |   |   |   |   |
| Loss                  on investment                                                                           |   |   | 305,479 |   |   | - |   |   | 305,479 |   |   | - |   |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                  LOSS                                                                                     |   |   | (5,787,709 | ) |   | (1,587,531 | ) |   | (17,709,413 | ) |   | (4,117,684 | ) |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DIVIDENDS                  ON CONVERTIBLE PREFERRED STOCK                                                     |   |   | (807,913 | ) |   | (22,035 | ) |   | (807,913 | ) |   | (215,933 | ) |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                  LOSS AVAILABLE TO COMMON STOCKHOLDERS                                                    |   | $ | (6,595,622 | ) | $ | (1,609,566 | ) | $ | (18,517,326 | ) | $ | (4,333,617 | ) |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                  LOSS AVAILABLE TO COMMON STOCKHOLDERS                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PER                  SHARE OF COMMON STOCK - BASIC AND                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED                                                                                                       |   | $ | (0.54 | ) | $ | (0.15 | ) | $ | (1.54 | ) | $ | (0.55 | ) |
|                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED                  AVERAGE NUMBER OF SHARES USED                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| IN                  CALCULATING NET LOSS PER SHARE,BASIC                  AND DILUTED                         |   |   | 12,148,718 |   |   | 10,681,032 |   |   | 12,010,177 |   |   | 7,922,195 |   |

----

| CLEVELAND                      BIOLABS, INC.                                   |   |                                      |         |   |   |         |   |    |         |
|--------------------------------------------------------------------------------|--------|-------------------------------------------|--------------|--------|--------|--------------|--------|---------|--------------|
|                                                                           |   |                                      |         |   |   |         |   |    |         |
| STATEMENTS                      OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS |   |                                      |         |   |   |         |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |
| Period                      From January 1, 2006 to December 31, 2006 and to   |   |                                      |         |   |   |         |   |    |         |
| September                      30, 2007 (unaudited)                            |   |                                      |         |   |   |         |   |    |         |
|                                                                           |   | Stockholders'                      Equity |         |   |   |         |
|                                                                           |   | Common                      Stock         |         |
|                                                                           |   |                                      |         |   |   | Additional   |   |    |         |
|                                                                           |   |                                      |         |   |   | Paid-in      |   | Penalty |         |
|                                                                           |   | Shares                                    |         | Amount |   | Capital      |   | Shares  |         |
| Balance                      at January 1, 2006                                |   |                                      | 6,396,801.00 |   |   | 31,984       |   |    | 3,338,020    |   |   | 81,125 |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of shares - previously accrued penalty shares    |   |                                      | 54,060       |   |   | 270          |   |    | 80,855       |   |   | (81,125 | ) |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of shares - stock dividend                       |   |                                      | 184,183      |   |   | 922          |   |    | 367,445      |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of penalty shares                                |   |                                      | 15,295       |   |   | 76           |   |    | (76          | ) |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of shares - initial public offering              |   |                                      | 1,700,000    |   |   | 8,500        |   |    | 10,191,500   |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Fees                      associated with initital public offering             |   |                                      | -            |   |   | -            |   |    | (1,890,444   | ) |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Conversion                      of preferred stock to common stock             |   |                                      | 3,351,219    |   |   | 16,756       |   |    | 5,291,385    |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Conversion                      of notes payable to common stock               |   |                                      | 124,206      |   |   | 621          |   |    | 312,382      |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of options                                       |   |                                      | -            |   |   | -            |   |    | 506,078      |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Exercise                      of options                                       |   |                                      | 625          |   |   | 3            |   |    | 2,810        |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of warrants                                      |   |                                      | -            |   |   | -            |   |    | 114,032      |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Proceeds                      from sales of warrants                           |   |                                      | -            |   |   | -            |   |    | 110          |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Net                      loss                                                  |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Other                      comprehensive income                                |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Unrealized                      gains (losses) on short term investments       |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Changes                      in unrealized holding gains (losses)              |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| arising                      during period                                     |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
| Less                      reclassification adjustment for (gains) losses       |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| included                      in net loss                                      |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
| Comprehensive                      loss                                        |   |                                      |    |   |   |    |   |    |    |   |   |    |   |
| Balance                      at December 31, 2006                              |   |                                      | 11,826,389   |   | $      | 59,132       |   | $       | 18,314,097   |   | $ | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of options                                       |   |                                      | -            |   |   | -            |   |    | 2,745,287    |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of Series B Preferred Shares                     |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Fees                      associated with Series B Preferred offering          |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Issuance                      of restricted shares                             |   |                                      | 190,000      |   |   | 950          |   |    | 1,699,500    |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Exercise                      of options                                       |   |                                      | 118,296      |   |   | 591          |   |    | 100,709      |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Exercise                      of warrants                                      |   |                                      | 48,063       |   |   | 240          |   |    | 90,275       |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Dividends                      on Series B Preferred Shares                    |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Net                      Loss                                                  |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
|                                                                           |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Other                      comprehensive income                                |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Unrealized                      gains (losses) on short term investments       |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| Changes                      in unrealized holding gains (losses)              |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| arising                      during period                                     |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
| Less                      reclassification adjustment for (gains) losses       |   |                                      |         |   |   |         |   |    |         |   |   |   |   |
| included                      in net loss                                      |   |                                      | -            |   |   | -            |   |    | -            |   |   | - |   |
| Comprehensive                      loss                                        |   |                                      |    |   |   |    |   |    |    |   |   |    |   |
| Balance                      at September 30, 2007                             |   |                                      | 12,182,748   |   | $      | 60,914       |   | $       | 22,949,868   |   | $ | - |   |

----

| CLEVELAND                  BIOLABS, INC.                                   |   |                                  |       |   |   |       |   |    |       |
|----------------------------------------------------------------------------|--------|---------------------------------------|------------|--------|--------|------------|--------|---------|------------|
|                                                                       |   |                                  |       |   |   |       |   |    |       |
| STATEMENTS                  OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS |   |                                  |       |   |   |       |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |
| Period                  From January 1, 2006 to December 31, 2006 and to   |   |                                  |       |   |   |       |   |    |       |
| September                  30, 2007 (unaudited)                            |   |                                  |       |   |   |       |   |    |       |
|                                                                       |   | Stockholders'                  Equity |       |   |   |       |   |
|                                                                       |   | Preferred                  Stock      |       |
|                                                                       |   |                                  |       |   |   | Additional |   |    |       |
|                                                                       |   |                                  |       |   |   | Paid-in    |   | Penalty |       |
|                                                                       |   | Shares                                |       | Amount |   | Capital    |   | Shares  |       |
| Balance                  at January 1, 2006                                |   |                                  | 3,051,219  |   |   | 15,256     |   |    | 4,932,885  |   |   | 360,000 |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of shares - previously accrued penalty shares    |   |                                  | 240,000    |   |   | 1,200      |   |    | 358,800    |   |   | (360,000 | ) |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of shares - stock dividend                       |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of penalty shares                                |   |                                  | 60,000     |   |   | 300        |   |    | (300       | ) |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of shares - initial public offering              |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Fees                  associated with initital public offering             |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Conversion                  of preferred stock to common stock             |   |                                  | (3,351,219 | )      |   | (16,756    | )      |    | (5,291,385 | ) |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Conversion                  of notes payable to common stock               |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of options                                       |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Exercise                  of options                                       |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of warrants                                      |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Proceeds                  from sales of warrants                           |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Net                  loss                                                  |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Other                  comprehensive income                                |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Unrealized                  gains (losses) on short term investments       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Changes                  in unrealized holding gains (losses)              |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| arising                  during period                                     |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
| Less                  reclassification adjustment for (gains) losses       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| included                  in net loss                                      |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
| Comprehensive                  loss                                        |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Balance                  at December 31, 2006                              |   |                                  | -          |   | $      | -          |   | $       | -          |   | $ | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of options                                       |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of Series B Preferred Shares                     |   |                                  | 4,288,712  |   |   | 21,444     |   |    | 29,999,540 |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Fees                  associated with Series B Preferred offering          |   |                                  | 290,298    |   |   | 1,451      |   |    | (1,154,308 | ) |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Issuance                  of restricted shares                             |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Exercise                  of options                                       |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Exercise                  of warrants                                      |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Dividends                  on Series B Preferred Shares                    |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Net                  Loss                                                  |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
|                                                                       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Other                  comprehensive income                                |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Unrealized                  gains (losses) on short term investments       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Changes                  in unrealized holding gains (losses)              |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| arising                  during period                                     |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
| Less                  reclassification adjustment for (gains) losses       |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| included                  in net loss                                      |   |                                  | -          |   |   | -          |   |    | -          |   |   | - |   |
| Comprehensive                  loss                                        |   |                                  |       |   |   |       |   |    |       |   |   |   |   |
| Balance                  at September 30, 2007                             |   |                                  | 4,579,010  |   | $      | 22,895     |   | $       | 28,845,232 |   | $ | - |   |

----

| CLEVELAND                  BIOLABS, INC.                                   |   |                                  |    |        |   |        |   |          |        |
|----------------------------------------------------------------------------|--------|---------------------------------------|---------|-------------|--------|-------------|--------|---------------|-------------|
|                                                                       |   |                                  |    |        |   |        |   |          |        |
| STATEMENTS                  OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS |   |                                  |    |        |   |        |   |          |        |
|                                                                       |   |                                  |    |        |   |        |   |          |        |
| Period                  From January 1, 2006 to December 31, 2006 and to   |   |                                  |    |        |   |        |   |          |        |
| September                  30, 2007 (unaudited)                            |   |                                  |    |        |   |        |   |          |        |
|                                                                       |   | Stockholders'                  Equity |    |        |   |        |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |
|                                                                       |   | Other                                 |    |        |   |        |   | Comprehensive |        |
|                                                                       |   | Comprehensive                         |    | Accumulated |   |        |   | Income        |        |
|                                                                       |   | Income/(Loss)                         |    | Deficit     |   | Total       |   | (Loss)        |        |
| Balance                  at January 1, 2006                                |   |                                  | (17,810 | )           |   | (5,184,856  | )      |          | 3,556,604   |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of shares - previously accrued penalty shares    |   |                                  | -       |        |   | -           |   |          | -           |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of shares - stock dividend                       |   |                                  | -       |        |   | (368,410    | )      |          | (43         | ) |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of penalty shares                                |   |                                  | -       |        |   | -           |   |          | -           |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of shares - initial public offering              |   |                                  | -       |        |   | -           |   |          | 10,200,000  |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Fees                  associated with initital public offering             |   |                                  | -       |        |   | -           |   |          | (1,890,444  | ) |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Conversion                  of preferred stock to common stock             |   |                                  | -       |        |   | -           |   |          | -           |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Conversion                  of notes payable to common stock               |   |                                  | -       |        |   | -           |   |          | 313,003     |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of options                                       |   |                                  | -       |        |   | -           |   |          | 506,078     |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Exercise                  of options                                       |   |                                  | -       |        |   | -           |   |          | 2,813       |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of warrants                                      |   |                                  | -       |        |   | -           |   |          | 114,032     |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Proceeds                  from sales of warrants                           |   |                                  | -       |        |   | -           |   |          | 110         |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Net                  loss                                                  |   |                                  | -       |        |   | (7,222,644  | )      |          | (7,222,644  | ) |   | (7,222,644 | ) |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Other                  comprehensive income                                |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Unrealized                  gains (losses) on short term investments       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Changes                  in unrealized holding gains (losses)              |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| arising                  during period                                     |   |                                  | 6,678   |        |   | -           |   |          | 6,678       |   | $ | 6,678 |   |
| Less                  reclassification adjustment for (gains) losses       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| included                  in net loss                                      |   |                                  | 6,967   |        |   | -           |   |          | 6,967       |   | $ | 6,967 |   |
| Comprehensive                  loss                                        |   |                                  |    |        |   |        |   |          |        |   | $ | (7,208,999 | ) |
| Balance                  at December 31, 2006                              |   | $                                     | (4,165  | )           | $      | (12,775,910 | )      | $             | 5,593,154   |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of options                                       |   |                                  | -       |        |   | -           |   |          | 2,745,287   |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of Series B Preferred Shares                     |   |                                  | -       |        |   | -           |   |          | 30,020,984  |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Fees                  associated with Series B Preferred offering          |   |                                  | -       |        |   | -           |   |          | (1,152,857  | ) |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Issuance                  of restricted shares                             |   |                                  | -       |        |   | -           |   |          | 1,700,450   |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Exercise                  of options                                       |   |                                  | -       |        |   | -           |   |          | 101,300     |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Exercise                  of warrants                                      |   |                                  | -       |        |   | -           |   |          | 90,515      |   |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Dividends                  on Series B Preferred Shares                    |   |                                  | -       |        |   | (807,913    | )      |          | (807,913    | ) |   |   |   |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Net                  Loss                                                  |   |                                  | -       |        |   | (17,709,413 | )      |          | (17,709,413 | ) |   | (17,709,413 | ) |
|                                                                       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Other                  comprehensive income                                |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Unrealized                  gains (losses) on short term investments       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| Changes                  in unrealized holding gains (losses)              |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| arising                  during period                                     |   |                                  | -       |        |   | -           |   |          | -           |   | $ | - |   |
| Less                  reclassification adjustment for (gains) losses       |   |                                  |    |        |   |        |   |          |        |   |   |   |   |
| included                  in net loss                                      |   |                                  | 4,165   |        |   | -           |   |          | 4,165       |   | $ | 4,165 |   |
| Comprehensive                  loss                                        |   |                                  |    |        |   |        |   |          |        |   | $ | (17,705,248 | ) |
| Balance                  at September 30, 2007                             |   | $                                     | -       |        | $      | (31,293,236 | )      | $             | 20,585,673  |   |   |   |   |

----

| CLEVELAND                    BIOLABS, INC.                                                                               |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |    |   |   |   |
| STATEMENTS                    OF CASH FLOWS                                                                              |   |
|                                                                                                                     |   |    |   |   |   |
| For                    the Nine Months Ended September 30, 2007 and 2006                    (unaudited)                  |   |
|                                                                                                                     |   |   |   |   |   |
|                                                                                                                     |   |    |   |   |   |
|                                                                                                                     |   |  September                    30 |   | September                    30 |   |
|                                                                                                                     |   |  2007 |   | 2006 |   |
|                                                                                                                     |   |  (unaudited) |   | (unaudited) |   |
| CASH                    FLOWS FROM OPERATING ACTIVITIES                                                                  |   |    |   |   |   |
| Net                    loss                                                                                              |   | $ | (17,709,413 | ) | $ | (4,117,684 | ) |
| Adjustments                    to reconcile net loss to net cash                                                         |   |   |   |   |   |   |   |
| used                    by operating activities:                                                                         |   |   |   |   |   |   |   |
| Depreciation                                                                                                             |   |   | 110,979 |   |   | 68,204 |   |
| Noncash                    interest expense                                                                              |   |   | - |   |   | 9,929 |   |
| Noncash                    salaries and consulting expense                                                               |   |   | 4,445,737 |   |   | 439,684 |   |
| Deferred                    compensation                                                                                 |   |   | - |   |   | 4,852 |   |
| Loss                    on investments                                                                                   |   |   | 305,479 |   |   | - |   |
| Changes                    in operating assets and liabilities:                                                          |   |   |   |   |   |   |   |
| Accounts                    receivable - trade                                                                           |   |   | (484,789 | ) |   | (76,644 | ) |
| Accounts                    receivable - interest                                                                        |   |   | (7,008 | ) |   | (5,170 | ) |
| Prepaid                    expenses                                                                                      |   |   | 167,907 |   |   | (132,729 | ) |
| Deposits                                                                                                                 |   |   | (12,392 | ) |   | (3,055 | ) |
| Accounts                    payable                                                                                      |   |   | 320,563 |   |   | 308,797 |   |
| Deferred                    revenue                                                                                      |   |   | 1,846,763 |   |   | (100,293 | ) |
| Accrued                    expenses                                                                                      |   |   | 269,424 |   |   | 15,596 |   |
| Milestone                    payments                                                                                    |   |   | (50,000 | ) |   | 50,000 |   |
| Total                    adjustments                                                                                     |   |   | 6,912,663 |   |   | 579,172 |   |
| Net                    cash (used by) provided by operating                                                              |   |   |   |   |   |   |   |
| activities                                                                                                               |   |   | (10,796,750 | ) |   | (3,538,512 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |
| CASH                    FLOWS FROM INVESTING ACTIVITIES                                                                  |   |   |   |   |   |   |   |
| Sale/(purchase)                    of short-term investments                                                             |   |   | 996,131 |   |   | (500,000 | ) |
| Issuance                    of notes receivable                                                                          |   |   | (250,000 | ) |   | - |   |
| Purchase                    of equipment                                                                                 |   |   | (831,430 | ) |   | (143,693 | ) |
| Costs                    of patents pending                                                                              |   |   | (153,417 | ) |   | (106,059 | ) |
| Net                    cash (used in) provided by investing activities                                                   |   |   | (238,716 | ) |   | (749,752 | ) |
|                                                                                                                     |   |   |   |   |   |   |   |
| CASH                    FLOWS FROM FINANCING ACTIVITIES                                                                  |   |   |   |   |   |   |   |
| Issuance                    of preferred stock                                                                           |   |   | 30,020,984 |   |   | - |   |
| Financing                    costs                                                                                       |   |   | (1,152,857 | ) |   | (1,679,456 | ) |
| Dividends                                                                                                                |   |   | (807,913 | ) |   | (43 | ) |
| Issuance                    of common stock                                                                              |   |   | - |   |   | 10,200,000 |   |
| Exercise                    of stock options                                                                             |   |   | 101,300 |   |   | 2,813 |   |
| Exercise                    of warrants                                                                                  |   |   | 90,515 |   |   | - |   |
| Issuance                    of warrants                                                                                  |   |   | - |   |   | 100 |   |
| Net                    cash (used in) provided by financing activities                                                   |   |   | 28,252,029 |   |   | 8,523,413 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| INCREASE                    (DECREASE) IN CASH AND EQUIVALENTS                                                           |   |   | 17,216,563 |   |   | 4,235,149 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| CASH                    AND EQUIVALENTS AT BEGINNING OF                                                                  |   |   | 3,061,993 |   |   | 1,206,462 |   |
| PERIOD                                                                                                                   |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| CASH                    AND EQUIVALENTS AT END OF PERIOD                                                                 |   | $ | 20,278,556 |   | $ | 5,441,611 |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| Supplemental                    disclosures of cash flow information:                                                    |   |   |   |   |   |   |   |
| Cash                    paid during the period for interest                                                              |   | $ | 1,087 |   | $ | 1,269 |   |
| Cash                    paid during the year for income taxes                                                            |   | $ | - |   |   |   |   |
|                                                                                                                     |   |   |   |   |   |   |   |
| Supplemental                    schedule of noncash financing activities:                                                |   |   |   |   |   |   |   |
| Issuance                    of stock options to employees, consultants, and independent board                    members |   | $ | 2,745,287 |   | $ | 439,684 |   |
| Issuance                    of shares to consultants                                                                     |   | $ | 1,700,450 |   | $ | - |   |
| Issuance                    of common stock dividend to preferred shareholders                                           |   | $ | - |   | $ | 368,366 |   |
| Conversion                    of notes payable and accrued interest to common stock                                      |   | $ | - |   | $ | 313,003 |   |
| Conversion                    of preferred stock to common stock                                                         |   | $ | - |   | $ | 5,308,142 |   |

----

**CLEVELAND      BIOLABS, INC.**

**NOTES      TO FINANCIAL STATEMENTS**

**Note      1. Organization**

**Note      2. Summary of Significant Accounting Policies**

| A. | Basis                of Presentation - The information at September 30, 2007 and September                30,                2006, and for the quarter and nine-month periods ended September                30, 2007                and September 30, 2006, 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 CBLI’s audited financial statements for the                year ended December 31, 2006, which were contained in the Company’s Annual                Report on Form 10-KSB filed with the U.S. Securities and Exchange                Commission. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| B. | Cash                and Equivalents - The Company considers highly liquid investments                with a                maturity date of three months or less to be cash equivalents. In                addition,                the Company maintains cash and equivalents at financial institutions,                which may exceed federally insured amounts at times and which may,                at                times, significantly exceed balance sheet amounts due to outstanding                checks. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| C. | Marketable                  Securities and Short Term Investments - The Company considers investments                  with a maturity date of more than three months to be short-term                  investments and has classified these securities as available-for-sale.                  Such investments are carried at fair value, with unrealized gains                  and                  losses included as accumulated other comprehensive income (loss)                  in                  stockholders' equity. The cost of available-for-sale securities                  sold is                  determined based on the specific identification                  method. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| D. | Accounts                Receivable - The Company extends unsecured credit to customers under                normal trade agreements, which generally require payment within 30                days.                Management estimates an allowance for doubtful accounts which is                based                upon management's review of delinquent accounts and an assessment                of the                Company's historical evidence of collections. There is no allowance                for                doubtful accounts as of September 30, 2007 and December 31,                2006. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| E. | Notes                Receivable - On December 7, 2006, the Company entered into an agreement                with the Orbit Brands Corporation (Borrower) and its subsidiaries                whereby                the Company would lend up to $150,000 each on two promissory notes                to the                Borrower at a rate of 5% per annum with a maturity date of one year.                The                proceeds of the loans were to be used by the Borrower solely to cover                expenses associated with converting the notes into common stock and                preparing the lending motions for the bankruptcy case involving the                Borrower. The loans were convertible into common stock of the Borrower                and                its subsidiaries. At September 30, 2007, the Company wrote off the                balance                outstanding of $300,000 plus accrued interest of $5,479 due to the                fact                that the Securities and Exchange Commission has initiated proceedings                to                permanently suspend trading in the shares of Borrower and to revoke                its                registration under the Securities Exchange Act of 1934. In addition,                Borrower does not appear to have sufficient funds to emerge from                its                bankruptcy proceedings. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| F. | 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 $49,298, and $24,514 for                the                quarters ended September 30, 2007 and 2006, respectively. Depreciation                expense was $110,979 and $68,206 for the nine months ended September                30,                2007 and 2006, respectively. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| G. | Impairment                of Long-Lived Assets - In accordance with Statements of Financial                Accounting Standards, or SFAS, No. 144, Accounting for the Impairment                or                Disposal of Long-Lived Assets, long-lived assets to be held and used,                including equipment and intangible assets subject to depreciation                and                amortization, are reviewed for impairment whenever events or changes                in                circumstances indicate that the carrying amounts of the assets or                related                asset group may not be recoverable. Determination of recoverability                is                based on an estimate of discounted future cash flows resulting from                the                use of the asset and its eventual disposition. In the event that                such cash                flows are not expected to be sufficient to recover the carrying amount                of                the asset or asset group, the carrying amount of the asset is written                down                to its estimated net realizable                value. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| H. | Intellectual                Property - The Company capitalizes the costs associated with the                preparation, filing, and maintenance of certain intellectual property                rights. Capitalized intellectual property is reviewed annually for                impairment. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A                portion of this intellectual property is owned by the Cleveland Clinic                Foundation (“CCF”) and granted to the Company through an exclusive                licensing agreement. As part of the licensing agreement, CBLI agrees                to                bear the costs associated with the preparation, filing and maintenance                of                patent applications relating to this intellectual property. If the                patent                application is approved, the costs paid by the Company are amortized                on a                straight-line basis over the shorter of 17 years or the anticipated                useful                life of the patent. If the patent application is not approved, the                costs                associated with the preparation, filing and maintenance of the patent                application by the Company on behalf of CCF will be expensed as part                of                selling, general and administrative expenses. Gross capitalized patents                pending costs were $366,918 and $222,789 on behalf of CCF for 12                patent                applications as of September 30, 2007 and December 31, 2006, respectively.                All of the CCF patent applications are still pending                approval. The                Company also has submitted three patent applications as a result                of                intellectual property exclusively developed and owned by the Company.                If                the 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 application                is not                approved, the costs associated with the preparation, filing and                maintenance of the patent application will be expensed as part of                selling,                general and administrative expenses at that time. Gross capitalized                patents pending costs were $39,478 and $30,189 on behalf of the Company                for three patent applications as of September 30, 2007 and December                31,                2006, respectively. The patent applications are still pending                approval. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| I.     | Line                  of Credit - The Company has a working capital line of credit that                  is fully                  secured by short-term investments. This fully-secured, working                  capital                  line of credit carries an interest rate of prime minus 1%, a borrowing                  limit of $1,000,000, and expires on                  September 25, 2008.                  At September 30, 2007, there were no outstanding borrowings under                  this                  credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| J.     | Fair                  Value of Financial Instruments - Financial instruments, including                  cash and                  equivalents, accounts receivable, notes receivable, accounts payable                  and                  accrued liabilities, are carried at net realizable value. The carrying                  amounts of the convertible notes payable approximate their respective                  fair                  values as they bear terms that are comparable to those available                  under                  current market conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

| K. | Use                of Estimates - The preparation of financial statements in conformity                with                accounting principles generally accepted in the U.S. 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. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| L.     | Revenue                Recognition - The Company recognizes revenue in accordance with Staff                Accounting Bulletin No. 104, “Revenue Recognition.” Revenue sources                consist of government grants, government contracts and commercial                development contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Revenues                  from government grants and contracts are for research and development                  purposes and are recognized in accordance with the terms of the                  award and                  the government agency. Grant revenue is recognized in one of two                  different                  ways depending on the grant. Cost reimbursement grants require                  us to                  submit proof of costs incurred that are invoiced by us to the government                  agency, which then pays the invoice. In this case, grant revenue                  is                  recognized at the time of submitting the invoice to the government                  agency.                  Fixed cost grants require no proof of costs and are paid as a request                  for                  payment is submitted for expenses. The grant revenue under these                  fixed                  costs grants is recognized using a percentage-of-completion method,                  which                  uses assumptions and estimates. These assumptions and estimates                  are                  developed in coordination with the principal investigator performing                  the                  work under the government fixed-cost grants to determine key milestones,                  expenses incurred, and deliverables to perform a percentage-of-completion                  analysis to ensure that revenue is appropriately recognized. Critical                  estimates involved in this process include total costs incurred                  and                  anticipated to be incurred during the remaining life of the grant.                  Government                  contract revenue is recognized periodically upon delivery of an                  invoice                  for allowable R&D expenses according to the terms of the contract. The                  Company has recognized grant revenue from the following agencies:                  the U.S.                  Army (DARPA), National Aeronautics and Space Administration (NASA),                  the                  National Institutes of Health (NIH) and the Department of Health                  and Human                  Services (HHS). The Company has also begun recognizing revenue                  from a                  sponsored research agreement with Roswell Park Cancer Institute.                  This                  agreement was funded by the State of New York as part of the incentive                  for                  the Company to relocate its corporate headquarters and research                  facilities                  to Buffalo, New York. Commercial development revenues are recognized                  when                  the service or development is                  delivered. |

| M. | Deferred                  Revenue - Deferred revenue results when payment is received in                  advance of                  revenue being earned. When cash is received, the Company makes                  a                  determination as to whether the revenue has been earned by applying                  a                  percentage-of-completion analysis to compute the need to recognize                  deferred revenue. The percentage of completion method is based                  upon (1)                  the total income projected for the project at the time of completion                  and                  (2) the expenses incurred to date. The percentage-of-completion                  can be                  measured using the proportion of costs incurred versus the total                  estimated                  cost to complete the contract. The                  Company received $2,000,000 in funds from the Roswell Park Cancer                  Institute during the second quarter of 2007 and is recognizing                  this                  revenue over the terms and conditions of the sponsored research                  agreement.                  For the quarter ended September 30, 2007, the Company recognized                  $153,238                  of this revenue resulting in a balance of deferred revenue of $1,846,763                  at September 30, 2007. At September 30, 2006, the Company had no                  deferred                  revenue. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| N. | Research                  and Development - Research and development expenses consist primarily                  of                  costs associated with salaries                  and related expenses for personnel, costs of materials used in                  R&D,                  costs of facilities and costs incurred in connection with third-party                  collaboration efforts.                  Expenditures relating to research and development are expensed                  as                  incurred. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| O. | 2006                  Equity Incentive Plan - On May 26, 2006, the Company's Board of                  Directors                  adopted the 2006 Equity Incentive Plan (“Plan”) to attract and retain                  persons eligible to participate in the Plan, motivate participants                  to                  achieve long-term Company goals, and further align participants'                  interests                  with those of the Company's other stockholders. The Plan expires                  on May                  26, 2016 and the                  aggregate number of shares of stock which may be delivered under                  the Plan                  shall not exceed 2,000,000 shares.                  On                  February 14, 2007, these 2,000,000 shares were registered with                  the SEC by                  filing a Form S-8 registration statement. For the quarter ended                  September                  30, 2007, there were 18,000 options and 15,000 shares granted under                  the                  Plan, and as of September 30, 2007 there were 588,000 stock options                  and                  190,000 shares granted under the Plan totaling 778,000 equity instruments                  awarded under the Plan. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| P.                       | Stock-Based                Compensation - The FASB issued SFAS No. 123(R) (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.                The Black Scholes model is used for standard stock options, but if                market                conditions are present within the stock options, the Company utilizes                Monte Carlo simulation to value the stock options. 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 published by the St. Louis Federal Reserve at the                time of                the option grant, assumes a forfeiture rate of zero, 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, and computes an expected volatility based                on                similar high-growth, publicly-traded, biotechnology companies. The                Company                does not include the use of its own stock in the volatility calculation                at                this time because of the brief history of the stock as a publicly                traded                security on a listed exchange. The Company recognizes the fair value                of                share-based compensation in net income on a straight-line basis over                the                requisite service period. |
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                     | During                the quarter ended September 30, 2007, the Company granted 18,000                additional stock options pursuant to a stock award agreement. The                Company                recognized a total of $395,129 in expense related to options for                the three                months ended September 30, 2007, and $2,745,287 for the nine months                ended                September 30, 2007. The                weighted average, estimated grant date fair values of stock options                granted during the quarter ended September 30, 2007 was $4.95. The                weighted average, estimated grant date fair values of stock options                granted during the nine months ended September 30, 2007 was                $5.90. The                following tables summarize the stock option activity for the nine                months                ended September 30, 2007 and September 30, 2006,                respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|                                           |   | **Shares** |    | **Weighted****Average****Exercise****Price                per****Share** |   | **Weighted****Average****Remaining****Contractual****Term****(in                Years)** |   |
|------------------------------------------------|--------|------------|---------|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
| Outstanding,                December 31, 2006  |   |       | 483,490 |                                                                     | $      | 2.17                                                                                     |   |   |   |   |
| Granted                                        |   |       | 543,000 |                                                                     | $      | 9.82                                                                                     |   |   |  |   |
| Exercised                                      |   |       | 124,000 |                                                                     | $      | 1.35                                                                                     |   |   |  |   |
| Forfeited,                Canceled             |   |       | 0       |                                                                     |   | n/a                                                                                      |   |   |  |   |
| Outstanding,                September 30, 2007 |   |       | 902,490 |                                                                     | $      | 6.89                                                                                     |   |   | 8.77 |   |
| Exercisable,                September 30, 2007 |   |       | 599,930 |                                                                     | $      | 6.58                                                                                     |   |   | 8.78 |   |

----

|                                           |   | **Shares** |    | **Weighted****Average****Exercise****Price                per****Share** |   | **Weighted****Average****Remaining****Contractual****Term****(in                Years)** |   |
|------------------------------------------------|--------|------------|---------|--------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|
| Outstanding,                December 31, 2005  |   |       | 324,240 |                                                                     | $      | .82                                                                                      |   |   |   |   |
| Granted                                        |   |       | 161,750 |                                                                     | $      | 4.92                                                                                     |   |   |  |   |
| 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 |   |

|   | In                addition, the Company recognized $1,700,450 in expense for shares                issued                under the Plan to various consultants during the nine months ended                September 30, 2007. During the quarter ended September 30, 2007 the                Company recognized $159,150 in compensation expense for shares issued                to a                key consultant under the Plan. For the quarter and nine months ended                September 30, 2006 there was no compensation expense recognized for                share                issuance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Q.     | Other                Expense - The Company recognizes those expenses that cannot be traced                directly to operations as Other Expense in accordance with FASB                guidelines. The Company recognized Other Expense for the following                items:For                the quarter ended September 30, 2007, the Company recognized $901,964                in                Other Expense due to the relocation of the corporate headquarters                and                research facilities to Buffalo, New York. For the nine months ended                September 30, 2007 the Company recognized $1,152,643 in Other Expense                due                to this relocation. The                Company recognized $305,479 in Other Expense for the quarter and                nine                months ended September 30, 2007 for the loss on the investment in                Notes                Receivable from the Orbit Brands Corporation as described in Note                E above.                For                the quarters ended September 30, 2007 and 2006, the Company recognized                $0                and $2,257 in Other Expense due to interest charges, respectively.                For the                nine months ended September 30, 2007 and 2006, the Company recognized                $1,087 and $11,198 in Other Expense due to interest charges, respectively. |

| R.     | Net                Loss Per Share - Basic and diluted net loss per share has been computed                using the weighted-average number of shares of common stock outstanding                during the period.  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                 |
|   | The                following table presents the calculation of basic and diluted net                loss per                share for the quarters and nine months ended September 30, 2007 and                2006: |

|                                                     |   | QuarterEnded                  |       | Quarter                Ended  |   | Nine-Months                Ended |   | Nine-Months                Ended |        |
|----------------------------------------------------------|--------|-------------------------------|------------|-------------------------------|--------|----------------------------------|--------|----------------------------------|-------------|
|                                                     |   | Sept.                30, 2007 |       | Sept.                30, 2006 |   | Sept.                30, 2007    |   | Sept.                30, 2006    |        |
|                                                     |   |                          |       |                          |   |                             |   |                             |        |
| Net                loss available to common shareholders |   | $                             | (6,595,622 | )                             | $      | (1,609,565                       | )      | $                                | (18,517,326 | ) | $ | (4,333,617 | ) |
|                                                     |   |                          |       |                          |   |                             |   |                             |        |   |   |   |   |
| Net                loss per share, basic and diluted     |   | $                             | (.54       | )                             | $      | (.15                             | )      | $                                | (1.54       | ) | $ | (.55 | ) |
|                                                     |   |                          |       |                          |   |                             |   |                             |        |   |   |   |   |
| Weighted-average                shares used in computing |   |                          | 12,148,718 |                          |   | 10,681,032                       |   |                             | 12,010,177  |   |   | 7,922,195 |   |

|   | The Company has excluded all outstanding              warrants and options from the calculation of diluted net loss per share              because all such securities are antidilutive for all applicable periods              presented. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The                total number of shares excluded from the calculations of diluted                net loss                per share, prior to application of the treasury stock method for                warrants,                was 3,453,268 and 764,424 for the quarters and nine months ended                September                30, 2007 and 2006, respectively. Such securities, had they been dilutive,                would have been included in the computation of diluted earnings per                share.                 The                total number of shares excluded from the calculations of diluted                net loss                per share, prior to the application of the treasury stock method                for* *options,                was 902,490 and 483,490 for the quarters and nine months ended September                30, 2007 and 2006, respectively. Such securities, had they been dilutive,                would have been included in the computation of diluted earnings per                share. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| S.     | Concentrations                of Risk - Grant revenue was comprised wholly from grants and contracts                issued by the federal government and accounted for 81.8% and 81.4%                of                total revenue for the quarter ended September 30, 2007 and 2006,                respectively. Grant revenue accounted for 82.1% and 86.1% for the                nine                months ended September 30, 2007 and 2006, respectively. Although                the                Company anticipates ongoing federal grant revenue, there is no guarantee                that this revenue stream will continue in the future.                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Financial                instruments that potentially subject                us to a significant concentration of credit risk consist primarily                of cash                and cash equivalents and securities available-for-sale. The Company                maintains deposits in federally insured institutions in excess of                federally insured limits. The Company does not believe it is exposed                to                significant credit risk due to the financial position of the depository                institutions in which those deposits are held. Additionally, the                Company                has established guidelines regarding diversification of its investment                portfolio and maturities of investments, which are designed to meet                safety                and liquidity.                                                                                                                                                                                                   |

| T. | Foreign                Currency Exchange Rate Risk - The Company has entered into a manufacturing                agreement with a foreign third party to produce one of its drug compounds                and is required to make payments in the foreign currency. As a result,                the                Company's financial results could be affected by changes in foreign                currency exchange rates. Currently, the Company's exposure primarily                exists with the Euro. As of September 30, 2007, the Company is obligated                to make payments under the agreement of 537,017 Euros. The Company                has                established means to purchase forward contracts to hedge against                this                risk. As of September 30, 2007, the Company has commitments for 197,847                Euros of hedging transactions. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| U. | Comprehensive                Income/(Loss) - The Company applies Statement of Financial Accounting                Standards (SFAS) No. 130, “Reporting Comprehensive Income.” SFAS No. 130                requires disclosure of all components of comprehensive income on                an annual                and interim basis. Comprehensive income is defined as the change                in equity                of a business enterprise during a period from transactions and other                events and circumstances from non-owner sources. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note      3. Stock Transactions**

----

----

**Note      4. Commitments and Contingencies**

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|                                                                 |   | **Operating****Leases** |      |
|----------------------------------------------------------------------|--------|-------------------------|-----------|
| 2007                (from October 1, 2007 through December 31, 2007) |   | $                       | 83,120    |   |
| 2008                                                                 |   |                    | 332,995   |   |
| 2009                                                                 |   |                    | 347,214   |   |
| 2010                                                                 |   |                    | 339,155   |   |
| 2011                                                                 |   |                    | 307,300   |   |
| 2012                                                                 |   |                    | 144,000   |   |
|                  Total                                          |   | $                       | 1,636,904 |   |

|                                                 |   | **Number of****Options** |    | **Weighted Average****Exercise                Price** |   |
|------------------------------------------------------|--------|-------------------------------|---------|------------------------------------------------------------|--------|
| Outstanding                at December 31, 2006 |   |                          | 483,490 |                                                       | $      | 2.17 |   |
| Granted                                              |   |                          | 543,000 |                                                       | $      | 9.82 |   |
| Exercised                                            |   |                          | 124,000 |                                                       | $      | 1.35 |   |
| Forfeited                                            |   |                          | 0       |                                                       |   | n/a |   |
| Outstanding                at September 30, 2007     |   |                          | 902,490 |                                                       | $      | 6.89 |   |

|                                                 |   | **Number of****Options** |    | **Weighted Average****Exercise                Price** |   |
|------------------------------------------------------|--------|-------------------------------|---------|------------------------------------------------------------|--------|
| Outstanding                at December 31, 2005 |   |                          | 324,240 |                                                       | $      | .82 |   |
| Granted                                              |   |                          | 161,750 |                                                       | $      | 4.92 |   |
| Exercised                                            |   |                          | 625     |                                                       | $      | 4.50 |   |
| Forfeited                                            |   |                          | 1,875   |                                                       | $      | 4.50 |   |
| Outstanding                at September 31, 2006     |   |                          | 483,490 |                                                       | $      | 2.17 |   |

|                                                 |   | **Number of****Warrants** |      | **Weighted Average****Exercise                Price** |    |
|------------------------------------------------------|--------|--------------------------------|-----------|------------------------------------------------------------|---------|
| Outstanding                at December 31, 2006 |   |                           | 814,424   |                                                       | $       | 3.36 |   |
| Granted                                              |   |                           | 2,687,602 |                                                       | $       | 10.40 |   |
| Exercised                                            |   |                           | 48,758    |                                                       | $  | 2.00 |   |
| Forfeited                                            |   |                           | --        |                                                       |    | N/A |   |
| Outstanding                at September 30, 2007     |   |                           | 3,453,268 |                                                       | $       | 8.86 |   |

----

|                                                 |   | **Number of****Warrants** |    | **Weighted Average****Exercise                Price** |   |
|------------------------------------------------------|--------|--------------------------------|---------|------------------------------------------------------------|--------|
| Outstanding                at December 31, 2005 |   |                           | 594,424 |                                                       | $      | 1.61 |   |
| Granted                                              |   |                           | 170,000 |                                                       | $      | 8.70 |   |
| Exercised                                            |   |                           | --      |                                                       |   | N/A |   |
| Forfeited                                            |   |                           | --      |                                                       |   | N/A |   |
| Outstanding                at September 30, 2006     |   |                           | 764,424 |                                                       | $      | 3.19 |   |

**Note      5. Subsequent Events**

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**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 and in our*
*        Annual Report on Form 10-KSB for the year ended December 31,        2006.*

**Overview**

***General      Overview***

***Technology***

***Products      In Development***

**Protectans**

----

*Protectan      CBLB502*

*      Salmonella typhimurium*

----

*Protectan      CBLB612*

----

**Curaxins**

*Curaxin      CBLC102*

----

*Other      Curaxins*

***Roswell      Park Cancer Institute***

----

***Financial      Overview***

----

**Critical Accounting Policies and the Use of      Estimates**

***Revenue      Recognition***

***R&D      Expenses***

***Intellectual      Property Related Costs***

----

***Stock-based      Compensation***

**Impact      of Recently Issued Accounting Pronouncements**

*        Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement        No. 109.*

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**Results      of Operations**

|                                           |   |   | **Quarter**                         |   |   | **Quarter**                              |   |   | **Nine                  Months**    |   |   | **Nine                  Months**    |   |   |                                  |   |   |                                  |   |
|------------------------------------------------|--------|--------|------------------------------------------|--------|--------|------------------------------------------|--------|--------|------------------------------------------|--------|--------|------------------------------------------|--------|--------|---------------------------------------|--------|--------|---------------------------------------|--------|
|                                           |   |   | **Ended**                                |   |   | **Ended**                           |   |   | **Ended **                     |   |   | **Ended**                                |   |   | **Year                  Ended**  |   |   | **Year                  Ended**  |   |
|                                           |   |   | **September                  30,**  |   |   | **September                  30,**  |   |   | **September                  30,**  |   |   | **September                  30,**  |   |   | **December 31,**            |   |   | **December 31,**            |   |
|                                           |   |   | **2007**                            |   |   | **2006**                            |   |   | **2007**                            |   |   | **2006**                            |   |   | **2006**                              |   |   | **2005 **                   |   |
|                                           |   |   |  **(unaudited)**               |   |   |  **(unaudited)**               |   |   |  **(unaudited)**               |   |   |  **(unaudited)**               |   |   |                                  |   |   |                                  |   |
| Revenues                                       |   | $      | 660,544                                  |   | $      | 323,368                                  |   | $      | 1,617,996                                |   | $      | 1,476,787                                |   | $      | 1,708,214                             |   | $      | 1,138,831                             |   |
| Operating                  expenses            |   |   | 5,548,149                                |   |   | 1,989,831                                |   |   | 18,631,619                               |   |   | 5,708,992                                |   |   | 9,126,315                             |   |   | 3,626,664                             |   |
| Other                  expense (income)        |   |   | 1,205,672                                |   |   | -                                        |   |   | 1,456,351                                |   |   | -                                        |   |   | -                                     |   |   | -                                     |   |
| Net                  interest expense (income) |   |   | (305,568                                 | )      |   | (78,933                                  | )      |   | (760,561                                 | )      |   | (114,521                                 | )      |   | (195,457                              | )      |   | (101,378                              | )      |
| Net                  income (loss)             |   | $      | (5,787,709                               | )      | $      | (1,587,530                               | )      | $      | (17,709,413                              | )      | $      | (4,117,684                               | )      | $      | (7,222,644                            | )      | $      | (2,386,455                            | )      |

**Nine      Months Ended September 30, 2007 Compared to Nine Months Ended September 30,      2006**

***Revenue***

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| **Agency**                  |   | **Program** |                                     | **Amount** |   | **Period                of****Performance** |   | **Revenue****2007****(thru****September                30)** |            | **Revenue****2006****(thru****September                30)** |   | **Revenue****2006** |   |
|-----------------------------|--------|-------------|------------------------------------------|------------|--------|---------------------------------------------|--------|--------------------------------------------------------------|-----------------|--------------------------------------------------------------|--------|---------------------|--------|
|                        |   |        |                                     |       |   |                                        |   | **(unaudited)**                                              |            | **(unaudited)**                                              |   |                |   |
| **NIH**                     |   |        | BioShield                program (NIAID) |       | $      | 1,500,000                                   |   |                                                         | 07/2005-01/2007 |                                                         |   |                |   | $ | 1,100,293 |   | $ | 1,100,293 |   |
| **NIH**                     |   |        | Phase                I NIH SBIR program  |       | $      | 100,000                                     |   |                                                         | 08/2005-01/2006 |                                                         |   |                |   | $ | 33,334 |   | $ | 33,334 |   |
| **NASA**                    |   |        | Phase                I NASA STTR program |       | $      | 100,000                                     |   |                                                         | 01/2006-01/2007 |                                                         | $      | 33,196              |   | $ | 33,197 |   | $ | 66,393 |   |
| **NIH**                     |   |        | Phase                II NIH SBIR program |       | $      | 750,000                                     |   |                                                         | 07/2006-06/2008 |                                                         | $      | 280,461             |   | $ | 88,320 |   | $ | 212,713 |   |
| **NIH**                     |   |        | NCI                Contract              |       | $      | 750,000                                     |   |                                                         | 09/2006-08/2008 |                                                         | $      | 394,780             |   | $ | 16,643 |   | $ | 90,481 |   |
| **DoD**                     |   |        | DTRA                Contract             |       | $      | 1,300,000                                   |   |                                                         | 03/2007-02/2009 |                                                         | $      | 466,322             |   |   |   |   |   |   |   |
| **NY                State** |   |        | RPCI                Research Agreement   | $          | $      | 3,000,000                                   |   |                                                         | 03/2007-02/2012 |                                                         | $      | 153,238             |   |   |   |   |   |   |   |
| Totals                      |   |        |                                     |       |   |                                        |   |                                                         |            |                                                         | $      | 1,327,997           |   | $ | 1271,787 |   | $ | 1,503,214 |   |

***Operating      Expenses***

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**Year      Ended December 31, 2006 Compared to Year Ended December 31,      2005**

***Revenue***

***Operating      Expenses***

**Liquidity      and Capital Resources**

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| 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 (completed January                2007) |   | $ | 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***

***Impact      of Exchange Rate Fluctuations***

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***Off-Balance      Sheet Arrangements***

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**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 Security Holders**

**Item      5. Other Information **

**Item      6. Exhibits**

| **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                                                                                                          |

----

**Signatures**

|                                    |                                                                                                                                      |                                          |
|-----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|
|                                    | CLEVELAND                BIOLABS, INC.                                                                                                    |
|                               |                                                                                                                                 |                                     |
| Dated:                November 14, 2007 | By:                                                                                                                             | /s/ MICHAEL                FONSTEIN      |
|                                    | Michael                FonsteinChief                Executive Officer (Principal                Executive Officer)    |
|                                    | CLEVELAND                BIOLABS, INC.                                                                                                    |
|                               |                                                                                                                                 |                                     |
| Dated:                November 14, 2007 | By:                                                                                                                             | /s/ JOHN                A. MARHOFER, JR. |
|                                    | John                A. Marhofer, Jr.Chief                Financial Officer(Principal                Financial Officer)                    |

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