UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




WASHINGTON, D.C.
20549




FORM
10-Q




xQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES


EXCHANGE
ACT OF 1934




For the
quarterly period ended March 31, 2008




 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES


EXCHANGE
ACT OF 1934




For the
transition period from __________ to __________




COMMISSION
FILE NUMBER 000-51334


HEMOBIOTECH,
INC.


(Exact
name of Registrant as Specified in Its Charter)





Delaware
            33-0995817(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)5001
      Spring Valley Rd, Suite 1040 - West, Dallas, Texas
75244(Address
      of principal executive offices and Zip Code)(972)
      455-8950(Registrant's
      telephone number, including area
code)




Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.




Yes x No  ̈




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




As of May
6, 2008, the registrant had outstanding 19,445,791 shares of common stock,
$0.001 par value per share.




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




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











HEMOBIOTECH,
INC.


(a
development stage company)





TABLE
OF CONTENTS





ITEM
            
            PAGEPART
      I – FINANCIAL INFORMATION
            
            4Item
      1. Financial Statements (unaudited)
            
            4Condensed
      Balance Sheets
            
            4Condensed
      Statements of Operations
            
            5Condensed
      Statements of Changes In Stockholders’ Equity
            
            6Condensed
      Statements of Cash Flows
            
            7Notes
      to Condensed Financial Statements
            
            8Item
      2. Management’s Discussion and Analysis or Plan of
    Operations
            
            15Item
      4. Controls and Procedures
            
            21PART
      II – OTHER INFORMATION
            
            22Item
      6. Exhibits
            
            22SIGNATURES
            
            23








- 2
-


CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS




In
addition to historical information, this Quarterly Report on Form 10-Q contains
forward-looking statements. Forward-looking statements are those that predict or
describe future events or trends and that do not relate solely to historical
matters. You can generally identify forward looking statements as statements
containing the words "believe," "expect," "will," "anticipate," "intend,"
"estimate," "project," "assume" or other similar expressions, although not all
forward-looking statements contain these identifying words. All statements in
this report regarding our future strategy, future operations, projected
financial position, estimated future revenues, projected costs, future
prospects, and results that might be obtained by pursuing management's current
plans and objectives are forward-looking statements. You should not place undue
reliance on our forward-looking statements because the matters they describe are
subject to known and unknown risks, uncertainties and other unpredictable
factors, many of which are beyond our control. Our forward-looking statements
are based on the information currently available to us and speak only as of the
date on which this report was filed with the Securities and Exchange Commission
(the "SEC"). We expressly disclaim any obligation to issue any updates or
revisions to our forward-looking statements, even if subsequent events cause our
expectations to change regarding the matters discussed in those statements. Over
time, our actual results, performance or achievements will likely differ from
the anticipated results, performance or achievements that are expressed or
implied by our forward-looking statements, and such difference might be
significant and materially adverse to our stockholders. Many important factors
that could cause such a difference are described in our Annual Report on Form
10-K, filed with the SEC on March 28, 2008, under the caption "Risk Factors,"
all of which you should review carefully. Please consider our forward-looking
statements in light of those risks as you read this report.





- 3
-


PART
I -- FINANCIAL INFORMATION




ITEM
1. FINANCIAL STATEMENTS




HEMOBIOTECH,
INC.


(a
development stage company)




CONDENSED
BALANCE SHEETS







March
      31,
            
            
            December
      31,2008
              (unaudited)
            
            
            2007
              (Derived
      from audited financial statements)ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            1,804,000
            
            
            $
            2,015,000Prepaid
      expenses
            
            
            381,000
            
            
            
            521,000Total
      current assets
            
            $
            2,185,000
            
            
            $
            2,536,000Equipment,
      net
            
            
            48,000
            
            
            
            50,000Restricted
      cash
            
            
            55,000
            
            
            
            55,000Total
      Assets
            
            $
            2,288,000
            
            
            $
            2,641,000LIABILITIESCurrent
      liabilitiesAccounts
      payable and accrued expenses
            
            $
            196,000
            
            
            $
            254,000Total
      current liabilities
            
            $
            196,000
            
            
            $
            254,000Deferred
      Rent
            
            $
            37,000
            
            
            $
            43,000STOCKHOLDERS’
      EQUITY
              Common
      stock ----- $.001 par value 55,000,000 sharesauthorized;
      19,445,791 as of March 31, 2008 and 19,144,007 at December 31, 2007
      (includes 1,000,000 shares subject to forfeiture) shares issued and
      outstanding
            
            $
            19,000
            
            
            $
            19,000Additional
      paid-in capital
            
            
            14,634,000
            
            
            
            14,186,000Deficit
      accumulated during the development stage
            
            
            (12,598,000
            )
            
            
            (11,861,000
            )Total
      Equity
            
            $
            2,055,000
            
            
            $
            2,344,000$
            2,288,000
            
            
            $
            2,641,000




See
Notes to Condensed Financial Statements.





- 4
-


HEMOBIOTECH,
INC.


(a
development stage company)




CONDENSED
STATEMENTS OF OPERATIONS


(UNAUDITED)





THREE
      MONTHS ENDED
              MARCH
      31,
            
            
            CUMULATIVE
      FROM OCTOBER 3, 2001
              (INCEPTION)
      THROUGH MARCH 31,2008
            
            
            2007
            
            
            2008Revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -Operating
      expenses:Research
      and development
            
            
            232,000
            
            
            
            167,000
            
            
            
            2,477,000General
      and administrative
            
            
            523,000
            
            
            
            697,000
            
            
            
            8,352,000Other
      (income) expenses:Interest
      expense
            
            
            -
            
            
            
            1,000
            
            
            
            2,111,000Interest
      income
            
            
            (18,000
            )
            
            
            (37,000
            )
            
            
            (342,000
            )Net
      loss
            
            $
            (737,000
            )
            
            $
            (828,000
            )
            
            $
            (12,598,000
            )Basic
      and diluted loss per common share
            
            $
            (.04
            )
            
            $
            (.05
            )Weighed
      average number of shares outstanding --- basic and diluted
            
            
            18,197,068
            
            
            
            16,936,887







See
Notes to Condensed Financial Statements.





- 5
-


HEMOBIOTECH,
INC.


(a
development stage company)


CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY





Common
      Shares
            
            
            Amount
            
            
            Additional
      Paid-In Capital
            
            
            Deficit
      Accumulated During the Development Stage
            
            
            TotalBalance
      –December
      31, 2007
            
            
            19,144,007
            
            
            $
            19,000
            
            
            $
            14,186,000
            
            
            $
            (11,861,000
            )
            
            $
            2,344,000Net
      Loss for the period
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (737,000
            )
            
            
            (737,000
            )Stock
      based compensation – board of advisors and consultant
            
            
            
            
            
            
            
            
            
            
            55,000
            
            
            
            
            
            
            
            55,000Stock
      based compensation – employees and directors
            
            
            
            
            
            
            
            
            
            
            34,000
            
            
            
            
            
            
            
            34,000Stock
      based compensation relating to shares issued to financial advisor
      (September 12, 2006) See Note G[3]
            
            
            
            
            
            
            
            
            
            
            94,000
            
            
            
            
            
            
            
            94,000Issuance
      of shares and warrants in Private Placement net of expenses of
      approximately $72,000 (approximately $46,000 to a shareholder of the
      Company) (March, 2008)
            
            
            301,784
            
            
            
            
            
            
            
            265,000
            
            
            
            
            
            
            
            265,000Balance
      –March
      31, 2008(unaudited)
            
            
            19,445,791
            
            
            $
            19,000
            
            
            $
            14,634,000
            
            
            $
            (12,598,000
            )
            
            $
            2,055,000







See
Notes to Condensed Financial Statements.








- 6
-


HEMOBIOTECH,
INC.


(a
development stage company)


CONDENSED
STATEMENTS OF CASH FLOWS


(UNAUDITED)


THREE
      MONTHS ENDED
              MARCH
      31,
            
            
            OCTOBER
      31, 2001
              (INCEPTION)
              THROUGH2008
            
            
            2007
            
            
            MARCH
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
            
            $
            (737,000
            )
            
            $
            (828,000
            )
            
            $
            (12,598,000
            )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Estimated
      fair value of options andcompensatory
      stock
            
            
            183,000
            
            
            
            405,000
            
            
            
            2,392,000Conversion
      charge – interest expense
            
            
            -
            
            
            
            -
            
            
            
            43,000Notes
      issued for services – related party
            
            
            -
            
            
            
            -
            
            
            
            354,000Expenses
      paid by stockholder
            
            
            -
            
            
            
            -
            
            
            
            14,000Amortization
      of deferred financing costs
            
            
            -
            
            
            
            -
            
            
            
            1,023,000Amortization
      of debt discount
            
            
            -
            
            
            
            -
            
            
            
            789,000Depreciation
            
            
            2,000
            
            
            
            1,000
            
            
            
            12,000Deferred Rent
            
            
            (6,000
            )
            
            
            -
            
            
            
            37,000Contribution
      of salary
            
            
            -
            
            
            
            -
            
            
            
            11,000Changes
      in:Accounts
      payable and accrued expenses
            
            
            (58,000
            )
            
            
            (12,000
            )
            
            
            908,000Accrued
      interest
            
            
            -
            
            
            
            -
            
            
            
            139,000Prepaid
      expenses
            
            
            140,000
            
            
            
            (656,000
            )
            
            
            (380,000
            )Net
      cash used in operating activities
            
            $
            (476,000
            )
            
            $
            (1,090,000
            )
            
            $
            (7,256,000
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Sale/(Purchase)
      of Short-Term Investments
            
            $
            -
            
            
            $
            945,000
            
            
            $
            (55,000
            )Purchase
      of property and equipment
            
            
            -
            
            
            
            (4,000
            )
            
            
            (59,000
            )Net
      cash used in investing activities
            
            $
            -
            
            
            $
            941,000
            
            
            $
            (114,000
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from issuance of common stock and debt, net of
      expenses
            
            $
            265,000
            
            
            
            -
            
            
            $
            4,718,000Payment
      of Notes
            
            
            -
            
            
            
            -
            
            
            
            (734,000
            )Exercise
      of warrants, net
            
            
            -
            
            
            
            -
            
            
            
            5,190,000Net
      cash provided by / (used in) by financing activities
            
            $
            265,000
            
            
            
            -
            
            
            $
            9,174,000(DECREASE)
      / INCREASE IN CASH ANDCASH
      EQUIVALENTS
            
            $
            (211,000
            )
            
            $
            (149,000
            )
            
            $
            1,804,000Cash
      and cash equivalents – beginning of period
            
            
            2,015,000
            
            
            
            3,193,000
            
            
            
            -CASH
      AND CASH EQUIVALENTS – END OF PERIOD
            
            $
            1,804,000
            
            
            $
            3,044,000
            
            
            $
            1,804,000SUPPLEMENTARY
      CASH FLOW INFORMATION:Interest
      Paid
            
            $
            -
            
            
            $
            1,000
            
            
            $
            112,000SUPPLEMENTARY
      NON-CASH INVESTING AND FINANCING ACTIVITIES:Accrued
      salary exchanged for Note
            
            
            -
            
            
            
            -
            
            
            $
            150,000Employees
      / stockholders contribution of salary
            
            
            -
            
            
            
            -
            
            
            $
            564,000Stockholders
      contribution of convertible note payableand
      related interest
            
            
            -
            
            
            
            -
            
            
            $
            280,000Conversion
      of carrying value of convertible notespayable
      and accrued interest of $18,000 (2006) and $97,000 (2005) into
      common  stock
            
            
            -
            
            
            
            -
            
            
            $
            1,815,000




See
Notes to Condensed Financial Statements.




- 7
-


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(UNAUDITED)




NOTE
A - THE COMPANY





We were
founded in 2001 as “HemoBioTech, Inc.,” a Texas corporation.  In 2003,
we incorporated a sister corporation named “HemoBioTech, Inc.,” in the state of
Delaware.  On December 1, 2003, HemoBioTech, Inc. (Texas) was merged
with and into HemoBioTech, Inc., (Delaware), with HemoBioTech, Inc. (Delaware)
as the surviving entity.  This entity is referred to herein as the
“Company”.





The
accompanying financial statements include the predecessor operations of the
Texas corporation from its inception on October 3, 2001. The historical basis of
accounting was carried over in the merger, including the deficit accumulated in
the development stage. The Company is researching and developing human blood
substitute patented technology licensed exclusively from Texas Tech University
Health Services Center ("TTUHSC") (See Note D). The Company is in the
development stage and its efforts have been principally devoted to capital
raising, organizational infrastructure development and research and
development.




NOTE
B - BASIS OF PRESENTATION





The
accompanying condensed financial statements as of March 31, 2008 and for the
three months ended March 31, 2008 and 2007 have not been audited, but have been
prepared in conformity with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X.  The condensed balance sheet at
of December 31, 2007 has been derived from audited financial statements. 
These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 2007 as
presented in our Annual Report on Form 10-K.  In the opinion of management,
this interim information includes all material adjustments which are of a normal
and recurring nature, necessary for a fair presentation.  The results for
the 2008 interim period are not necessarily indicative of results to be expected
for the entire year.





The
financial statements have been prepared assuming that the Company will continue
as a going concern which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. The Company has incurred
cumulative losses of $12,598,000 through the period through March 31, 2008, and
has been dependent on funding operations through the private sale of convertible
debt and equity securities. At March 31, 2008, the Company had $1,804,000 in
cash and cash equivalents. As discussed in Note F, during March 2008 the Company
received net proceeds of $265,000 through the Private Placement of equity
securities. The accompanying financial statements do not include any adjustment
that might be necessary if additional funding is not received.  While
the Company has been able to obtain such funding in the past, there can be no
assurance that they will be able to do so in the future. Management's plans
include continuing to finance operations through one or more private or public
offerings of equity securities and monitoring and reducing discretionary
expenditures. See also Footnote G(3).




NOTE
C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




(1)
RESEARCH AND DEVELOPMENT:





Research
and development costs are charged to expense as incurred.





(2) LOSS
PER COMMON SHARE:





Basic and
diluted loss per common share is based on the net loss divided by the
weighted average number of common shares outstanding during the period. No
effect has been given to the following outstanding potential common shares such
as options, warrants and outstanding shares subject to forfeiture issued to a
financial services consultant during September 2006, as described in Note G(3)
in the diluted computation as their effect would be antidilutive:





THREE
      MONTHS ENDED
              MARCH
      31,2008
            
            
            2007Stock
      Options
            
            
            2,056,990
            
            
            
            1,794,275Warrants
            
            
            3,873,947
            
            
            
            2,442,372Common
      shares subject to forfeiture(1)
            
            
            1,000,000
            
            
            
            1,500,000Total
            
            
            6,930,937
            
            
            
            5,736,647





- 8
-


(1)Common
shares not included in basic earnings per share since subject to
forfeiture.




(3) FAIR
VALUE OF FINANCIAL INSTRUMENTS:




The
carrying value of cash equivalents, accounts payable and accrued expenses
approximates their fair value due to the short period to maturity of these
instruments.




(4) USE
OF ESTIMATES:




The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles 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. Such
estimates include the selection of assumptions underlying the calculation of the
fair value of options. Actual results could differ from those
estimates.




(5)
RECENT ACCOUNTING PRONOUNCEMENTS:




In
February 2008, the FASB issued Staff Position 157-2 (“FSP
157-2”).  FSB 157-2 permits delayed adoption of SFAS 157 for certain
non-financial assets and liabilities, which are not recognized at fair value on
a recurring basis, until fiscal years and interim periods beginning after
November 15, 2008.  As permitted by FSP 157-2, the Company has elected
to delay the adoption of SFAS 157 for qualifying non-financial assets and
liabilities, such as fixed assets and patents.  The Company is in the
process of evaluating the impact, if any, that the application of SFAS 157-2 to
its non-financial assets will have on the Company’s consolidated results of
operations or financial position.





In
February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115.”  SFAS No. 159 permits an entity to elect fair value as the
initial and subsequent measurement attribute for many financial assets and
liabilities.  Entities electing the fair value option would be
required to recognize changes in fair value in earnings.  Entities
electing the fair value option are required to distinguish, on the face of the
statement of financial position, the fair value of assets and liabilities for
which the fair value option has been elected and similar assets and liabilities
measured using another measurement attribute.  SFAS No. 159 became
effective beginning January 1, 2008.  The Company elected not to
measure any eligible items using the fair value option in accordance with SFAS
No. 159 and therefore, SFAS No. 159 did not have an impact on the Company’s
financial position, results of operations or cash flows.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS No. 141R”).  SFAS No. 141R provides revised
guidance on how acquirers recognize and measure the consideration transferred,
identifiable assets required, liabilities assumed, noncontrolling interests, and
goodwill acquired in a business combination.  SFAS No. 141R also
expands required disclosures surrounding the nature and financial effects of
business combinations.  SFAS No. 141R is effective, on a prospective
basis, for us in the fiscal year beginning January 1, 2009.  This
statement will have no material effect on our financial position or results of
operations.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements.”  SFAS No. 160 establishes
requirements for ownership interests in subsidiaries held by parties other than
the Company (sometimes called “minority interests” be clearly identified,
presented and disclosed in the consolidated statement of financial position
within equity, but separate from the parent’s equity.  All changes in
the parent’s ownership interests are required to be accounted for consistently
as equity transactions and any noncontrolling equity investments in
deconsolidated subsidiaries must be measured initially at fair
value.  SFAS No. 160 is effective, on a prospective basis, for us in
the fiscal year beginning January 1, 2009.  However, presentation and
disclosure requirements must be retrospectively applied to comparative financial
statements.  This statement will have no material effect on our
financial position or results of operations.





We
adopted the provisions of Financial Accounting Standards Board interpretation
No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation
of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007.  As a
result of the implementation of FIN 48, we recognized no adjustment for
uncertain tax provisions.  At the adoption date of January 1, 2007, we
had a deferred tax asset which was fully reserved by a valuation allowance to
reduce the deferred tax asset to the amount that more likely than not to be
realized.





- 9
-
 NOTE D - AGREEMENTS WITH TEXAS TECH UNIVERSITY HEALTH
SCIENCES CENTER ("TTUHSC")





On
January 22, 2002, the Company entered into an exclusive license agreement with
TTUHSC with respect to receiving certain patented rights.  The Company
is committed to the exploitation of such patented rights.




In
consideration for entering into the agreement, the Company issued 678,820 shares
of common stock to TTUHSC (subject to anti-dilution
protection).  These shares issued were valued at approximately $1,000,
their estimated fair value, and charged to operations.  The Company
has agreed to reimburse TTUHSC for all intellectual property protection costs
and patent maintenance fees.  On May 20, 2004, TTUHSC agreed to waive
its anti-dilution protection in exchange for 135,765 additional shares of common
stock.  Such shares were valued at approximately $115,000, their
estimated fair value, and charged to operations. In addition, subject to
obtaining FDA approval of a blood substitute product, the Company has agreed to
fund, over a four-year period, $1.2 million to support efforts in incubating and
commercializing other TTUHSC technologies.  As of March 31, 2008, such
approval had not been obtained.  Under the agreement, the Company
reserves the right of first refusal on licensing and commercializing other
technology developed from such funding. In addition, in July 2002, the Company
entered into a Sponsored Research Agreement (“SRA”) with TTUHSC for the period
September 1, 2002 through August 31, 2006.  In December 2004, the
Company paid a fee of approximately $231,000 to fund the next phase of its
research under the SRA through December 31, 2005.




In
January 2006, the Company entered into a Stage III SRA with TTUHSC for the
period January 1, 2006, to December 31, 2006.  In connection
therewith, the Company made an initial payment of approximately $287,000 which
was amortized during 2006.





In
January 2007, the Company entered into a Stage IV SRA with TTUHSC for the period
beginning January 1, 2007. In connection therewith, the Company made an initial
payment of approximately $780,000. This amount will be charged to operations as
incurred based on monthly reporting to the Company by TTUHSC.  As of
March 31, 2008, approximately $322,000 is included in prepaid expenses on the
accompanying balance sheet. Additional payments may be made to TTUHSC under the
agreement based on mutually agreed upon budgets.





The
Sponsored Research Agreements may be terminated by either party on 90 days
written notice





NOTE
E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES




Accounts
payable and accrued expenses consist of the following:




March
      31, 2008
            
            
            December
      31, 2007Professional
      fees
            
            $
            117,000
            
            
            $
            188,000Liquidated
      damages
            
            
            38,000
            
            
            
            38,000Other
            
            
            41,000
            
            
            
            28,000Total
            
            $
            196,000
            
            
            $
            254,000





NOTE
F - STOCKHOLDERS' EQUITY




(1)
PRIVATE PLACEMENT:





During
December 2007 the Company circulated a Private Placement Term Sheet and Exhibits
(“the 2007 Private Placement”) for the purpose of raising additional capital.
Our Private Placement offering of  units consists of one share of
HemoBioTech, Inc. common stock (“Share”) and one warrant (Warrant”) to purchase
one share of common stock (collectively, the “Unit”) may  result in up
to $6,000,000 in gross proceeds, subject to an over-allotment
option  for up to an additional $1,000,000 in gross
proceeds.  The purchase price per Unit is based on the average of the
closing price of our common stock on the OTC bulletin Board for the ten trading
days immediately preceding the date of the initial closing of the 2007 Private
Placement, discounted by 20%. Each Warrant is exercisable for the purchase of
one share of our common stock at 150% ($1.68) of the per Unit price for a period
of five years from the effective registration date of the shares underlying the
Warrants. The warrants may be redeemed in whole or in part by the Company, upon
30 day’s written notice, at price of $.01 share, provided the weighted average
closing price of the Common Stock exceeds 185% of the per-Unit purchase price
for a period of 20 consecutive trading days ending within 15 days prior to the
date on which the notice of redemption is given and the registration statement
for underlying shares is effective. In addition, the Company is obligated to
issue warrants to its placement agent in the amount of 30% of the total warrants
issued to investors on essentially the same terms; however, these warrants are
only callable when the Company provides a notice of redemption and a
registration statement for the underlying shares is effective. This offering
will be open to investors until July 31, 2008, unless extended by the
Company.


- 10
-


On
December 31, 2007 the Company completed an initial close of the 2007 Private
Placement consisting of gross proceeds of approximately $792,000 at the per Unit
price of $1.12. As a result of this closing 707,120 shares of our common stock
was issued along with warrant agreements for the issuance of 707,120 additional
shares upon exercise of the warrants at an exercise price of $1.68. Net of
expenses, primarily to our financial advisor, the Company received net proceeds
of $686,000. In addition, 212,136 warrants were issued to our placement agent
with essentially the same terms as our investor warrants; however, these
warrants are only callable when the Company provides a notice of redemption and
a registration statement for the underlying shares is effective. The Company is
required to file a registration statement to register the Shares and the shares
of our common stock underlying the Warrants under Form SB-2 (or comparable form)
within 45 business days of the closing of the offering.  The Company
will respond to all Commission comments within 30 business days of receipt of
such comments.  We will cause the registration statement to become
effective within 10 business days after receipt of a “no review” notice from the
Commission. If the registration statement is not filed as indicated above, or
declared effective within 90 business days following the filing, we will pay
investors within 30 calendar days of the end of each month we are in violation
of the forgoing liquidated damages of 2% of the dollar amount invested
(pro-rated for partial months) for a maximum of 8 months commencing on the
scheduled filing deadline.  The payments can be made in cash or shares
of our common stock at our option. The Company has amended the registration
rights agreement to reflect the liquidated damage timeframes to begin at the
final closing date of the offering. The Company is in the process of obtaining
waivers from the initial close investors to extend these above timeframes
related to the liquidated damage penalty to timeframes beginning at the final
closing date of the offering. The warrants were valued at December 31, 2007
using the Black-Scholes stock option valuation model and totaled $621,000 and
$186,000 for the investors and placement agents respectively.




During
March, 2008 the Company completed a partial close of its 2007 Private Placement
consisting of gross proceeds of $338,000 at the per unit cost of
$1.12.  As a result of the March closing, 301,784 shares of our common
stock were issued along with warrant agreements for the issuance of 301,784
additional shares upon exercise of the warrants at an exercise price of
$1.68.  Net of expenses, the Company received net proceeds of
$265,000.  In addition, 90,535 warrants were issued to our placement
agent, who is also a shareholder of the Company. The warrants were valued at
March 11, 2008 using the Black-Scholes stock option valuation model and totaled
$167,000 and $50,000 for the investors and placement agents
respectively.




On
October 27, 2004, the Company completed a Private Placement (“the 2004 Private
Placement”) of 45 units, priced at $100,000 per unit, and raised gross proceeds
of $4,500,000. Each unit consists of a $50,000 unsecured convertible promissory
note, 58,824 shares of common stock and 117,648 warrants. The notes bear
interest at 10% per annum (an effective rate of 77%) and are convertible at the
option of the holder into common stock or convertible securities to be sold by
the Company in its next financing, as defined, at a conversion price equal to
the per share offering price of such financing.




Based on
negotiations with the placement agent, the Company agreed to a fair value for
the common stock of $.85 per share and calculated the fair value of each warrant
to be $.53 using the Black-Scholes option pricing model.  Prior to the
revision in the method of valuing the common stock, the Company used
Black-Scholes to value both common stock and warrants. The
gross proceeds from the sale of each unit were allocated based on the relative
fair values to each of the components.





Convertible
      notes payable
            
            $
            31,000Common
      stock
            
            
            31,000Stock
      Warrants
            
            
            38,000Total
            
            $
            100,000





Based on
the allocation of the relative fair values to the components of the 2004 Private
Placement offering, the debt discount was calculated to be $855,000, which was
amortized as expense to interest expense over the term of the
notes.




The
Company agreed to file a registration statement within 60 days of final closing
of the 2004 Private Placement and to use commercially reasonable efforts to
cause the registration statement to be effective within 120 days of final
closing.  In the event the registration statement was not filed and
declared effective within the required time, the Company would incur liquidated
damages of 2% per month based on the subscription amount of each purchaser in
the Company October 2004 Private Placement. In connection therewith, during
2005, the Company incurred liquidating damages aggregating approximately
$48,000. As of March 31, 2008, the Company owes $38,000 of such damages. (See
Note E).





- 11
-


(2) STOCK
WARRANTS:





In
connection with the 2007 Private Placement, through March 31, 2008 the Company
issued 1,008,904 Class A warrants to investors exercisable at $1.68 per share
through the fifth anniversary of the effectiveness of a registration statement
of shares underlying the warrants. The warrants are subject to redemption, at
the Company’s sole option, after one year from the date of effectiveness of the
registration statement of common stock underlying the warrants if the common
stock price equaled or exceeded $2.07 for a period of at least 20 consecutive
trading days at a redemption price of $.01 per warrant. In addition, the Company
issued to its placement agent warrants totaling 30% of the total warrants issued
to investors. Accordingly, the Company issued 302,671 warrants to the placement
agent through March 31, 2008.





During
the fourth quarter 2007, the Company granted 120,000 warrants to a service
provider.  The warrants vest over a nine month period.  In
connection therewith, the Company valued 60,000 vested warrants using the
Black-Scholes option pricing model with the following assumptions:





Exercise
      Price
            $1.90Maturity
            5
      YearsRisk
      Free Interest Rate
            3.5%
      - 4.0%Volatility
            80%





At March
31, 2008, the Company had the following warrants outstanding:




Exercise
      Price
                
                Expiration
      Date
                
                Number
      of Shares ReservedPlacement
      Agent – 2004
                
                $
                0.90
                
                May
      13, 2010
                
                
                2,382,372Other
                
                $
                1.00
                
                July
      28, 2009
                
                
                50,000Other
                
                $
                1.06
                
                September
      13, 2009
                
                
                10,000Other
                
                $
                1.90
                
                October
      12, 2012
                
                
                120,000
                (1)Class
      A – 2007
                
                $
                1.68
                
                December
      31, 2012
                
                
                707,120
                (2)Placement
      Agent – 2007
                
                $
                1.68
                
                December
      31, 2012
                
                
                212,136Placement
      Agent – March, 2008
                
                $
                1.68
                
                March
      11, 2013
                
                
                90,535Class
      A – 2007
                
                $
                1.68
                
                March
      11, 2013
                
                
                301,784
                (2)Total
                
                
                
                
                
                
                
                3,873,947




(1)
            Subject
      to vesting.


(2)
            Subject
      to redemption (see Note F(1)).








(3) STOCK
OPTION/STOCK ISSUANCE PLAN:




During
2003, the Board of Directors of the Company approved a Stock Option/Stock
Issuance Plan (the "Old Plan") which provides for the granting of options or
stock to purchase up to 1,629,168 shares of common stock, under which directors,
employees and independent contractors are eligible to receive incentive and
non-statutory stock options and common shares (employees). The Company's
stockholders approved the Old Plan in August 2004.On June 9,
2006, the Company’s stockholders approved an increase of 1,500,000 shares of
common stock from the 1,629,168 shares of common stock available to be granted
under the Plan, increasing the number of shares to 3,129,168.




Additional
information on shares subject to options is as follows:





At March
31, 2008, 1,072,178 options were available for grant under the Plan. The
following tables present information relating to stock options under the Plan as
of March 31, 2008.


- 12
-





THREE
      MONTHS ENDED
              MARCH
      31, 2008Shares
            
            
            Aggregate
      Intrinsic Value
            
            
            Weighted
      Average Exercise PriceOptions
      outstanding at beginning of period
            
            
            1,886,990
            
            
            
            -
            
            
            $
            0.58Granted
            
            
            170,000
            
            
            
            -
            
            
            $
            1.21Options
      outstanding at end of period
            
            
            2,056,990
            
            
            $
            1,250,941
            
            
            $
            0.63Options
      exercisable at end of period
            
            
            1,811,835
            
            
            $
            1,202,990
            
            
            $
            0.56Options
      not vested at end of period
            
            
            245,155
            
            
            
            47,951
            
            
            $
            1.14Options
      vested or expected to vest
            
            
            2,056,990
            
            
            $
            1,250,941
            
            
            $
            0.63








MARCH
      31, 2008OPTIONS
      OUTSTANDING
            
            
            OPTIONS
      EXERCISABLERange
      of Exercise Price
            
            
            Shares
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Remaining Life in Years
            
            
            Shares
            
            
            Weighted
      Average Exercise Price$
            0.18
      - $0.20
            
            
            
            1,325,055
            
            
            $
            0.19
            
            
            
            3.5
            
            
            
            1,279,792
            
            
            $
            0.19$
            0.85
      – $0.94
            
            
            
            178,360
            
            
            $
            0.85
            
            
            
            6.6
            
            
            
            154,098
            
            
            $
            0.85$
            1.06
      – $1.65
            
            
            
            305,860
            
            
            $
            1.29
            
            
            
            8.9
            
            
            
            184,599
            
            
            $
            1.35$
            1.75
      - $2.42
            
            
            
            247,715
            
            
            $
            2.02
            
            
            
            8.6
            
            
            
            193,346
            
            
            $
            2.042,056,990
            
            
            $
            0.63
            
            
            
            5.1
            
            
            
            1,811,835
            
            
            $
            0.56





As of
March 31, 2008, 1,811,835 options were fully vested. A summary of the status of
the Company’s nonvested options as of March 31, 2008 and changes during the
three months ended March 31, 2008, is presented below.





Stock
      Options
            
            
            Weighted
      Average
              Exercise
      PriceNonvested
      at January 1, 2008
            
            
            160,684
            
            
            $
            1.08Options
      granted
            
            
            170,000
            
            
            $
            1.21Options
      vested
            
            
            (85,529
            )
            
            $
            1.15Nonvested
      at March 31, 2008
            
            
            245,155
            
            
            $
            1.14




As of
March 31, 2008, there was $90,000 of total unrecognized compensation cost
related to nonvested employees and directors share-based compensation
arrangements granted under the Plan. That cost is expected to be recognized over
a weighted-average period of 1.79 years.


- 13
-


The
weighted-average fair values at date of grant for options granted during the
three-month period ended March 31, 2008 and 2007 were $0.99 and $1.66
respectively. The value of the options was estimated using the Black-Scholes
option pricing model with the following weighted average assumptions:




2008Expected
      life in years
            5-10Interest
      rate
            2.51%
      – 3.78%Volatility
            80%Dividend
      yield
            0%





NOTE
G  –  COMMITMENTS AND OTHER MATTERS





(1)
LEASES:




During
February 2007 the Company moved into new office space and agreed to a sixty-six
month office lease.  The lease agreement includes rent abatement for
approximately ten months during 2007 and 2008.  Provisions of the
lease include a security deposit of approximately $5,800 and a thirty six month
letter of credit in the amount of approximately $55,000.  In addition,
if the Company cancels this lease after the forty-second month, and prior to its
full sixty-six month term, the Company will be obligated to pay a cancellation
charge of approximately $46,000. The estimated minimum lease payments for the
next five years are:  In 2008 - $65,000; in 2009 - $66,000; in 2010 -
$67,000; in 2011 - $68,000; in 2012 - $70,000 and none thereafter.





(2) CONSULTING
AGREEMENTS:




On
October 14, 2004, the Company entered into an advisory agreement with a member
of our scientific advisory board to receive technical advisory services. The
agreement can be terminated by either party on 30 days' written notice. The
agreement provides for $1,500 per month and the issuance of an option under the
Plan to purchase 15,000 shares of common stock of the Company at an exercise
price of $0.85 per share. In addition, at the end of each year of service on the
advisory board, the company will grant an additional non-qualified stock option
to purchase 5,000 shares of Common Stock at an exercise price equal to the then
fair market value of the Common Stock. Such options vest 25% on the first
anniversary and then monthly thereafter over a period of thirty six
months.





On July
13, 2005, the Company entered into an advisory agreement with its Acting Vice
President and Principal Investigator of Research and Development to receive
advisory services on technical, medical and market issues related to
HemoBioTech, including its second generation blood substitute, HemoTech. The
agreement provides for non-qualified stock options to purchase 271,528 shares of
Common Stock of HemoBioTech at an exercise price per share of $0.18, subject to
vesting through July 13, 2009. In connection therewith, the Company recorded a
charge of $59,000 and $37,000 for the years ended December 31, 2007 and 2006
respectively. As of March 31, 2008, 226,265 options had vested. Additionally,
the Company recorded a charge to expenses for the three months ended March 31,
2008 of $10,000. The Company will record additional charges as and when the
options vest at the then fair value.




On
January 16, 2008, the Company granted stock options to two scientific
consultants employed by TTUSHC.  Each grant provides for 75,000
non-qualified stock options to purchase shares of the Company’s stock at an
exercise price of $1.19 which was the fair market value of the Company’s shares
on the grant date.  The options vest 25% immediately and the remaining
75% vest monthly over the next 36 months.  Accordingly, the Company
recorded a charge of $43,000 during the three months ended March 31,
2008.





(3)
FINANCIAL ADVISOR AGREEMENT:





On
September 12, 2006, the Company entered into a three year agreement with its
placement agent and financial advisor for consulting services related to
corporate finance and other financial services. The financial advisor is also a
significant shareholder in the Company. The services shall include assisting the
Company in evaluating and negotiating particular contracts or transactions, if
requested to do so by the Company and to raise for the Company its next
financing of up to $10 million with a minimum of $6 million in the next 18
months from the date of the agreement.   As compensation for such
services, the Company agreed to issue 1,500,000 shares of its common stock. The
agreement states that 500,000 shares would vest to the consultant on the one
year anniversary of the agreement.  Accordingly, on


- 14
-


September
12, 2007, 500,000 shares vested to the financial consultant. The remaining
1,000,000 shares are subject to forfeiture in the event that the consultant
fails to achieve certain performance criteria set forth in the agreement. In
addition, the agreement provides for a fee if the financial advisor acts as a
finder or financial consultant in various business transactions in which the
Company may be involved such as mergers, acquisitions or joint ventures during
the term of the agreement. Accordingly, the Company has recorded $855,000 in
charges for the year ended December 31, 2007 for the estimated cost of those
financial services and $1,155,000 has been charged to operations since the
inception of the agreement. The Company recorded $94,000 of such charges for the
period ended March 31, 2008. The Company will record an additional expense over
the service period related to this stock issuance as and when the performance
criteria are met at the then market price of the stock.





NOTE
H  –  SUBSEQUENT EVENT





On May 5,
2008 the Company agreed to license certain technology from TTUHSC titled
Orthogonal Method for the Removal of Transmissible Spongiform Encephalopathy
Agents from Biological Fluids (“TSE Technology”). This is a technology that
results in the removal and inactivation of infectious agents such as prions
(which can cause Mad Cow Disease) and viruses.  Such removal and
inactivation is critical in the purification of animal products for human
use.  It can be used not only for HemoTech production but also has the
potential for generating sublicensing revenue from pharmaceutical, biotechnology
and the cosmetic industries. The term of the agreement extends to the full end
of the term or terms for which patent rights have not expired or, if only
technology rights are licensed and no patent rights are applicable, for a term
of 15 years. The license agreement calls for a nonrefundable license
documentation fee of $10,000 and 500,000 shares of the Company’s common
stock.  The agreement also contains an annual renewal fee of $10,000
per year and a royalty based on net sales of Licensed Products (as defined by
the agreement) sold by the Company that contain the patented TSE
Technology.  The royalty percentage will be lower if Licensed Products
are not protected by a valid patent. The agreement calls for a minimum royalty
beginning six months after approval of a Licensed Product by the FDA. No royalty
applies to the embedded TSE Technology in the sale of our HemoTech product. The
Company is permitted to sublicense the TSE Technology and TTUHSC will receive a
portion of both cash and non cash remuneration received by the Company for a
sublicense.  Additionally, the Company will pay a portion of any
royalty received to TTUHSC.





The
Company has also agreed to issue additional shares of the Company’s common stock
in exchange for the purchase of certain equipment used in the HemoTech process.
The equipment will be owned by TTUHSC and will be used to further the
development of HemoTech, among other possible research uses.





The
agreement may be terminated by either party by mutual written agreement upon 180
days notice, or by TTUHSC based on certain provisions relating to defaults
according to the agreement. The Company plans to incur a charge to research and
development expenses for these items in the second quarter of 2008.




ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS




PLAN
OF OPERATIONS




We are
primarily engaged in the research and development of human blood substitute
technology exclusively licensed from Texas Tech University Health Sciences
Center (“TTUHSC”). Since October 27, 2004 most of our working capital was used
to pay for general and administrative costs, salaries, legal and accounting fees
and the cost of raising money. After reviewing the blood substitute technology
developed by researchers at Texas Tech, in January 2002 we licensed from Texas
Tech the exclusive rights to various alternative compositions of HemoTech, a
novel blood substitute that is based on hemoglobin (which is the key protein in
red blood cells that carries oxygen) of both bovine (cow) and human origin, as
well as methods for its production and use. What makes HemoTech a novel
potential blood substitute product is the fact that it is comprised of
hemoglobin that has been isolated from bovine blood and then chemically modified
to make the product non-toxic. We also have an agreement with Texas Tech that
any patent issued from its patent application relating to the induction of
erythropoiesis (which is the production of red blood cells by the body) will be
included under our exclusive license with Texas Tech. In addition to our license
and patent agreement with Texas Tech, beginning in July 2002, we have entered
into a series of Sponsored Research Agreements (“SRA”) with TTUHSC under which
we are entitled to use certain of Texas Tech's production and research and
development facilities in Lubbock, Texas.




- 15
-


In
January 2007, the Company entered into a Stage IV SRA with TTUHSC for the period
beginning January 1, 2007. In connection therewith, the Company made an initial
payment of approximately $780,000. This amount will be charged to operations
over the period of the research (see Note D to the Financial Statements).
Additional payments may be made to TTUHSC under the agreement based on mutually
agreed upon budgets. The SRA IV activities include maintaining the animal
facility which houses a controlled herd of Hereford cows needed for the
production of HemoTech and assistance in the implementation of FDA
recommendations received at a Pre-IND meeting with the FDA in April
2006.  The SRA IV activities also include the manufacture of HemoTech.
The product will be made at the production facility at TTUHSC and will be used
for pre-clinical and clinical studies upon acceptance of the IND.  The
agreement will also involve further research and development with a focus on
additional uses of HemoTech and expanded patent protection.




During
June 2007 we engaged a U.S. based Clinical Research Organization to assist the
Company in submitting technical information to the Drug Controller General of
India (DCGI) for the purpose of obtaining regulatory authority to conduct
clinical trials in India. A goal is to establish clinical trials in India and if
successful commercialize HemoTech in India.  This strategy may be in
place prior to clinical trials and commercialization in the U.S.




Our goal
is to address an increasing demand for a safe and inexpensive human blood
substitute product in the United States and around the world through our
licensed technology. We believe that certain initial pre-clinical and early
stage human trials undertaken outside the U.S. by prior holders of this
technology suggest that our licensed technology may possess properties that
diminish the intrinsic toxic effects of hemoglobin and help reduce or eliminate
the abnormal reaction associated with hemorrhagic shock (which is the loss of
blood pressure and the lowering of vital signs resulting from the loss of
blood).




We have a
limited operating history, no customer base and no revenues to date. Our plan of
operations for the next twelve months is focused primarily on the development of
our licensed technology and business, production of our product, HemoTech, for
use in Phase I U.S. clinical trials, filing of an IND with the FDA, continuing
and enlarging the animal facility at Texas Tech University, upgrading our
existing production facility based on FDA recommendations and furthering our
intellectual property position through the introduction of additional patents
and initiation of Phase I U.S. clinical studies if the IND is
accepted.




We
believe our available cash and cash generated through the sale of our Private
Placement will be sufficient to complete our immediate planned operations. While
the Company has been able to obtain such funding in the past, there can be no
assurance that they will be able to do so in the future. Management's plans
include continuing to finance operations through one or more private or public
offerings of equity securities and monitoring and reducing discretionary
expenditures.




RECENT
DEVELOPMENTS





(1) NEW
TECHNOLOGY:





On May 5,
2008 the Company agreed to license certain technology from TTUHSC titled
Orthogonal Method for the Removal of Transmissible Spongiform Encephalopathy
Agents from Biological Fluids (“TSE Technology”). This is a technology that
results in the removal and inactivation of infectious agents such as prions
(which can cause Mad Cow Disease) and viruses.  Such removal and
inactivation is critical in the purification of animal products for human
use.  It can be used not only for HemoTech production but also has the
potential for generating sublicensing revenue from pharmaceutical, biotechnology
and the cosmetic industries. The term of the agreement extends to the full end
of the term or terms for which patent rights have not expired or, if only
technology rights are licensed and no patent rights are applicable, for a term
of 15 years. The license agreement calls for a nonrefundable license
documentation fee of $10,000 and 500,000 shares of the Company’s common
stock.  The agreement also contains an annual renewal fee of $10,000
per year and a royalty based on net sales of Licensed Products (as defined by
the agreement) sold by the Company that contain the patented TSE
Technology.  The royalty percentage will be lower if Licensed Products
are not protected by a valid patent. The agreement calls for a minimum royalty
beginning six months after approval of a Licensed Product by the FDA. No royalty
applies to the embedded TSE Technology in the sale of our HemoTech product. The
Company is permitted to sublicense the TSE Technology and TTUHSC will receive a
portion of both cash and non cash remuneration received by the Company for a
sublicense.  Additionally, the Company will pay a portion of any
royalty received to TTUHSC.





The
Company has also agreed to issue additional shares of the Company’s common stock
in exchange for the purchase of certain equipment used in the HemoTech process.
The equipment will be owned by TTUHSC and will be used to further the
development of HemoTech, among other possible research uses.


- 16
-


The
agreement may be terminated by either party by mutual written agreement upon 180
days notice, or by TTUHSC based on certain provisions relating to defaults
according to the agreement. The Company plans to incur a charge to research and
development expenses for these items in the second quarter of 2008.




(2)
PRIVATE PLACEMENT:
 
 On
December 31, 2007, we completed a private placement of 707,120 units (the
“Units”), each consisting of one share of our common stock (our “Common Stock”)
and one warrant to purchase our Common Stock (a “Warrant”),  resulting
in gross proceeds of $791,974 based on a per-Unit price of $1.12.  The
Warrants have an initial exercise price of $1.68.  The Warrants may be
redeemed in whole or in part by us,





On March
11, 2008, we completed the private placement of an additional 301,784 Units,
resulting in gross proceeds of $338,000 based on a per-Unit price of
$1.12.  The Warrants have an initial exercise price of
$1.68.  The Warrants may be redeemed in whole or in part by us, upon
30 days’ written notice, at a price of $.01 per Warrant share, provided the
weighted average closing price of our Common Stock exceeds 185% of the per-Unit
purchase price for a period of 20 consecutive trading days ending within 15 days
prior to the date on which the notice of redemption is given, and the
registration statement for underlying shares is effective.  Net of
expenses, primarily to our financial advisor, we received net proceeds from this
private placement of $265,000, which will be used for research and development
activities, licensing and other general working capital purposes.





In both
cases, the Units were offered in accordance with Regulation D (“Regulation D”)
under the Securities Act of 1933, as amended (the “Securities
Act”).  Accordingly, each investor qualified as an “accredited
investor” as defined in Regulation D in order to participate in these offerings,
as determined by representations made by such investors prior to their
participation.  Additionally, each investor’s right to transfer the
Shares and the shares of our common stock underlying the Warrants is restricted
as provided in the Securities Act and the rules and regulations adopted
thereunder, as well as pursuant to state securities laws.




RESEARCH
AND DEVELOPMENT OF HEMOTECH




HemoTech
is currently our only potential product. We expect that the remaining
production, development, testing and FDA approval of HemoTech, if ever, could
occur over a period of approximately four years.




HemoTech
must undergo several major stages of production, development, and clinical
testing before being in a position to submit its New Drug Application (“NDA”) to
the FDA, as follows:




·
            PRODUCTION
      OF HEMOTECH. In order to produce HemoTech for Phase I U.S. clinical
      trials, we must complete certain upgrades of the current HemoTech
      production facilities located at TTUHSC. A portion of these upgrades have
      been completed during 2006 and through 2007 and are based on
      recommendations from the FDA. We anticipate that these additional upgrades
      will be substantially complete in 2008, although there can be no assurance
      that this will be the case, depending on, among other things, worker
      schedules, available materials, unexpected costs associated with
      construction and our ability to raise sufficient capital in order to
      complete such upgrades.





·
            PREPARATION
      AND SUBMISSION OF U.S. IND APPLICATION. We started preparing material for
      our U.S. IND application on December 13, 2004, when we entered into our
      Stage II Sponsored Research Agreement with TTUHSC. We are actively
      planning and implementing the FDA recommendations including upgrading the
      production facility, preparing for clinical trials and the production of
      HemoTech and/or in preparation for clinical trials in India; collectively
      at a cost estimated to range from $5,000,000 to $8,000,000, which are
      necessary for submission of our U.S. IND application and production of the
      product, although there can be no assurance that we will be able to meet a
      specified timetable or budgeted amount. We currently do not have
      sufficient funds available to pay this amount.  We will need to
      raise at least $6,000,000 in the near term  in order to complete
      the above mentioned activities.


- 17
-


·
            INDIA
      STRATEGY. During June 2007 we engaged a U.S. based Clinical Research
      Organization to assist the Company in submitting technical information to
      the Drug Controller General of India (DCGI) for the purpose of obtaining
      regulatory authority to conduct clinical trials in India. A goal is to
      establish clinical trials in India and if successful commercialize
      HemoTech in India.  This strategy may be in place prior to
      clinical trials and commercialization in the
  U.S.





·
            PHASE
      I OF OUR U.S. CLINICAL TRIALS. Once our U.S. IND application has been
      accepted by the FDA, we expect to be able to commence our Phase I U.S.
      clinical trials of HemoTech. Depending on whether the FDA accepts our U.S.
      IND application, we believe that we could begin Phase I U.S. clinical
      trials soon thereafter although there is no guarantee that we can meet
      this goal. We estimate that our Phase I U. S. clinical trials (including
      the costs of doing additional research and development of HemoTech during
      our Phase I U.S. clinical trials and the operational and overhead costs
      that we will incur during our Phase I U. S. clinical trials) could cost
      approximately $10.0 million, although the final cost could be more or less
      than this estimate, which includes the
  following:




·
            approximately
      $1.4 million for the production of
HemoTech;




·
            approximately
      $1.6 million for the testing of HemoTech on
  humans;




·
            approximately
      $1.9 million for personnel, administrative, and operational expenses that
      we expect to incur during our Phase I U. S. clinical
    trials;




·
            approximately
      $1.7 million for legal, accounting, consulting, technical and other
      professional fees that we expect to incur during our Phase I U. S.
      clinical trials;




·
            approximately
      $1.6 million for research and development costs that we expect to incur
      during our Phase I U. S. clinical trials;
and




·
            approximately
      $2.0 million for preparation of Phase II clinical
  trials.




We expect
that our Phase I U. S. clinical trials would take approximately six to nine
months to complete from the date we start such trials, though such trials could
take significantly longer to complete, depending on, among other things, the
rate of production of HemoTech and the availability of patients. We estimate
that we will be required to raise additional capital (although there can be no
assurance that we can meet this timeframe) in order to fund our Phase I U.S.
clinical trials, as well as preparation for Phase II clinical trials from start
to finish and to cover the related expenses described above. If submission or
acceptance of our U.S. IND application is delayed for any reason and if we are
unable to raise such additional capital in a timely manner, commencement of our
Phase I U. S. clinical trials would also be delayed.




·
            PHASE
      II OF OUR U.S. CLINICAL TRIALS. A Phase II clinical trial could commence
      subsequent to a successful Phase I trial.  We estimate that our
      Phase II U.S. clinical trials (including the costs of doing additional
      research and development of HemoTech during our Phase II U.S. clinical
      trials and the operational and overhead costs that we will incur during
      our Phase II U.S. clinical trials) will cost approximately $20.0 million,
      which includes the following:




·
            further
      production of HemoTech;




·
            further
      testing of HemoTech and related
activities;




·
            personnel,
      administrative, and operational expenses that we expect to incur during
      our Phase II U. S. clinical trials;




·
            legal,
      accounting, consulting, technical and other professional fees that we
      expect to incur during our Phase II U. S. clinical trials;
    and




·
            research
      and development costs that we expect to incur during our Phase II U. S.
      clinical trials.




The exact
cost of each step will be determined in the future and will depend on various
factors including FDA regulatory guidance and the availability of resources of
TTUHSC.


- 18
-




·
            PHASE
      III OF OUR U.S. CLINICAL TRIALS. If we are able to complete our Phase II
      U.S. clinical trials, we will seek approval from the FDA for our Phase III
      U. S. clinical trials soon
thereafter.




At such
time, and in order to cut the costs of conducting and completing our Phase III
U.S. clinical trials, we anticipate that we will seek to enter into a
partnership with a biopharmaceutical company that has expertise in the
production and marketing of biological products, although there can be no
assurance that we will be able to do so.




Alternatively,
if we are not able to enter into such a partnership, we may seek to enter into a
manufacturing arrangement with an experienced pharmaceutical manufacturer, under
which such manufacturer would produce HemoTech, which would significantly reduce
the costs of our Phase III U.S. clinical trials by eliminating the need to build
a production facility that meets the FDA's standards for Phase III U.S. clinical
trials.




If we are
not able to enter into a partnership or find a manufacturer that is willing to
manufacture HemoTech for us, we may be required to perform all aspects of the
Phase III U. S. clinical trials independently. In this case, we estimate that
our Phase III U.S. clinical trials (including the costs of doing additional
research and development of HemoTech during our Phase III U.S. clinical trials
and the operational and overhead costs that we will incur during our Phase III
U.S. clinical trials) could cost approximately $195.0 million, which includes
the following:





·
            approximately
      $100.0 million to build a production facility for HemoTech that is
      suitable for such advanced testing and that meets the standards of the FDA
      as a product testing facility;





·
            approximately
      $70.0 million for the further testing and production of
      HemoTech;





·
            approximately
      $10.0 million for personnel, administrative, and operational expenses that
      we expect to incur during our Phase III U.S. clinical
    trials;





·
            approximately
      $5.0 million for legal, accounting, consulting , technical and other
      professional fees that we expect to incur during our Phase III U.S.
      clinical trials; and





·
            approximately
      $5.0 million for research and development costs that we expect to incur
      during our Phase III U.S. clinical
trials.




We expect
that our Phase III U.S. clinical trials could be finished within fifteen to
eighteen months from the date we start such trials, though such trials could
take significantly longer to complete, depending on, among other things, the
timely completion of a suitable production facility for HemoTech and the
availability of patients. If we are unable to partner with a pharmaceutical
company, we estimate that we will be required to raise the approximately $200
million (or such lesser amount as may be required if we are successfully able to
enter into a partnership) that we will need in order to fund our Phase III U.S.
clinical trials from start to finish and to cover the related expenses described
above. If commencement or completion of our Phase II U.S. clinical trials are
delayed for any reason, or if we are unable to raise sufficient funds to begin
our Phase III U.S. clinical trials immediately following completion of our Phase
II U.S. clinical trials, our Phase III U.S. clinical trials will be
delayed.




The
estimated costs of each of the phases of our clinical trials set forth above
represent our best estimate of such expenses based on, among other things,
current economic conditions and availability of materials and personnel. Since
many of these phases will not even be commenced by us for another two to three
years, we cannot offer any assurance that such estimates will reflect the actual
amounts that we may be required to incur during each phase of our clinical
trials based on, among other things, then-current economic conditions,
availability of materials and personnel, and other factors that may be relevant
at the time. The amounts we may actually be required to expend during any phase
of our clinical trials may be significantly more than the amounts estimated by
us above.


-
19 -


If our
clinical trials are successful and we are able to meet the timelines set forth
above, it is possible that an NDA could be approved by the FDA as early as
mid-2010, although there can be no assurance that an NDA would be approved by
such time, if ever. There can also be no assurance that we will be able to
complete our clinical trials under the schedule described above, or ever, or
that we will be able to develop a viable and marketable human blood substitute,
even if we are able to complete our clinical trials. Further, we do not expect
to generate any revenues until after such time as HemoTech has received FDA
approval, if ever.




RESULTS
OF OPERATIONS




We are a
development stage company and have not generated any revenue from inception
through March 31, 2008. To date, our efforts have been principally devoted to
evaluating the HemoTech technology, negotiating and entering into our license
agreement and Sponsored Research Agreements with TTUHSC, hiring employees and
consultants, establishing our Board of Advisors, raising capital, and engaging
in other organizational and infrastructure development. In addition, during 2007
the Company upgraded the production facility at Texas Tech University and
maintained an animal donor facility. During 2007 we began implementing a global
strategy to include submission of technical information to the Drug Controller
General of India (“DCGI”). We submitted this information in early April 2008 for
the purpose of obtaining regulatory authority to conduct clinical trials in
India.




Total
expenses, and thus our losses, totaled $12,598,000 from October 3, 2001
(inception) through March 31, 2008.




FOR
THE THREE MONTHS ENDED MARCH 31 2008 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 2007





Total
expenses, and thus our losses, for the three months ended March 31, 2008, were
$737,000 compared with $828,000 for the same period a year ago resulting from
somewhat lower overall general and administrative costs and higher research and
development costs.





General
and Administrative costs were $523,000 for the three months ended March 31,
2008, a decrease of $174,000 compared with the same period in the prior year.
This decrease primarily results from lower non-cash stock based compensation to
our financial consultant, employees and directors more than offsetting slightly
higher cash costs in the areas of legal costs, investor relations and office
expenses.  For the 2008 period, stock based compensation includes
charges of $128,000, compared with $374,000 for the same period in 2007
resulting from a lower share price in the current period used in the computation
of stock based compensation expense.





Research
and Development expenses were $232,000 for the 2008 period, increasing $65,000
from the $167,000 in the same period in 2007 resulting primarily from higher
costs paid to outside laboratories and regulatory consultants.  Spending
related to the Stage IV Sponsored Research Agreement with Texas Tech University
Health Sciences Center (TTUHSC) were slightly higher in the current period
compared to the prior year. Stock based compensation was $55,000 in the three
months ended March 31, 2008 compared to $31,000 in the same period one year
ago.  Net stock based compensation expense related to Research and
Development activities was higher in the current period resulting from the
inclusion of two scientific consultants that were awarded stock options in
January, 2008, more than offsetting the effect of a lower share price in the
current period.





Interest
income decreased slightly in 2008 due to lower average bank balances compared to
higher average bank balances in 2007 resulting from warrant exercises in
2006.





LIQUIDITY
AND CAPITAL RESOURCES





During
the three months ended March 31, 2008, net cash used in operating activities of
$476,000 compared to $1,090,000 in the same period during 2007. During January,
2007 the company paid TTUHSC approximately $780,000 as an initial payment for
its Stage IV Sponsored Research Agreement.  At March 31, 2008,
approximately $322,000 of the TTUHSC 2007 payment is included in prepaid
expenses on our Balance Sheet.





Investing
activities during the 2007 include the maturation of a $1,000,000 short-term
investment made in 2006 and the purchase of a certificate of deposit (restricted
cash) in 2007 related to our current lease agreement.


- 20
-


During
March, 2008 the Company closed on a portion of our Private Placement offering
that was initiated during December, 2007.  The Company received gross
proceeds from investors of $338,000 during the 2008 quarter and after financing
costs the Company received net proceeds of $265,000.





We
believe our cash available of $1,804,000 at March 31, 2008 and the cash
generated by our Private Placement offering will be sufficient to fund our
current operations. While the Company has been able to obtain such funding in
the past, there can be no assurance that they will be able to do so in the
future. Management's plans include continuing to finance operations through one
or more private or public offerings of equity securities and monitoring and
reducing discretionary expenditures. In order to complete our planned operations
which includes implementing FDA recommendations necessary for submitting our IND
to the FDA, upgrading the production facility, preparation for clinical trials,
submitting technical information to the Drug Controller General of India
(“DCGI”) for the purpose of obtaining regulatory approval to conduct clinical
trials in that country, and the production of HemoTech; collectively at a cost
ranging from $6,000,000 to $8,000,000, we will need to raise at least $6 million
in the near term, although there can be no assurance that we can meet this
timeframe. If we fail to generate enough working capital, either from future
equity, or exercise of our Warrants, or revenue, we will have to curtail our
planned operations.





OFF-BALANCE
SHEET ARRANGEMENTS




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
applicable.




ITEM
4. CONTROLS AND PROCEDURES




Disclosure
controls and procedures are designed with an objective of ensuring that
information required to be disclosed in our periodic reports filed with the SEC,
such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized
and reported within the time periods specified by the SEC.
Disclosure controls also are designed with an objective of ensuring that such
information is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, in order to allow timely
consideration regarding required disclosures.




Based on
their review and evaluation as of the end of the period covered by this Form
10-Q, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)
are effective as of the end of the period covered by this report. They are not
aware of any significant changes in our disclosure controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.




The term
internal control over financial reporting is defined as a process designed by,
or under the supervision of, the registrant's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
registrant's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:




(a)
Pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of the
registrant;




(b)
Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the registrant are
being made only in accordance with authorizations of management and directors of
the registrant; and




(c)
Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the registrant's assets that
could have a material adverse effect on the financial statements.




During
the period covered by this Form 10-Q, there have not been any changes in our
internal control over financial reporting that have materially affected, or that
are reasonably likely to materially affect, our internal control over financial
reporting.


- 21
-


PART
II -- OTHER INFORMATION




Items 1,
2, 3, 4 and 5 are not applicable and have been omitted.





ITEM
6. EXHIBITS





Exhibit No.
            Description31.1
            Certification
      of Principal Executive Officer required under Rule 13a-14(a) or Rule
      15d-14(a) of the Securities and Exchange Act of 1934, as
      amended.31.2
            Certification
      of Principal Financial Officer required under Rule 13a-14(a) or Rule
      15d-14(a) of the Securities and Exchange Act of 1934, as
      amended.32.1
            *Certification
      of Principal Executive Officer required under Rule 13a-14(b) or Rule
      15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18
      U.S.C. Section 1350.32.2
            *Certification
      of Principal Financial Officer required under Rule 13a-14(b) or Rule
      15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18
      U.S.C. Section 1350.*
            The
      certifications attached as Exhibits 32.1 and 32.2 accompany this Quarterly
      Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002 and shall not be deemed "filed" by HemoBioTech, Inc. for purposes of
      Section 18 of the Securities Exchange Act of 1934, as
    amended.




















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-


SIGNATURES




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




HEMOBIOTECH,
INC.







Date:
      May 13, 2008
            By:
            /s/
      ARTHUR P. BOLLON, PH.D.Arthur
      P. Bollon, Ph.D.Chairman
      of the Board of Directors, President and Chief Executive
      OfficerDated:
      May 13, 2008
            By:
            /s/
      MARK J. ROSENBLUMMark
      J. RosenblumChief
      Financial Officer and Secretary







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