UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                                   (Mark one)

     |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006


                                       OR

     |_| 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                   (I.R.S. Employer
       incorporation or organization)                   Identification No.)
      14221 DALLAS PARKWAY, SUITE 1400
                DALLAS, TEXAS                                 75254
  (Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (214 540-8411)

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 November 3, 2006,  the  registrant had  outstanding  18,436,887  shares of
common stock, $0.001 par value per share.

Transitional Small Business Disclosure Format (check one): Yes [_] No [X]

<PAGE>


                                HEMOBIOTECH, INC.
                          (a development stage company)


                                TABLE OF CONTENTS

                                                                            Page
PART I -- FINANCIAL INFORMATION                                                2
    ITEM I. -- Financial Statements                                            2


         Condensed Balance Sheets                                              2
         Condensed Statements of Operations                                    3
         Condensed Statements of Changes In Stockholders' Equity               4
         Condensed Statements of Cash Flows                                    5
         Notes to Condensed Financial Statements                               6
   ITEM 2 -- Management's Discussion and Analysis or Plan of Operations
                                                                              14
   ITEM 3 -- Controls and Procedures                                          20
PART II -- OTHER INFORMATION                                                  22
                   SIGNATURES                                                 23
   Exhibit Index                                                              24
   Exhibit 31.1                                                               25
   Exhibit 31.2                                                               26
   Exhibit 32.1                                                               27
   Exhibit 32.2                                                               28



<PAGE>



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


In addition to  historical  information,  this  Quarterly  Report on Form 10-QSB
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-KSB,  filed with the SEC on March 30, 2006, 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.

<PAGE>


                                                PART I -- FINANCIAL INFORMATION

                                                  ITEM I. FINANCIAL STATEMENTS


                                                       HEMOBIOTECH, INC.
                                                (a development stage company)


                                                   CONDENSED BALANCE SHEETS






<TABLE>
<CAPTION>


                                                                        SEPTEMBER 30,       DECEMBER 31,
                                                                           2006                 2005

                                                                        (Unaudited)
<S>                                                                   <C>                  <C>

ASSETS:
CURRENT ASSETS:

           Cash and cash equivalents                                   $     3,677,000      $  1,259,000
           Short term investments                                      $     1,000,000              -
           Prepaid expenses                                                    156,000            42,000
                                                                             ---------         ---------
                             Total current assets                            4,833,000         1,301,000
           Equipment, net                                                       13,000            11,000
                                                                             ---------         ---------
                                                                       $     4,846,000      $  1,312,000
                                                                             =========         =========

LIABILITIES:
CURRENT LIABILITIES:

           Accounts payable and accrued expenses                       $       120,000      $    360,000
           Accrued interest payable                                                -              20,000
           Convertible notes payable                                               -             337,000
                                                                              --------        ----------
                   Total current liabilities                           $       120,000      $    717,000
                                                                              --------        ----------
STOCKHOLDERS' EQUITY:

Common stock, $0.001 par value, 55,000,000 shares authorized,

18,436,887  (includes  1,500,000  shares subject to forfeiture)
shares issued and outstanding as of September 30, 2006
and 11,638,040 shares issued and outstanding as of December 31, 2005   $        19,000      $     12,000
Additional paid-in capital                                                  11,858,000         6,155,000
Unearned compensation                                                           -                (7,000)
Deficit accumulated during the development stage                           (7,151,000)       (5,565,000)
                                                                            ----------        ----------
                   Total stockholders' equity                                4,726,000           595,000
                                                                            ----------        ----------
                                                                       $     4,846,000      $  1,312,000
                                                                             =========        ==========





                                See Notes to Condensed Financial Statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                        HEMOBIOTECH, INC.
                                                 (a development stage company)


                                                CONDENSED STATEMENTS OF OPERATIONS
                                                           (UNAUDITED)






                                                                                                                October 3, 2001
                                               Three Months Ended               Nine Months Ended                (inception)
                                                 September 30,                    September 30,                   through
                                                                                                                 September 30,
                                             2006              2005            2006          2005                    2006
                                       ----------------  --------------    ------------- ------------         ------------------
<S>                                   <C>               <C>           <C>             <C>                    <C>

Revenue                               $     -           $    -           $       -     $     -                $        -

Operating expenses:

         Research and development        134,000           150,000          412,000        226,000                 961,000
         General and
           administrative                398,000           519,000        1,210,000      1,080,000               4,236,000


Other income (expenses)

         Interest expense                      0           554,000           53,000      1,594,000               2,109,000
         Interest income                 (48,000)          (13,000)         (89,000)       (40,000)               (155,000)
                                         --------         --------          -------        -------               ---------
Net loss                              $ (484,000)      $(1,210,000)     $(1,586,000)   $(2,860,000)           $ (7,151,000)
                                       ==========      ============     ============   =============          ============
Basic and diluted loss
         per common share                 $(0.03)           $(0.12)          $(0.11)        $(0.28)
                                          =======           =======          =======        =======

Weighted average number
         of shares outstanding
         basic and diluted             16,675,922        10,501,298       14,601,672     10,230,959
                                       ==========        ==========       ==========     ==========





                                        See Notes to Condensed Financial Statements.
</TABLE>

<PAGE>



<TABLE>
<CAPTION>

                                                        HEMOBIOTECH, INC.
                                                (a development stage company)

                                        CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY





                         COMMON          AMOUNT        ADDITIONAL          UNEARNED           DEFICIT                 TOTAL
                         STOCK                          PAID -IN         COMPENSATION       ACCUMULATED
                                                        CAPITAL                              DURING THE
                                                                                            DEVELOPMENT
                                                                                              STAGE
<S>                     <C>             <C>           <C>             <C>                <C>                    <C>

     BALANCE

December 31, 2005       11,638,040      $ 12,000      $ 6,155,000     $    (7,000)        $ (5,565,000)          $    595,000
Elimination of
   unvested
   compensation                                           (7,000)           7,000                                        -
 Net Loss for the
   period                                                                                   (1,586,000)            (1,586,000)
Stock based
  compensation -
   board of
   Advisors and
   consultant                                             83,000                                                       83,000
Stock based
   compensation-
   employees and
   directors                                             129,000                                                      129,000
Conversion of
  notes payable
  into common
  stock                    142,812                       286,000                                                      286,000

Exercise of
  warrants, net
  of expenses of
  $273,000               5,156,035        5,000        5,185,000             -                    -                 5,190,000

Shares issued
   to financial
   advisor
   (September 12,
   2006)
   See Note F            1,500,000        2,000           27,000                                                       29,000
                         ----------    ----------       ----------      ----------            ----------            ----------



     BALANCE
September 30, 2006
   (unaudited)          18,436,887    $  19,000      $ 11,858,000     $      -            $ (7,151,000)          $  4,726,000
                        ==========      =======        ==========         =======           ===========           ==========




                                        See Notes to Condensed Financial Statements.


</TABLE>

<PAGE>


<TABLE>
<CAPTION>




                                                          HEMOBIOTECH, INC.
                                                   (a development stage company)
                                                CONDENSED STATEMENTS OF CASH FLOWS
                                                           (unaudited)



                                                                                                     OCTOBER 3, 2001
                                                                        NINE MONTHS ENDED             (Inception)
                                                                           SEPTEMBER 30,                Through
                                                                       2006           2005         SEPTEMBER 30, 2006
                                                                  -------------    -----------    -------------------


<S>                                                             <C>             <C>              <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                        $(1,586,000)     $(2,860,000)     $    (7,151,000)

     Adjustments to reconcile net loss to net cash used
        in operating activities:
               Fair value of options and
                 compensatory stock                                  212,000         124,000               568,000
               Conversion charge - interest expense                   43,000                                43,000
               Notes Issued for services - related party                -               -                  354,000
               Expenses paid by stockholder                             -               -                   14,000
               Amortization of deferred financing costs                 -            781,000             1,023,000
               Amortization of debt discount                            -            662,000               789,000
               Depreciation                                            2,000           1,000                 4,000
               Contribution of salary                                                   -                   11,000
               Changes in:
                   Accounts payable and accrued expenses           (210,000)         320,000               832,000
                   Accrued interest                                  (3,000)         152,000               139,000
                   Prepaid expenses                                (114,000)          15,000             (156,000)
                                                                  ----------       ----------           ----------
       Net cash used in operating activities                     (1,656,000)       (805,000)           (3,530,000)
                                                                  ==========       ==========           ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                               (3,000)         (8,000)              (16,000)
    Purchase of Short term investments                           (1,000,000)            -              (1,000,000)
                                                                 -----------       ----------           ----------
       Net cash used in investing activities                     (1,003,000)            -              (1,016,000)
                                                                  ==========       ==========           ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceed from issuance of common stock and debt                     -                -                3,767,000
Payment of Notes                                                   (113,000)            -                (734,000)
Exercise of warrants, net                                          5,190,000            -                5,190,000
                                                                  ----------      ----------            ----------
    Net cash provided by financing activities                      5,077,000            -                8,223,000
                                                                  ==========      ==========            ==========
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   2,418,000       (813,000)             3,677,000
Cash and cash equivalents - beginning of period                    1,259,000       3,086,000                     0
                                                                  ----------      ----------            ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD                          3,677,000     $ 2,273,000      $      3,677,000
                                                                  ==========     ===========            ==========

SUPPLEMENTARY CASHFLOW INFORMATION:
INTEREST PAID:                                                  $    13,000         -             $        110,000
SUPPLEMENTARY NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Accrued salary exchanged for Note                                    -            -             $        150,000
  Employees/stockholders contribution of salary                        -            -             $        564,000
  Stockholders contribution of convertible note payable
          and related interest                                         -            -             $        280,000
  Conversion  of  carrying  value  of   convertible   notes
          payable and accrued interest into common stock        $   243,000      $ 1,029,000      $      1,815,000





                                             See Notes to Condensed Financial Statements.

</TABLE>




<PAGE>


                     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 Service  Center  ("TTU") (See Note E). 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 interim financial  statements  presented are unaudited but in the opinion of
management,   have  been  prepared  in  conformity  with  accounting  principles
generally accepted in the United States of America applied on a basis consistent
with those of the annual financial statements. Such interim financial statements
reflect all adjustments  (consisting of normal recurring accruals) necessary for
a fair presentation of the financial  position and the results of operations for
the interim periods presented. The results of operations for the interim periods
presented are not  necessarily  indicative of the results to be expected for the
full  fiscal  years.  The  interim  financial   statements  should  be  read  in
conjunction  with the audited  financial  statements for the year ended December
31, 2005.

The Company has incurred  cumulative losses of $7,151,000 for the period through
September 30, 2006,  and has been  dependent on funding  operations  through the
private sale of convertible debt and equity  securities.  At September 30, 2006,
the Company had $4,677,000 in cash, cash equivalents and short term investments.
Management  believes  that current cash  resources  will be  sufficient  to fund
operations for the next twelve months.  Management's plans include continuing to
finance  operations  through one or more  private or public  offerings of equity
securities and monitoring and reducing expenditures.

NOTE C -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1] 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 outstanding  shares subject to forfeiture issued to
a financial  services  consultant  during  September  2006, as described in Note
F[4].No  effect has been given to the  following  outstanding  potential  common
shares such as options,  warrants  and  convertible  instruments  in the diluted
computation as their effect would be antidilutive:

<TABLE>
<CAPTION>


                                               NINE MONTHS ENDED

                                                 SEPTEMBER 30,

                                               2006            2005
                                               ----            ----

        <S>                                <C>             <C>


        Options                            1,623,415       1,515,915
        Convertible notes                     -            2,647,080
        Warrants                           2,442,372       7,676,532
        Common shares
         subject to forfeiture             1,500,000          -
                                          -----------    -----------
        Total                              5,565,787      11,839,527

</TABLE>



[2] STOCK -BASED COMPENSATION:


Effective  January 1, 2006, the Company has adopted SFAS No. 123 (Revised 2004),
Share Based  Payment,  ("SFAS No.  123(R)")  which  requires a public  entity to
measure the cost of employee, officer and director services received in exchange
for an award of equity  instruments  based on the  grant-date  fair value of the
award. SFAS No. 123(R) supersedes the Company's  previous  accounting under SFAS
No.  123,  Accounting  for Stock  Based  Compensation  ("SFAS No.  123"),  which
permitted  the  Company  to  account  for  such  compensation  under  Accounting
Principles Board Opinion No. 25,  Accounting for Stock Issued to Employees ("APB
No. 25"). Pursuant to APB No. 25, and related  interpretations,  no compensation
cost had been  recognized in connection  with the issuance of stock options,  as
all options  granted under the Company's 2003 Stock  Option/Stock  Issuance Plan
(the  "Option  Plan") and all  options  granted  outside  the Option Plan had an
exercise  price  equal to or  greater  than the market  value of the  underlying
common stock on the date of grant. The Company adopted SFAS No. 123(R) using the
modified prospective transition method, which requires that compensation cost be
recorded as earned for all unvested  stock options  outstanding at the beginning
of the first  fiscal year of adoption  of SFAS No.  123(R)  based upon the grant
date fair value estimated in accordance with the original provisions of SFAS No.
123 and for compensation cost for all share-based payments granted subsequent to
the adoption,  based on the grant date fair value  estimated in accordance  with
the  provisions  of  SFAS  No.  123(R).  The  Company's  condensed  consolidated
financial  statements,  as of and for the nine months ended  September 30, 2006,
reflect  the  impact  of SFAS  No.  123(R).  In  accordance  with  the  modified
prospective  transition method, the Company's condensed  consolidated  financial
statements  for prior  periods  have not been  restated to  reflect,  and do not
include the impact of SFAS No. 123(R).

As a result of adopting  SFAS 123(R) on January 1, 2006,  the Company's net loss
for the three and nine months ended September 30, 2006, is $54,000 and $126,000,
respectively,  higher  than  if it had  continued  to  account  for  share-based
compensation under APB No. 25.

The following table illustrates the effect on net loss and loss per share if the
Company  had  applied the fair value  recognition  provisions  of SFAS 123(R) to
options  granted under the  Company's  stock option plans for the three and nine
months ended September 30, 2005. For purposes of this pro forma disclosure,  the
value of the options is estimated using a Black-Scholes  option-pricing  formula
and amortized to expense over the options' vesting periods:

<TABLE>
<CAPTION>

                                                      THREE             NINE
                                                      MONTHS            MONTHS
                                                      ENDED             ENDED
                                                   SEPTEMBER 30,     SEPTEMBER 30,
                                                       2005            2005
                                                   ------------     ------------
<S>                                                <C>             <C>

Net Loss, as reported                            $ (1,210,000)      $(2,860,000)

         Deduct: Stock-based employee
         compensation expense included
         in reported net income, net
         of related tax effects.                        -                -

         Add: Total stock-based employee
         compensation expense determined under
         fair value based method for all
         awards, net of related tax effects.          (15,000)          (42,000)
                                                     ----------       ----------
Pro Forma Net Loss                               $ (1,225,000)      $(2,902,000)
           Net loss per common share:
                       as reported               $       (.12)      $      (.28)
                       pro forma                 $       (.12)      $      (.28)

</TABLE>



The weighted-average fair values at date of grant for options granted during the
nine months  ended  September  30, 2005 was $0.77.  The value of the options was
estimated  using the  Black-Scholes  option  pricing  model  with the  following
weighted-average assumptions:

<TABLE>
<CAPTION>

                                                      NINE MONTHS ENDED
                                                        SEPTEMBER 30,
                                                            2005
                                                      ---------------
             <S>                                     <C>

             Expected life in years                        5-10
             Interest rate                             4.2% - 4.30%
             Volatility                                    80%
             Dividend yield                                 0%


</TABLE>


[3] 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.


<PAGE>


NOTE D -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>


                                    SEPTEMBER 30, 2006      DECEMBER 31, 2005
                                    -----------------       -----------------
        <S>                         <C>                     <C>

         Professional fees               $ 42,000               $288,000
         Liquidated damages                38,000                 40,000
         Insurance                         40,000                   -
         Other                               -                    32,000
                                       ------------           ------------
         Total                           $120,000               $360,000

</TABLE>

NOTE E -- AGREEMENTS WITH TEXAS TECH UNIVERSITY HEALTH SERVICE CENTER ("TTU")


On January 22, 2002,  the Company  entered into an exclusive  license  agreement
with TTU 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 TTU  (subject  to  anti-dilution  protection).  In
addition,  the Company has agreed to fund, over a four-year period, $1.2 million
to support  efforts in incubating and  commercializing  other TTU  technologies.
Under  the  agreement,  the  Company  reserves  the  right of first  refusal  on
licensing and commercializing  other technology developed from such funding. The
shares issued were valued at approximately  $1,000,  their estimated fair value,
and charged to  operations.  The  funding of the $1.2  million is subject to the
Company  obtaining FDA approval of a blood substitute  product.  As of September
30, 2006,  such  approval had not been  obtained.  In addition,  the Company has
agreed to  reimburse  TTU for all  intellectual  property  protection  costs and
patent  maintenance fees. On May 20, 2004, TTU 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,  in July 2002,  the  Company  entered  into a  sponsored  research
agreement  with TTU for the period  September 1, 2002  through  August 31, 2006,
subject to a two-year  extension to be mutually  agreed on by the parties in the
second year of the agreement  and prior to December 31, 2006.  The agreement may
be terminated by either party on 90 days written  notice.  In November 2004, the
Company  agreed  to fund the next  phase of its  research  under  the  sponsored
research  agreement  through  November 30, 2005 for a fixed fee of approximately
$231,000, which was paid in December 2004.

In January  2006,  the Company  entered  into a Stage Three  Sponsored  Research
Agreement  with TTU for the period  January 1, 2006,  to December 31,  2006.  In
connection  therewith,  the  Company  made an initial  payment of  approximately
$287,000 which is being  amortized  over the period of the research.  Additional
payments may be made to TTU under the  agreement  based on mutually  agreed upon
budgets.

NOTE F -- STOCKHOLDERS' EQUITY

[1] PRIVATE PLACEMENT:

On October 27,  2004,  the Company  completed a 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.

<TABLE>
<CAPTION>
       <S>                                      <C>

        Convertible notes payable                $   31,000
        Common stock                                 31,000
        Warrants                                     38,000
                                                  ------------
            Total                                $  100,000
</TABLE>

Based on the  allocation  of the relative  fair values to the  components of the
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.

At the time of the Company's  next  financing,  the Company will  determine if a
beneficial  conversion feature exists. The beneficial conversion feature will be
determined  by the  Company  by  comparing  the  number of shares  that would be
received  pursuant  to the  conversion  price at the time of the next  financing
compared  with the number that would have been  received  based on the then fair
value of the shares.  No beneficial  conversion  feature  existed at the date of
conversion  since the conversion  price was greater than the then share value of
the stock at issuance date of the Notes.

Through October 27, 2005, an aggregate of $1,540,000  principal  amount of Notes
and  approximately  $97,000 accrued but unpaid  interest  thereon were converted
into an  aggregate of  1,544,490  shares of the  Company's  common  stock,  at a
negotiated conversion price of $1.06 per share, in accordance with amendments to
the original terms of the Notes  permitting such conversion.  Effective  October
27,  2005,  holders of $337,000  aggregate  principal  amount of Notes agreed to
extend the maturity  date of such Notes from October 27, 2005 to April 27, 2006.
Accordingly,  the Company  paid the  remaining  outstanding  balance of $372,000
aggregate  principal  amount of Notes,  together with  approximately  $97,000 of
accrued interest thereon, to holders of Notes that had not converted their Notes
into shares of Company common stock on or prior to October 27, 2005.

For the period  January 1, 2006 through April 27, 2006, an aggregate of $225,000
principal amount of Notes and approximately  $18,000 accrued but unpaid interest
thereon were  converted  into an aggregate  of 142,812  shares of the  Company's
common stock,  at conversion  prices  ranging from $1.53 to $1.96 per share,  in
accordance  with  amendments to the original terms of the Notes  permitting such
conversion.   In  connection  therewith,   the  Company  recorded  a  charge  of
approximately  $43,000 as interest expense  representing the difference  between
the conversion price and the market price at date of conversion.

On April 27,  2006,  the  Company  paid the  remaining  outstanding  Notes in an
aggregate of $113,000  principal  amount and accrued but unpaid interest thereon
of approximately $13,000.


[2] STOCK WARRANTS

In connection with the private  placement,  the Company issued 5,294,162 Class A
warrants  exercisable  at $1.06 per share through the fifth  anniversary  of the
effectiveness of a registration statement of shares underlying the warrants. The
warrants were 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
$2.12 for a period of at least 20 consecutive trading days at a redemption price
of $.001 per warrant.

On June 12,  2006,  the  Company's  stock  price had been at least  $2.12 for 20
consecutive  trading  days.  On that date,  the Company  provided  notice of its
redemption of the Class A Warrant,  effective July 14, 2006, in accordance  with
the terms of the Class A Warrant.

Through July 14, 2006,  5,156,035 Class A Warrants were exercised at an exercise
price of $1.06 per  share,  and the  Company  received  net  proceeds  from such
exercises of  approximately  $5,190,000.  The  remaining  138,127  Warrants were
redeemed by the Company during July 2006 at a minimal cost.

In connection  with the private  placement,  the  placement  agent was granted a
warrant to purchase  2,382,372  shares of common  stock at an exercise  price of
$.90 per share ("Placement Agent Warrants"), exercisable for five years from the
effective date of a registration statement to be filed on behalf of investors in
the offering.  The placement agent was granted  "piggyback"  registration rights
with respect to the shares underlying this warrant.  The warrants are subject to
redemption,  at the  Company's  sole  option,  after  one year  from the date of
effectiveness  of the  registration  statement  covering the resale of shares of
common  stock  underlying  these  warrants if the common  stock price  equals or
exceeds  $2.12  for a period  of at  least 20  consecutive  trading  days,  at a
redemption price of $.001 per warrant.

During  the third  quarter  of 2005,  the  Company  granted  50,000  and  10,000
warrants,  respectively to two service providers.  In connection therewith,  the
Company  valued  the  warrants  using  Black-Scholes  option  pricing  model and
recorded a charge of $34,000.

At September 30, 2006, the Company had the following warrants outstanding:



<TABLE>
<CAPTION>

                                                                Number of Shares
                         Exercise Price   Expiration Date           Reserved
                        ---------------   ---------------        ---------------
        <S>             <C>               <C>                   <C>

        Placement Agent     .90              May 13, 2010           2,382,372
        Other              1.00             July 28, 2009              50,000
        Other              1.06        September 13, 2009              10,000
                                                                   ===========
        Total                                                       2,442,372

</TABLE>


[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.

Options  granted  are  exercisable  for a period of up to 10 years  from date of
grant at an  exercise  price which is not less than the fair value of the common
stock on date of grant,  except that the exercise period of options granted to a
stockholder owning more than 10% of the outstanding capital stock may not exceed
five years and their  exercise price may not be less than 110% of the fair value
of the common stock at date of grant.  Options  generally  vest 25% on the first
anniversary  date of the grant and then,  thereafter,  equally  over  thirty-six
months.

During the year ended December 31, 2004, in connection with the change in status
of an option  holder  from a member of the Board of Advisors  to  Director,  the
Company  recorded  deferred  stock  compensation  of $13,000,  representing  the
difference  between the  exercise  price and the market  value of the  Company's
common stock on the date such stock option holder's status was changed. Deferred
compensation  is  included  as a  component  of  stockholders'  equity  (capital
deficiency) and is being amortized to expense over the remaining  vesting period
of the stock options. Such amortization expenses were $3,000 for the nine months
ended September 30, 2006.

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,  HemoTechTM. 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
certain  vesting  through July 13, 2009.  In connection  therewith,  the Company
recorded a charge of $23,000 and $141,000  for the nine months  ended  September
30, 2006 and the full year 2005 respectively. The Company will record additional
charges as and when the options vest at the then fair value.

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 September  30, 2006,  1,505,753  options were  available  for grant under the
Plan. The following tables present  information  relating to stock options under
the Plan as of September 30, 2006.

<TABLE>
<CAPTION>

                                                                   NINE MONTHS ENDED
                                                                     SEPTEMBER 30,
                                                        2006                              2005
                                            -----------------------------      ------------------------
                                                                Weighted                        Weighted
                                                                 Average                         Average
                                                                 Exercise                        Exercise
                                                Shares           Price          Shares           Price
                                              ---------      ------------       ------          ----------
<S>                                         <C>            <C>                <C>             <C>

Options outstanding at beginning of
     period                                   1,535,915      $   0.29           1,119,387        $  0.23
Granted                                          87,500      $   1.78             396,528        $  0.40
                                            -------------                      -------------

Options outstanding at end of period          1,623,415       $  0.37           1,515,915        $  0.28
Options exercisable at end of period          1,305,639       $  0.37             962,600        $  0.26
                                            ------------                       -------------
Options not vested at end of period             317,776                           553,315
                                            ============                       =============
Options vested or expected to vest            1,623,415                         1,515,915


</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                                SEPTEMBER 30, 2006


                          OPTIONS OUTSTANDING                        OPTIONS EXCERCISABLE
                          -------------------                        --------------------

                                      WEIGHTED        WEIGHTED                  WEIGHTED
                                       AVERAGE         AVERAGE                  AVERAGE
     RANGE OF                         EXERCISE        REMAINING                 EXERCISE
  EXERCISE PRICE       SHARES          PRICE        LIFE IN YEARS     SHARES      PRICE
 ---------------     ---------    ---------------   --------------    ------    --------
<S>                   <C>         <C>              <C>             <C>        <C>

@$0.18 -  0.20        1,325,055          0.19           5.0         1,087,313       0.19

@$0.85 -  0.94          178,360          0.85           8.1           116,244       0.86

@$1.06 -  1.17           20,000          1.07           8.4            12,500       1.08

@$1.40 -  1.60           50,000          1.45           8.9            50,000       1.45

@$2.15 -  2.42           50,000          2.21           8.9            39,582       2.21

                      1,623,415        $ 0.37           5.6         1,305,639     $ 0.37
                      ==========      ========        ========      ==========    =======

Aggregate
intrinsic value     $ 1,707,482                                 $   1,381,419
                    =============                               =============
</TABLE>



As of September 30, 2006, there was $68,000 of total  unrecognized  compensation
cost  related  to  non-vested  employee  share-based  compensation  arrangements
granted  under  the  Plan.  That  cost  is  expected  to be  recognized  over  a
weighted-average period of 1.54 years.

The weighted-average fair values at date of grant for options granted during the
nine-month  period  ended  September  30,  2006 and 2005  were  $1.43  and $0.77
respectively.  The value of the options was  estimated  using the  Black-Scholes
option pricing model with the following weighted average assumptions:





<TABLE>
<CAPTION>

                                           2006                    2005
                                        -----------            -----------
<S>                                    <C>                    <C>

Expected life in years                      5-10                    5-10
Interest rate                          4.53% - 5.15%           4.2% - 4.30%
Volatility                                  80%                     80%
Dividend yield                              0%                       0%

</TABLE>

[4] STOCK ISSUED TO FINANCIAL ADVISOR

On September 12, 2006,  the Company  entered into a three year  agreement with a
financial advisor for consulting services related to corporate finance and other
financial services. The services which the financial advisor will perform, 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 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
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 recorded a $29,000 charge during the third quarter for
the estimated cost of those financial  services for the three-month period ended
September  30, 2006.  The Company will record an additional  expense  related to
this stock issuance as and when the  performance  criteria are met at the market
price of the stock.


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

PLAN OF OPERATIONS


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.  was merged  with and into
HemoBioTech, Inc., with HemoBioTech, Inc. as the surviving entity.

We are  primarily  engaged  in the  research  and  development  of  human  blood
substitute  technology  exclusively  licensed from Texas Tech University  Health
Services  Center,  although in 2003,  2004,  2005 and in the nine  months  ended
September 30, 2006,  most of our working capital was used to pay for general and
administrative  costs  including  salaries,  legal and  accounting  fees and the
continuation  of our sponsored  research  agreement with Texas Tech  University.
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 HemoTechTM, 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  HemoTechTM 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,  we entered into a sponsored  research  agreement  with Texas Tech in July
2002, under which we are entitled to use certain of Texas Tech's  production and
research and development facilities in Lubbock, Texas.

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).


RECENT DEVELOPMENTS

On September 12, 2006,  the Company  entered into a three year  agreement with a
financial advisor for consulting services related to corporate finance and other
financial services. The services which the financial advisor will perform, 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 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
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 recorded a $29,000 charge during the third quarter for
the estimated cost of those financial  services for the three-month period ended
September  30, 2006.  The Company will record an additional  expense  related to
this stock issuance as and when the  performance  criteria are met at the market
price of the stock.

Recent Accounting Pronouncements

In June 2006, the Financial  Accounting  Standards  Board  ("FASB")  issued FASB
Interpretation  No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes  - an
interpretation  of  FASB  Statement  No.  109"  (FIN  48),  which  prescribes  a
recognition  threshold and  measurement  attribute  for the financial  statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return.  FIN 48 also  provides  guidance on  derecognition,  classification,
interest  and  penalties,   accounting  in  interim   periods,   disclosure  and
transition.  FIN 48 is effective for fiscal years  beginning  after December 15,
2006.  We do not expect the adoption of FIN 48 to have a material  impact on our
financial  reporting,  and we are currently  evaluating the impact,  if any, the
adoption of FIN 48 will have on our disclosure requirements.

RESEARCH AND DEVELOPMENT OF HEMOTECHTM

HemoTechTM is currently our only potential product. We expect that the remaining
production,  development,  testing and FDA approval of HemoTechTM, if ever, will
occur over a period of approximately five to six years. In other words, assuming
we are able to progress  through each phase of clinical  trials  efficiently and
without significant delay, we believe we could obtain FDA approval of HemoTechTM
by 2011, and possibly even earlier,  although there is no guarantee that we will
meet this time table.

HemoTechTM  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:

 o   PRODUCTION OF HEMOTECHTM.  In order to produce  HemoTechTM for Phase I U.
     S.  clinical  trials,  we must  complete  certain  upgrades  of the current
     HemoTechTM  production  facilities located at Texas Tech. The initial stage
     of  these  upgrades  was  completed  during  the  second  quarter  of 2005.
     Additional  necessary  upgrades  are planned  for 2006.  A portion of these
     upgrades are contemplated by our Stage 3 Sponsored  Research Agreement with
     Texas Tech.  We paid  $287,000 to Texas Tech on January 12,  2006,  when we
     entered into our Stage 3 Sponsored Research  Agreement.  In addition to the
     upgrades contemplated in the Stage 3 Sponsored Research Agreement,  we plan
     to make additional  upgrades and  modifications to our existing  production
     facility and equipment.  These additional upgrades will be completed during
     2007,  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.

 o   PREPARATION AND SUBMISSION OF U.S. IND APPLICATION.  We started preparing
     our U.S. IND  application  on December  13, 2004,  when we entered into our
     Phase 2 sponsored  research  agreement  with Texas Tech.  Under our Phase 2
     sponsored  research  agreement,  Texas  Tech has  agreed  to  assist  us in
     preparing our U.S. IND application by providing certain services, including
     converting  information  contained  in the European  IND  application  into
     digital  format and  analyzing  our proposed  Phase I U.S.  clinical  trial
     testing procedures, to be set forth in our U.S. IND application. To further
     implement the preparation of the IND application, the Company had a Pre-IND
     meeting with the FDA on April 21, 2006.  As a result of that  meeting,  the
     company expects to submit the US IND during 2007 at a cost of approximately
     $2,000,000 or greater, although there can be no assurance that we will meet
     this deadline or budgeted amount.


 o   PHASE I OF OUR U.S.  CLINICAL  TRIALS.  A Phase I US  clinical  trial for
     HemoTechTM   will  commence   subsequent  to  the  acceptance  of  the  IND
     application.  We estimate that our Phase I clinical  trials  (including the
     costs of doing additional research and development of HemoTechTM 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:

 o   approximately $1.4 million for the production of HemoTechTM;

 o   approximately $1.6 million for the testing of HemoTechTM on humans;

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

 o   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;

 o   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 the initial  modification  of the  HemoTechTM  production
     facility in preparation for our Phase II U. S. 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  HemoTechTM  and the  availability  of patients.  We
estimate that we will be required to raise an additional approximately $6 - 10.0
million  over  the next  seventeen  months  in  order  to fund our  Phase I U.S.
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.

 o   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 HemoTechTM  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:

 o   approximately  $4.0 million for  additional  upgrades to the  HemoTechTM
     production facility and the further production of HemoTechTM;

 o   approximately  $4.0 million for the further  testing of  HemoTechTM  and
     related activities;

 o   approximately $4.5 million for personnel, administrative, and operational
     expenses that we expect to incur during our Phase II U. S. clinical trials;

 o   approximately $2.5 million for legal, accounting,  consulting , technical
     and other  professional fees that we expect to incur during our Phase II U.
     S. clinical trials; and

 o   approximately  $2.5 million for research and  development  costs that we
     expect to incur during our Phase II U. S. clinical trials.

We expect that our Phase II U. S.  clinical  trials  could be  completed  within
approximately  eight to ten months  from the date we start such  trials,  though
such trials could take significantly longer to finish, depending on, among other
things, the timely completion of necessary upgrades to the HemoTechTM production
facility and the availability of patients.  If commencement or completion of our
Phase I U. S. clinical trials are delayed for any reason, or if we are unable to
raise sufficient  funds to begin our Phase II U. S. clinical trials  immediately
following  completion of our Phase I U. S. clinical  trials,  our Phase II U. S.
clinical trials will be delayed.

 o   Phase III of our U.S.  Clinical  Trials. A Phase III Clinical trial could
     commence  subsequent to a successful  Phase II trial.  At such time, and in
     order to cut the costs of  conducting  and  completing  our Phase III U. S.
     clinical  trials by  approximately  50%, 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 HemoTechTM, 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
     HemoTechTM  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 HemoTechTM  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:


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


 o   approximately  $70.0 million for the further  testing of HemoTechTM  and
     related activities;

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

 o   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

 o   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
15-18 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 HemoTechTM 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 is 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 five
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.

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 by 2011,
and possibly even earlier,  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  HemoTechTM  has
received FDA approval, if ever.

RESULTS OF OPERATIONS


We are a  development  stage  company and have not  generated  any revenue  from
inception through September 30, 2006. Until the consummation of our October 2004
private  placement,  we did not have the  financial  resources  to engage in any
significant  research and  development  activities.  Warrant  exercises  for the
period  January  1,  2006  through  July  14,  2006  provided  net  proceeds  of
approximately  $5,190,000  and  enabled  us to engage in  certain  research  and
development activities in addition to funding our general operations.

Total  expenses,  and thus our losses,  totaled  $7,151,000 from October 3, 2001
(inception)  through September 30, 2006. Such losses included  $3,454,000 during
2005, and $1,586,000 for the nine months ended September 30, 2006.

THREE MONTHS ENDED  SEPTEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 2005

Total  expenses,  and thus our losses,  for the three months ended September 30,
2006,  were  $484,000  compared with  $1,210,000  for the same period a year ago
resulting from  significantly  lower interest costs and somewhat lower operating
expenses.

Net interest costs were  approximately  $589,000 lower due to  amortizations  of
debt issue and debt discount ($269,000 and $238,000 respectively) costs incurred
during the three  months of 2005 that did not repeat in the 2006  period.  Total
amortization of these costs was completed  during 2005.  Interest costs relating
to our 10% Convertible  Promissory  Notes was $0 for the 2006 period compared to
$47,000 in the previous  year as these notes were either  converted  into common
stock or paid by April  2006.  (See  Liquidity  and  Capital  Resources  below).
Interest  income for the current  period  includes  $48,000 earned from cash and
cash equivalents.

General  and  Administrative  costs were  $398,000  for the three  months  ended
September 30, 2006, a decrease of $121,000  compared with the same period in the
prior  year.  This  decrease  results  from  lower  professional  fees more than
offsetting higher  compensation  costs from our adoption of SFAS 123(R),  "stock
based compensation" resulting in a charge to general and administrative expenses
of  approximately  $35,000,  and  increased  salary and  related  costs.  Higher
professional  fees  in the  prior  year  resulted  from  the  completion  of the
company's SB-2 registration during 2005.

Research and Development  expenses were $134,000 for the 2006 period, a decrease
of $16,000  compared  with the same period in 2005.  The 2005 period  includes a
charge  related to stock based  compensation  granted our  consultant and acting
Vice President and Principal Investigator of Research and Development that had a
fair value of $115,000.  Excluding this charge, the current period expenses were
higher due to increased regulatory  consultant costs and increased  amortization
of our Sponsored  Research  Agreement with Texas Tech University during the 2006
period. In addition,  stock-based  compensation  related to the adoption of SFAS
123(R) included $19,000 in the three months ended September 30, 2006.

NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2005

Total  expenses,  and thus our losses,  for the nine months ended  September 30,
2006,  were  $1,586,000  compared with $2,860,000 for the same period a year ago
resulting from  significantly  lower interest  costs,  offset by somewhat higher
general administrative and research costs.

Net interest costs were  approximately  $1,590,000 lower due to amortizations of
debt issue and debt discount ($662,000 and $781,000 respectively) costs incurred
during  the first nine  months of 2005 that did not  repeat in the 2006  period.
Total  amortization  of these costs was completed  during 2005.  Interest  costs
relating to our 10% Convertible  Promissory  Notes was lower for the 2006 period
as all notes were either  converted to common stock or paid by April 2006.  (See
Liquidity  and  Capital  Resources  below).  Interest  cost for the 2006  period
includes a conversion  charge of $43,000 related to $225,000  principal value of
those notes converted during the first four months of 2006, which represents the
difference  between  the  conversion  price and the market  price at the date of
conversion.  Interest  income was  $89,000  for the 2006  period  compared  with
$40,000 for the same period last year  resulting  from  increased  cash and cash
equivalents and a slightly higher interest rate.

General and  Administrative  costs were  $1,210,000  for the nine  months  ended
September 30, 2006, an increase of $130,000 compared with the same period in the
prior year. This increase results from our adoption of SFAS 123(R), "stock based
compensation"  resulting in a charge to general and  administrative  expenses of
approximately $122,000, increased salary and related costs of $135,000, combined
with higher office expenses more than offsetting  lower  professional  fees when
compared with costs of the prior year.

Research and Development expenses were $412,000 for the 2006 period, an increase
of $186,000  compared with the same period in 2005.  This increase  results from
significantly  higher regulatory  consulting costs and amortization of our Stage
Three  Sponsored  Research  Agreement with Texas Tech University The 2005 period
includes a charge related to stock based compensation granted our consultant and
acting Vice  President and Principal  Investigator  of Research and  Development
that had a fair value of $115,000. In addition, stock-based compensation related
to the  adoption  of SFAS  123(R)  included  $4,000  in the  nine  months  ended
September 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES


In October  2004,  we  completed a private  placement  of units,  with each unit
consisting of one 10%  convertible  unsecured  promissory  note in the principal
amount of $50,000; 58,824 shares of our common stock; and a five-year warrant to
purchase  117,648  shares of our common stock at an exercise  price of $1.06 per
share.  We sold 45 units in the private  placement  at a price of  $100,000  per
unit,  and we received  gross  proceeds of $4.5  million.  Our net proceeds were
$3.43 million.

During the period of August 2005 through  April 2006, an aggregate of $1,765,000
principal  amount of our notes and  $115,000 of accrued but unpaid  interest was
converted  into  an  aggregate  of  1,687,301  shares  of our  common  stock  at
negotiated  conversion  prices  ranging  from  $1.06 to  $1.96  per  share.  The
inducement  feature  corresponding with the conversion of the $225,000 principal
value was $43,000.

Through July 14, 2006,  5,156,000 Class A Warrants were exercised at an exercise
price of $1.06 per  share,  and the  Company  received  net  proceeds  from such
exercises of approximately $5,190,000.

We intend to use our available cash, cash equivalents and short term investments
(of which there is approximately $4,677,000 remaining as of September 30, 2006),
over the next twelve months to pay for the following costs and expenditures:

 o   preparation of our U.S. IND application,  related laboratory testing, and
     submission to the FDA; and

 o   additional  upgrades to HemoTechTM  production facility and initiation of
     production of HemoTechTM for clinical trials.

 o   our general administrative expenses (including salaries,  legal and other
     professional  fees,  consulting and advisory fees, and to pay for the costs
     associated with raising additional capital);

We believe the cash, cash equivalents and short term investments available to us
at September  30, 2006 will be sufficient  to conduct the  activities  described
above  through  the  next  twelve  months.  In  order to  complete  our  planned
operations and clinical trials we will need to raise an additional approximately
$6-10  million  within  the next  seventeen  months,  although  there  can be no
assurance that we can meet this timeframe.

ITEM 3. 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-QSB,  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-QSB,  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-QSB,  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.


<PAGE>


PART II --OTHER INFORMATION


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



ITEM 6. EXHIBITS


31.1 Certification of Principal  Executive Officer required under Rule 13a-14(a)
or Rule under 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-QSB 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.


<PAGE>

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.

 Dated: November 8, 2006           By: /s/ Arthur P. Bollon, Ph.D.

                                   Dr. Arthur P. Bollon- Chairman of the
                                   Board and Chief Executive Officer
                                   (PRINCIPAL EXECUTIVE OFFICER)


 Dated: November 8,  2006          By: /s/ Mark J. Rosenblum

                                   Mark J. Rosenblum - Chief Financial Officer
                                   and Secretary
                                   (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)


<PAGE>

EXHIBIT INDEX


31.1    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-QSB 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.