**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-KSB**
 **(MARK
        ONE)**
 
 x
              **ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934**
 
 **For
        the fiscal year ended December 31, 2005**
 
 o
              **TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
 
 **For
        the transition period from to**
 
 **Commission
        file number** **000-51065**
 
 **MILLSTREAM
                  II ACQUISITION CORPORATION****(Name
                  of small business issuer in its
                  charter)**
 
 **Delaware**
              
              
              **20-1665695**(State
                  or other jurisdiction of incorporation or organization)
              
              
              (I.R.S.
                  Employer Identification No.)
 
 **435
                  Devon Park Drive, Bldg. 400, Wayne, PA**
              **19087**(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 **Issuer’s
        telephone number: (610) 975-4909**
 
 **Securities
        registered under Section 12(b) of the Exchange Act: None**
 
 **Securities
        registered under Section 12(g) of the Exchange Act:**
 
 **Units
        consisting of one share of Common Stock,**
 **par
        value $.0001 per share, and two Warrants**
 
 **Common
        Stock, par value $.0001 per share**
 
 **Warrants
        to purchase shares of Common Stock**
 (Title
        of
        Class)
  Check
        whether the issuer is not required to file
        reports pursuant to Section 13 or 15(d) of the Exchange Act o
 
 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 o









Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.  x





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





State
      issuer’s revenues for its most recent fiscal year: None





State
      the
      aggregate market value of voting and non-voting common equity held by
      non-affiliates of registrant based upon the average bid and asked sale price
      on
      March 24, 2006: $26,734,710





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 5,600,000 as of March 24, 2006





**DOCUMENTS
      INCORPORATED BY REFERENCE**





None.





Transitional
      Small Business Disclosure Format (Check one): Yes o No x









***CAUTIONARY
      STATEMENT FOR FORWARD-LOOKING STATEMENTS***





*This
      Annual Report on Form 10-KSB includes forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. We have based these
      forward-looking statements on our current expectations and projections about
      future events. These forward-looking statements are subject to known and unknown
      risks, uncertainties and assumptions about us that may cause our actual results,
      levels of activity, performance or achievements to be materially different
      from
      any future results, levels of activity, performance or achievements expressed
      or
      implied by such forward-looking statements. In some cases, you can identify
      forward-looking statements by terminology such as "may," "will," "should,"
      "could," "would," "expect," "plan," "anticipate," "believe," "estimate,"
      "continue," or the negative of such terms or other similar expressions. Factors
      that might cause or contribute to such a discrepancy include, but are not
      limited to, those described in this Annual Report on Form 10-KSB and in our
      other Securities and Exchange Commission filings.*





**PART
      I**


**Item
      1. Description of Business** **.**




**Introduction**




We
      are a
      blank check company formed to serve as a vehicle for the acquisition of an
      operating business. We were incorporated in Delaware on September 24, 2004.
      The registration statement for our initial public offering ("the Offering")
      was
      declared effective December 17, 2004. On December 23, 2004, we sold 4,100,000
      units in the Offering and on December 30, 2004, we sold 500,000 units in the
      Offering. The total units sold of 4,600,000 includes all of the 600,000 units
      subject to the underwriters’ overallotment option. Each of our units consists of
      one share of our common stock, $.0001 par value per share, and two redeemable
      common stock purchase warrants. Each warrant entitles the holder to purchase
      from us one share of common stock at an exercise price of $5.00. We received
      net
      proceeds of approximately $24,691,000 from the Offering.




Our
      management has broad discretion with respect to the specific application of
      the
      net proceeds of the Offering and, as a result, the Offering was characterized
      as
      a blank check offering. $23,736,000 of these net proceeds has been placed in
      a
      trust account and invested in United States government securities. The funds
      held in the trust account will not be released until the earlier of the date
      on
      which we consummate a business combination or liquidate our assets.




**Effecting
      a business combination**




*General*




We
      are
      not presently engaged in, and we will not engage in, any substantive commercial
      business until we consummate a business combination. We intend to utilize cash
      derived from the proceeds of the Offering, our capital stock, debt or a
      combination of these in effecting a business combination. Although substantially
      all of the net proceeds of the Offering are intended to be generally applied
      toward effecting a business combination, the proceeds are not otherwise being
      designated for any more specific purposes. A business combination may involve
      the acquisition of, or merger with, a company which does not need substantial
      additional capital but which desires to establish a public trading market for
      its shares, while avoiding what it may deem to be adverse consequences of
      undertaking a public offering itself. These include time delays, significant
      expense, loss of voting control and compliance with various Federal and state
      securities laws. In the alternative, a business combination may involve a
      company which may be financially unstable or in its early stages of development
      or growth. While we may seek to effect business combinations with more than
      one
      target business, we will probably have the ability, as a result of our limited
      resources, to effect only a single business combination.




1




*We
      have not identified a target business or target industry*




To
      date,
      we have not selected any target business or target industry on which to
      concentrate our search for a business combination. Subject to the limitations
      that a target business have a fair market value of at least 80% of our net
      assets at the time of the acquisition, as described below in more detail, we
      have virtually unrestricted flexibility in identifying and selecting a
      prospective acquisition candidate. Accordingly, there is no basis to evaluate the possible merits or risks of
      the
      target business with which we may ultimately complete a business combination.
      To
      the extent we effect a business combination with a financially unstable company
      or an entity in its early stage of development or growth, including entities
      without established records of sales or earnings, we may be affected by numerous
      risks inherent in the business and operations of financially unstable and early
      stage or potential emerging growth companies. Although our management will
      endeavor to evaluate the risks inherent in a particular target business, we
      cannot assure you that we will properly ascertain or assess all significant
      risk
      factors.




*Sources
      of target businesses*




We
      anticipate that target business candidates will be brought to our attention
      from
      various unaffiliated sources, including investment bankers, venture capital
      funds, private equity funds, leveraged buyout funds, management buyout funds
      and
      other members of the financial community, who may present solicited or
      unsolicited proposals. Our officers and directors as well as their affiliates
      may also bring to our attention target business candidates. While we do not
      presently anticipate engaging the services of professional firms that specialize
      in business acquisitions on any formal basis, we may engage these firms in
      the
      future, in which event we may pay a finders fee or other compensation. In no
      event, however, will we pay any of our initial officers, directors or
      stockholders (collectively, our “Founders”) or any entity with which they are
      affiliated any finders fee or other compensation for services rendered to us
      prior to or in connection with the consummation of a business combination.




*Selection
      of a target business and structuring of a business combination*




Subject
      to the requirement that our initial business combination must be with a target
      business with a fair market value that is at least 80% of our net assets at
      the
      time of such acquisition, our management has virtually unrestricted flexibility
      in identifying and selecting a prospective target business. In evaluating a
      prospective target business, our management considers, among other factors,
      the
      following:




·
            financial
                condition and results of
                operations;




·
            growth
                potential;




·
            experience
                and skill of management and availability of additional
                personnel;




·
            capital
                requirements;




·
            competitive
                position;




2




·
              barriers
                  to entry in other industries;
  ·
              stage
                  of development of the products, processes or
                  services;
  ·
              degree
                  of current or potential market acceptance of the products, processes
                  or
                  services;
  ·
              proprietary
                  features and degree of intellectual property or other protection
                  of the
                  products, processes or services;
  ·
              regulatory
                  environment of the industry; and
  ·
              costs
                  associated with effecting the business
                  combination.
  These
        criteria are not intended to be exhaustive. Any evaluation relating to the
        merits of a particular business combination will be based, to the extent
        relevant, on the above factors as well as other considerations deemed relevant
        by our management in effecting a business combination consistent with our
        business objective. In evaluating prospective target businesses, we conduct
        extensive due diligence reviews encompassing, among other things, meetings
        with
        incumbent management and inspection of facilities, as well as review of
        financial and other information which is made available to us.
  The
        time
        and costs required to select and evaluate a target business and to structure
        and
        complete the business combination cannot presently be ascertained with any
        degree of certainty. Any costs incurred with respect to the identification
        and
        evaluation of a prospective target business with which a business combination
        is
        not ultimately completed will result in a loss to us and reduce the amount
        of
        capital available to otherwise complete a business combination.
  *Fair
        Market Value of Target Business*
  The
        initial target business that we acquire must have a fair market value equal
        to
        at least 80% of our net assets at the time of such acquisition. The fair
        market
        value of such business will be determined by our board of directors based
        upon
        standards generally accepted by the financial community, such as actual and
        potential sales, earnings and cash flow and book value. If our board is not
        able
        to independently determine that the target business has a sufficient fair
        market
        value, we will obtain an opinion from an unaffiliated, independent investment
        banking firm which is a member of the National Association of Securities
        Dealers, Inc. with respect to the satisfaction of such criteria. We will
        not be
        required to obtain an opinion from an investment banking firm as to the fair
        market value if our board of directors independently determines that the
        target
        business has sufficient fair market value.
  *Probable
        lack of business diversification*
  While
        we
        may seek to effect business combinations with more than one target business,
        our
        initial business combination must be with a target business which satisfies
        the
        minimum valuation standard at the time of such acquisition, as discussed
        above.
        Consequently, it is probable that we will have the ability to effect only
        a
        single business combination. Accordingly, the prospects for our success may
        be
        entirely dependent upon the future performance of a single business. Unlike
        other entities which may have the resources to complete several business
        combinations of entities operating in multiple industries or multiple areas
        of a
        single industry, it is probable that we will not have the resources to diversify
        our operations or benefit from the possible spreading of risks or offsetting
        of
        losses. By consummating a business combination with only a single entity,
        our
        lack of diversification may:
  3
  ·
                subject
                    us to numerous economic, competitive and regulatory developments,
                    any or
                    all of which may have a substantial adverse impact upon the particular
                    industry in which we may operate subsequent to a business combination,
                    and
  ·
                result
                    in our dependency upon the development or market acceptance of
                    a single or
                    limited number of products, processes or services.
 *Limited
        ability to evaluate the target business’ management*
  Although
        we intend to closely scrutinize the management of a prospective target business
        when evaluating the desirability of effecting a business combination, we
        cannot
        assure you that our assessment of the target business’ management will prove to
        be correct. In addition, we cannot assure you that the future management
        will
        have the necessary skills, qualifications or abilities to manage a public
        company. Furthermore, the future role of our officers and directors, if any,
        in
        the target business cannot presently be stated with any certainty. While
        it is
        possible that one or more of our directors will remain associated in some
        capacity with us following a business combination, it is unlikely that any
        of
        them will devote their full efforts to our affairs subsequent to a business
        combination. Moreover, we cannot assure you that our officers and directors
        will
        have significant experience or knowledge relating to the operations of the
        particular target business.
  Following
        a business combination, we may seek to recruit additional managers to supplement
        the incumbent management of the target business. We cannot assure you that
        we
        will have the ability to recruit additional managers, or that additional
        managers will have the requisite skills, knowledge or experience necessary
        to
        enhance the incumbent management.
  *Opportunity
        for stockholder approval of business combination*
  Prior
        to
        the completion of a business combination, we will submit the transaction
        to our
        stockholders for approval, even if the nature of the acquisition is such
        as
        would not ordinarily require stockholder approval under applicable state
        law. In
        connection with seeking stockholder approval of a business combination, we
        will
        furnish our stockholders with proxy solicitation materials prepared in
        accordance with the Securities Exchange Act of 1934, which, among other matters,
        will include a description of the operations of the target business and audited
        historical financial statements of the business.
  In
        connection with the vote required for any business combination, all of our
        Founders have agreed to vote their 1,000,000 shares of common stock (“Founder
        Shares”) in accordance with the majority of the shares of common stock voted by
        the public stockholders. This voting arrangement shall not apply to shares
        included in units purchased in the Offering or purchased following the Offering
        in the open market by any of our initial stockholders, officers and directors.
        We will proceed with the business combination only if a majority of the shares
        of common stock voted by the public stockholders are voted in favor of the
        business combination and public stockholders owning less than 20% of the
        shares
        sold in the Offering exercise their conversion rights.
  *Conversion
        rights*
  At
        the
        time we seek stockholder approval of any business combination, we will offer
        each public stockholder the right to have such stockholder’s share of common
        stock converted to cash if the stockholder votes against the business
        combination and the business combination is approved and completed. The actual
        per-share conversion price will be equal to the amount in the trust account,
        inclusive of any interest (calculated as of two business days prior to the
        consummation of the proposed business combination), divided by the number
        of
        shares sold in the Offering. As of December 31, 2005, the per-share conversion
        price would have been $5.31. An eligible stockholder may request conversion
        at
        any time after the mailing to our stockholders of the proxy statement and
        prior
        to the vote taken with respect to a proposed business combination at a meeting
        held for that purpose, but the request will not be granted unless the
        stockholder votes against the business combination and the business combination
        is approved and completed. Any request for conversion, once made, may be
        withdrawn at any time up to the date of the meeting. It is anticipated that
        the
        funds to be distributed to stockholders entitled to convert their shares
        who
        elect conversion will be distributed promptly after completion of a business
        combination. Public stockholders who convert their stock into their share
        of the
        trust account still have the right to exercise the warrants that they received
        as part of the units. We will not complete any business combination if public
        stockholders, owning 20% or more of the shares sold in this offering, exercise
        their conversion rights.
  4
  *Liquidation
        if no business combination*
   If
        we do
        not complete a business combination within 18 months after the completion
        of the
        Offering (June 23, 2006), or within 24 months (December 23, 2006) if the
        extension criteria described below have been satisfied, we will be dissolved
        and
        will distribute to all of our public stockholders, in proportion to their
        respective equity interests, an aggregate sum equal to the amount in the
        trust
        account, inclusive of any interest, plus any remaining net assets. The Founders
        have waived their rights to participate in any liquidation distribution with
        respect to their Founder Shares. There will be no distribution from the trust
        account with respect to our warrants which will expire worthless.
  If
        we
        were to expend all of the net proceeds of the Offering, other than the proceeds
        deposited in the trust account, and without taking into account interest,
        if
        any, earned on the trust account, the initial per-share liquidation price
        would
        be $5.31. The proceeds deposited in the trust account could, however, become
        subject to the claims of our creditors, which could rank prior to the claims
        of
        our public stockholders. We cannot assure you that the actual per-share
        liquidation price will not be less than $5.31, plus interest, due to claims
        of
        creditors. Arthur
        Spector, our chairman of the board, chief executive officer and president,
        has
        agreed pursuant to agreements with us and EarlyBirdCapital that, if we
        distribute the proceeds held in the trust account to our public stockholders,
        he will be
        personally liable to pay debts and obligations to vendors
        or other entities that are owed money by us for services rendered or products
        sold to us to the
        extent they have claims against the funds in our trust account. We cannot
        assure
        you, however, that Mr. Spector would be able to satisfy those
        obligations.
  If
        we
        enter into either a letter of intent, an agreement in principle or a definitive
        agreement to complete a business combination prior to the expiration of 18
        months (June 23, 2006) after the completion of the Offering, but are unable
        to
        complete the business combination within the 18-month period, then we will
        have
        an additional six months (December 23, 2006) in which to complete the business
        combination contemplated by the letter of intent, agreement in principle
        or
        definitive agreement. If we are unable to do so within 24 months following
        the
        completion of the Offering, we will then liquidate. Upon notice from us,
        the
        trustee of the trust account will commence liquidating the investments
        constituting the trust account and will turn over the proceeds to our transfer
        agent for distribution to our stockholders. We anticipate that our instruction
        to the trustee would be given promptly after the expiration of the applicable
        18-month or 24-month period.
  5
 Our
        public stockholders will be entitled to receive funds from the trust account
        only in the event of our liquidation upon the failure to consummate a business
        combination within the allotted time or if the stockholders seek to convert
        their respective shares into cash upon a business combination which the
        stockholder voted against and which is completed by us. In no other
        circumstances will a stockholder have any right or interest of any kind to
        or in
        the trust account.
  **Competition**
  In
        identifying, evaluating and selecting a target business, we may encounter
        intense competition from other entities having a business objective similar
        to
        ours. There are numerous blank check companies that have completed initial
        public offerings that are seeking to carry out a business plan similar to
        our
        business plan. Additionally, we may be subject to competition from other
        companies looking to expand their operations through the acquisition of a
        target
        business. Many of these entities are well established and have extensive
        experience identifying and effecting business combinations directly or through
        affiliates. Many of these competitors possess greater technical, human and
        other
        resources than us and our financial resources will be relatively limited
        when
        contrasted with those of many of these competitors. While we believe there
        may
        be numerous potential target businesses that we could acquire, our ability
        to
        compete in acquiring certain sizable target businesses will be limited by
        our
        available financial resources. This inherent competitive limitation gives
        others
        an advantage in pursuing the acquisition of a target business.
        Further:
 ·
                our
                    obligation to seek stockholder approval of a business combination
                    may
                    delay the completion of a
                    transaction;
  ·
                our
                    obligation to convert into cash shares of common stock held by
                    our public
                    stockholders in certain instances may reduce the resources available
                    to us
                    for a business combination; and
  ·
                our
                    outstanding warrants and options, and the future dilution they
                    potentially
                    represent, may not be viewed favorably by certain target businesses.
 Any
        of
        these factors may place us at a competitive disadvantage in successfully
        negotiating a business combination. Our management believes, however, that
        our
        status as a public entity and potential access to the United States public
        equity markets may give us a competitive advantage over privately-held entities
        having a similar business objective as ours in acquiring a target business
        with
        significant growth potential on favorable terms.
  If
        we
        succeed in effecting a business combination, there will be, in all likelihood,
        intense competition from competitors of the target business. We cannot assure
        you that, subsequent to a business combination, we will have the resources
        or
        ability to compete effectively.
  **Employees**
  We
        have
        four directors and one executive officer. These individuals are not obligated
        to
        devote any specific number of hours to our matters and intend to devote only
        as
        much time as they deem necessary to our affairs. The amount of time they
        will
        devote in any time period will vary based on the availability of suitable
        target
        businesses to investigate, although we expect Mr. Spector to devote an average
        of approximately ten hours per week to our business. We do not intend to
        have
        any full time employees prior to the consummation of a business combination.
  6


**Risks
      associated with our business**





In
      addition to other information included in this report, the following factors
      should be considered in evaluating our business and future
      prospects.





***We
      are a development stage company with no operating history and very limited
      resources.***





We
      are a
      recently incorporated development stage company with no operating results to
      date. Since we do not have an operating history, you will have no basis upon
      which to evaluate our ability to achieve our business objective, which is to
      acquire an unidentified operating business. We will not generate any revenues
      until, at the earliest, after the consummation of a business
      combination.





***If
      third parties bring claims against us, the proceeds held in trust could be
      reduced and the per-share liquidation price received by stockholders will be
      less than $5.31 per share.***





Our
      placing of funds in trust may not protect those funds from third party claims
      against us. The proceeds held in trust could be subject to claims which could
      take priority over the claims of our public stockholders. We cannot assure
      you
      that the per-share liquidation price will not be less than $5.31 per share
      due
      to claims of creditors. If we liquidate before the completion of a business
      combination, Arthur Spector, our chairman of the board, chief executive officer
      and president, will be personally liable under certain circumstances to ensure
      that the proceeds in the trust fund are not reduced by the claims of various
      vendors or other entities that are owed money by us for services rendered or
      products sold to us, or to any target businesses. However, we cannot assure
      you
      that Mr. Spector will be able to satisfy those obligations. Furthermore, even
      after our liquidation (including the distribution of the monies then held in
      the
      trust account), under the Delaware General Corporation Law, stockholders may
      be
      held liable for claims by third parties against a corporation to the extent
      of
      distributions received by them in a dissolution. Accordingly, we cannot assure
      you that third parties will not seek to recover from our stockholders amounts
      owed to them by us.





***Because
      there are numerous companies with a business plan similar to ours seeking to
      effectuate a business combination, it may be more difficult for us to do so.***





There
      are
      numerous similarly structured blank check companies have completed initial
      public offerings in the United States with business plans similar to ours and
      there are a number of additional offerings for blank check companies that are
      still in the registration process but have not completed initial public
      offerings. While some of those companies must complete a business combination
      in
      specific industries, a number of them may consummate a business combination
      in
      any industry they choose. Therefore, we may be subject to competition from
      these
      and other companies seeking to consummate a business plan similar to ours.
      Because of this competition, we cannot assure you that we will be able to
      effectuate a business combination within the required time periods.





***Since
      we have not currently selected any target business or target industry with
      which
      to complete a business combination, we are unable to currently ascertain the
      merits or risks of the business’ operations.***





Since
      we
      have not yet identified a prospective target business or target industry, there
      is no basis for investors to evaluate the possible merits or risks of the target
      business’ operations or industry. To the extent we complete a business
      combination with a financially unstable company or an entity in its development
      stage, we may be affected by numerous risks inherent in the business operations
      of those entities. Although our management will endeavor to evaluate the risks
      inherent in a particular target business or industry, we cannot assure you
      that
      we will properly ascertain or assess all of the significant risk factors. We
      also cannot assure you that an investment in our securities will not ultimately
      prove to be less favorable than a direct investment, if an opportunity were
      available, in a target business.





7


***We
      may issue shares of our common stock and preferred stock to complete a business
      combination, which would reduce the equity interest of our stockholders and
      likely cause a change in control of our ownership.***





Our
      certificate of incorporation authorizes the issuance of up to 15,000,000 shares
      of common stock, par value $.0001 per share, and 1,000,000 shares of preferred
      stock, par value $.0001 per share. We currently do not have any further
      authorized but unissued shares of our common stock available for issuance (after
      appropriate reservation for the issuance of shares upon full exercise of our
      outstanding warrants and options). All of the 1,000,000 shares of preferred
      stock are available for issuance. Although we currently have no commitments
      to
      issue our securities, we will, in all likelihood, issue a substantial number
      of
      additional shares of our common stock or preferred stock, or a combination
      of
      common and preferred stock, to complete a business combination. The issuance
      of
      additional shares of our common stock or any number of shares of our preferred
      stock:





•  may
      significantly reduce the equity interest of stockholders;





•  will
      likely cause a change in control if a substantial number of our shares of common
      stock are issued, which may affect, among other things, our ability to use
      our
      net operating loss carry forwards, if any, and most likely also result in the
      resignation or removal of our present officers and directors; and





•  may
      adversely affect prevailing market prices for our common stock.





Similarly,
      if we issue debt securities, it could result in:





•  default
      and foreclosure on our assets if our operating revenues after a business
      combination were insufficient to pay our debt obligations;





•  acceleration
      of our obligations to repay the indebtedness even if we have made all principal
      and interest payments when due if the debt security contains covenants that
      require the maintenance of certain financial ratios or reserves and any such
      covenant is breached without a waiver or renegotiation of that
      covenant;





•  our
      immediate payment of all principal and accrued interest, if any, if the debt
      security is payable on demand; and





•  our
      inability to obtain additional financing, if necessary, if the debt security
      contains covenants restricting our ability to obtain additional financing while
      such security is outstanding.





***The
      ability of our stockholders to exercise their conversion rights may not allow
      us
      to effectuate the most desirable business combination or optimize our capital
      structure.***





When
      we
      seek stockholder approval of any business combination, we will offer each public
      stockholder the right to have his, her or its shares of common stock converted
      to cash if the stockholder votes against the business combination and the
      business combination is approved and completed. Such holder must both vote
      against such business combination and then exercise his, her or its conversion
      rights to receive a pro rata portion of the trust account. Accordingly, if
      our
      business combination requires us to use substantially all of our cash to pay
      the
      purchase price, because we will not know how many stockholders may exercise
      such
      conversion rights, we may either need to reserve part of the trust account
      for
      possible payment upon such conversion, or we may need to arrange third party
      financing to help fund our business combination in case a larger percentage
      of
      stockholders exercise their conversion rights than we expect. Therefore, we
      may
      not be able to consummate a business combination that requires us to use all
      of
      the funds held in the trust account as part of the purchase price, or we may
      end
      up having a leverage ratio that is not optimal for our business combination.
      This may limit our ability to effectuate the most attractive business
      combination available to us.





8


***It
      is likely that our current officers and directors will resign upon consummation
      of a business combination and we will have only limited ability to evaluate
      the
      management of the target business.***





Our
      ability to successfully effect a business combination will be totally dependent
      upon the efforts of our key personnel. The future role of our key personnel
      in
      the target business, however, cannot presently be ascertained. Although it
      is
      possible that some of our key personnel will remain associated in various
      capacities with the target business following a business combination, it is
      likely that the management of the target business at the time of the business
      combination will remain in place. Moreover,
      our key personnel will be able to remain with the company after the consummation
      of a business combination only if they are able to negotiate employment or
      consulting agreements in connection with the business combination, the terms
      of
      which, including the compensation to be paid to such individuals, would be
      determined at such time between the respective parties. However, the ability
      of
      our key personnel to remain with the company after the consummation of a
      business combination will not be the determining factor in our decision as
      to
      whether or not we will proceed with any potential business combination. Although
      we intend to closely scrutinize the management of a prospective target business
      in connection with evaluating the desirability of effecting a business
      combination, we cannot assure you that our assessment of management will prove
      to be correct. These
      individuals may be unfamiliar with the requirements of operating a public
      company which could cause us to have to expend time and resources helping them
      become familiar with such requirements. This could be expensive and
      time-consuming and could lead to various regulatory issues which may adversely
      affect our operations.





***Our
      officers and directors may allocate their time to other businesses thereby
      causing conflicts of interest in their determination as to how much time to
      devote to our affairs. This could have a negative impact on our ability to
      consummate a business combination.***





Our
      officers and directors are not required to commit their full time to our
      affairs, which may result in a conflict of interest in allocating their time
      between our operations and other businesses. We do not intend to have any full
      time employees prior to the consummation of a business combination. Arthur
      Spector, our sole executive officer, is engaged in several other business
      endeavors and is not obligated to contribute any specific number of hours to
      our
      affairs. If Mr. Spector's other business affairs require him to devote more
      substantial amounts of time to such affairs, it could limit his ability to
      devote time to our affairs and could have a negative impact on our ability
      to
      consummate a business combination.





9


***Some
      of our officers and directors may in the future become affiliated with entities
      engaged in business activities similar to those intended to be conducted by
      us
      and, accordingly, may have conflicts of interest in determining which entity
      a
      particular business opportunity should be presented.***





Some
      of
      our officers and directors may in the future become affiliated with entities,
      including other “blank check” companies, engaged in business activities similar
      to those intended to be conducted by us. Additionally, our officers and
      directors may become aware of business opportunities which may be appropriate
      for presentation to us as well as the other entities with which they have
      fiduciary obligations. Accordingly, they may have conflicts of interest in
      determining to which entity a particular business opportunity should be
      presented. We cannot assure you that these conflicts will be resolved in our
      favor.





***All
      of our officers and directors own shares of our common stock which will not
      participate in liquidation distributions and therefore they may have a conflict
      of interest in determining whether a particular target business is appropriate
      for a business combination.***





All
      of
      our officers and directors own stock in our company, but have waived their
      right
      to receive distributions upon our liquidation with respect to their Founder
      Shares. The shares and warrants owned by our directors and officers will be
      worthless if we do not consummate a business combination. The personal and
      financial interests of our directors and officers may influence their motivation
      in identifying and selecting a target business and completing a business
      combination timely. Consequently, our directors’ and officers’ discretion in
      identifying and selecting a suitable target business may result in a conflict
      of
      interest when determining whether the terms, conditions and timing of a
      particular business combination are appropriate and in our stockholders’ best
      interest.





***It
      is probable that we will only be able to complete one business combination,
      which will cause us to be dependent solely on a single business and a limited
      number of products or services.***





As
      of
      December 31, 2005, we had $24,443,182 on deposit in a trust fund that we may
      use
      to complete a business combination. Our initial business combination must be
      with a business with a fair market value of at least 80% of our net assets
      at
      the time of such acquisition. Consequently, it is probable that we will
      consummate a business combination with a single operating business. Accordingly,
      the prospects for our success may be:





•  solely
      dependent upon the performance of a single business, or





•  dependent
      upon the development or market acceptance of a single or limited number of
      products, processes or services.





In
      this
      case, we will not be able to diversify our operations or benefit from the
      possible spreading of risks or offsetting of losses, unlike other entities
      which
      may have the resources to complete several business combinations in different
      industries or different areas of a single industry.





***Because
      of our limited resources and structure, we may not be able to consummate a
      business combination with growth potential.***





We
      expect
      to encounter intense competition from other entities having a business objective
      similar to ours, including venture capital funds, leveraged buyout funds and
      operating businesses competing for acquisitions. Many of these entities are
      well
      established and have extensive experience in identifying and effecting business
      combinations directly or through affiliates. Many of these competitors possess
      greater technical, human and other resources than we do and our financial
      resources will be relatively limited when contrasted with those of many of
      these
      competitors. While we believe that there are numerous potential target
      businesses that we could acquire, our ability to compete in acquiring certain
      sizable target businesses will be limited by our available financial resources.
      This inherent competitive limitation gives others an advantage in pursuing
      the
      acquisition of certain target businesses. Further, the obligation we have to
      seek stockholder approval of a business combination may delay the consummation
      of a transaction, and our obligation to convert into cash the shares of common
      stock held by public stockholders in certain instances may reduce the resources
      available for a business combination. Additionally, our outstanding warrants,
      and the future dilution they potentially represent, may not be viewed favorably
      by certain target businesses. Any of these obligations may place us at a
      competitive disadvantage in successfully negotiating a business combination. Additionally,
      because of our structure, there may be fewer attractive target businesses
      available to acquire or privately held target businesses may not be not inclined
      to enter into a transaction with a publicly held blank check companies like
      us.





10


***We
      may be unable to obtain additional financing, if required, to complete a
      business combination or to fund the operations and growth of the target
      business, which could compel us to restructure the transaction or abandon a
      particular business combination.***





Although
      we believe our current assets will be sufficient to allow us to consummate
      a
      business combination, in as much as we have not yet identified any prospective
      target business, we cannot ascertain the capital requirements for any particular
      transaction. If we require further funds, either because of the size of the
      business combination or the depletion of our available cash in search of a
      target business, or because we become obligated to convert into cash a
      significant number of shares from dissenting stockholders, we will be required
      to seek additional financing. We cannot assure you that such financing would
      be
      available on acceptable terms, if at all. To the extent that additional
      financing proves to be unavailable when needed to consummate a particular
      business combination, we would be compelled to restructure the transaction
      or
      abandon that particular business combination and seek an alternative target
      business candidate. In addition, if we consummate a business combination, we
      may
      require additional financing to fund the operations or growth of the target
      business. The failure to secure additional financing could have a material
      adverse effect on the continued development or growth of the target business.
      None of our officers, directors or stockholders is required to provide any
      financing to us in connection with or after a business combination.





***Our
      initial stockholders, including our officers and directors, control a
      substantial interest in us and thus may influence certain actions requiring
      stockholder vote.***





Our
      board
      of directors is divided into three classes, each of which will generally serve
      for a term of three years with only one class of directors being elected in
      each
      year. It is unlikely that there will be an annual meeting of stockholders to
      elect new directors prior to the consummation of a business combination, in
      which case all of the current directors will continue in office at least until
      the consummation of the business combination. If there is an annual meeting,
      as
      a consequence of our “staggered” board of directors, only a minority of the
      board of directors will be considered for election and our initial stockholders,
      because of their ownership position, will have considerable influence regarding
      the outcome. Accordingly, our initial stockholders will continue to exert
      control at least until the consummation of a business combination.





11


***Our
      outstanding warrants may have an adverse effect on the market price of common
      stock and make it more difficult to effect a business
      combination.***





We
      currently have outstanding warrants to purchase 9,200,000 shares of common
      stock
      and an option to purchase 300,000 units, including 300,000 shares of common
      stock and warrants to purchase an additional 600,000 shares of common stock.
      To
      the extent we issue shares of common stock to effect a business combination,
      the
      potential for the issuance of substantial numbers of additional shares upon
      exercise of these warrants and options could make us a less attractive
      acquisition vehicle in the eyes of a target business as such securities, when
      exercised, will increase the number of issued and outstanding shares of our
      common stock and reduce the value of the shares issued to complete the business
      combination. Accordingly, our warrants and options may make it more difficult
      to
      effectuate a business combination or increase the cost of the target business.
      Additionally, the sale, or even the possibility of sale, of the shares
      underlying the warrants and options could have an adverse effect on the market
      price for our securities or on our ability to obtain future public financing.
      If
      and to the extent these warrants and options are exercised, our shareholders
      may
      experience dilution to their holdings.





***If
      we are unable to effect a business combination and are forced to liquidate,
      our
      warrants will expire worthless.***





If
      we do
      not complete a business combination by June 23, 2006, or by December 23, 2006
      if
      certain criteria have been satisfied, we will be dissolved and will distribute
      to all holders of shares issued in the Offering, in proportion to the number
      of
      shares held by them, an aggregate sum equal to the amount in the trust fund,
      inclusive of any interest, plus any remaining net assets. In such event, there
      will be no distribution with respect to our outstanding warrants. Accordingly,
      the warrants will expire worthless.





***If
      our Founders exercise their registration rights, it may have an adverse effect
      on the market price our common stock and the existence of these rights may
      make
      it more difficult to effect a business combination.***





Our
      Founders are entitled to demand that we register the resale of their shares
      of
      common stock at any time after the date on which their shares are released
      from
      escrow. If our Founders exercise their registration rights with respect to
      all
      of their shares of common stock, then there will be an additional 1,000,000
      shares of common stock eligible for trading in the public market. The presence
      of this additional number of shares of common stock eligible for trading in
      the
      public market may have an adverse effect on the market price of our common
      stock. In addition, the existence of these rights may make it more difficult
      to
      effectuate a business combination or increase the cost of the target business,
      as the stockholders of the target business may be discouraged from entering
      into
      a business combination with us or will request a higher price for their
      securities as a result of these registration rights and the potential future
      effect their exercise may have on the trading market for our common
      stock.





***Our
      securities are quoted on the OTC Bulletin Board, which limits the liquidity
      and
      price of our securities.***





Our
      securities are traded on the OTC Bulletin Board, an NASD-sponsored and operated
      inter-dealer automated quotation system for equity securities not included
      on
      The Nasdaq Stock Market. Quotation of our securities on the OTC Bulletin Board
      limits the liquidity and price of our securities more than if our securities
      were quoted or listed on The Nasdaq Stock Market or a national exchange.




12


***If
      we are deemed to be an investment company, we may be required to institute
      burdensome compliance requirements and our activities may be restricted, which
      may make it difficult for us to complete a business
      combination.***





If
      we are
      deemed to be an investment company under the Investment Company Act of 1940, we
      may be
      subject to certain restrictions that may make it more difficult for us to
      complete a business combination ,
      including:





•  restrictions
      on the nature of our investments; and





•  restrictions
      on the issuance of securities,





In
      addition, we may have imposed upon us burdensome requirements,
      including:





•  registration
      as an investment company;





•  adoption
      of a specific form of corporate structure; and





•  reporting,
      record keeping, voting, proxy and disclosure requirements and other rules and
      regulations.





We
      do not
      believe that our anticipated principal activities will subject us to the
      Investment Company Act of 1940. To this end, the proceeds held in trust may
      be
      invested by the trust agent only in “government securities” with specific
      maturity dates. By restricting the investment of the proceeds to these
      instruments, we intend to meet the requirements for the exemption provided
      in
      Rule 3a-1 promulgated under the Investment Company Act of 1940. If we were
      deemed to be subject to the act, compliance with these additional regulatory
      burdens would require additional expense that we have not allotted
      for.





**Item
      2. Description of Property.**





We
      maintain our executive offices at 435 Devon Park Drive, Building 400, Wayne,
      Pennsylvania 19087. The cost for this space is included in the $7,500 per-month
      fee 400 Building LLC, an affiliate of Arthur Spector, our chairman of the board,
      chief executive officer and president, charges us for general and administrative
      services pursuant to a letter agreement between us and 400 Building LLC. We
      believe, based on rents and fees for similar services in the Philadelphia
      metropolitan area, that the fee charged by 400 Building LLC is at least as
      favorable as we could have obtained from an unaffiliated person. We consider
      our
      current office space adequate for our current operations.





**Item
      3. Legal Proceedings.**





We
      are
      not presently a party to any pending legal proceeding.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





There
      were no matters submitted to a vote of security holders during the fourth
      quarter of the year ended December 31, 2005.




13


**PART
      II**





**Item
      5. Market for Common Equity and Related Stockholder
      Matters.**





Our
      units, common stock and warrants are each quoted on the OTC Bulletin Board
      under
      the symbols MSMAU, MSMA and MSMAW, respectively. The following table sets forth
      the high and low closing bid quotations for the calendar quarter indicated
      since
      such units commenced public trading on December 20, 2004. The over-the-counter
      market quotations reported below reflect inter-dealer prices, without markup,
      markdown or commissions and may not represent actual transactions. Our common
      stock and warrants commenced public trading on January 3, 2005. Prior to
      December 20, 2004, there was no established public trading market for our common
      stock.





UnitsQuarter
                ended
            High
            LowDecember
                31, 2004
            $6.49
            $5.97





Units
            Common
                Stock
            Warrants2005
            High
            Low
            High
            Low
            High
            LowFirst
                Quarter
            $7.10
            $6.36
            $5.35
            $5.05
            $0.92
            $0.70Second
                Quarter
            $6.75
            $6.30
            $5.60
            $5.05
            $0.88
            $0.68Third
                Quarter
            $7.00
            $6.15
            $5.19
            $5.00
            $0.90
            $0.67Fourth
                Quarter
            $7.19
            $6.15
            $5.28
            $5.08
            $0.91
            $0.55Units
            Common
                Stock
            Warrants2006
            High
            Low
            High
            Low
            High
            LowFirst
                Quarter*
            $7.50
            $6.95
            $5.45
            $5.20
            $1.15
            $0.84


*Through
      March 24, 2006.





We
      have
      not paid any cash dividends on the common stock and we do not intend to pay
      any
      dividends prior to the consummation of a business combination.





As
      of
      March 24, 2006, we had 1 holder of record of our units, 6 holders of record
      of
      our common stock and 1 holder of record of our warrants.





**Recent
      Sales of Unregistered Securities and Use of Proceeds**





In
      September 2004, we sold the following shares of common stock without
      registration under the Securities Act of 1933, as amended:





Stockholders
            
            Number
                of SharesArthur
                Spector
            
            347,500Spector
                Family Trust
            
            347,500Dr.
                Heinz C. Schimmelbusch
            
            60,000Robert
                E. Keith, Jr.
            
            60,000Don
                K. Rice
            
            60,000


Such
      shares were issued in connection with our organization pursuant to the exemption
      from registration contained in Section 4(2) of the Securities Act as they
      were sold to sophisticated, wealthy individuals or entities. Of these shares,
      the 347,500 shares issued to Mr. Spector were sold at a purchase price of
      approximately $.0718 per share. The other shares issued to the individuals
      and
      entity listed above were sold at purchase prices of $0.0001 per share. On
      December 7, 2004, the Board of Directors authorized a stock dividend of
      0.1428571 shares of common stock for each share of common stock outstanding,
      increasing the total number of shares of common stock outstanding prior to
      the
      Offering to 1,000,000.






14


On
      December 23, 2004, we closed our initial public offering of 4,000,000 Units,
      with each Unit consisting of one share of our common stock and warrants to
      purchase two shares of our common stock at an exercise price of $5.00 per share.
      The managing underwriter in the offering was EarlyBirdCapital, Inc. The
      securities sold in the offering were registered under the Securities Act of
      1933
      on a registration statement on Form S-1 (No. 333-119937). The Securities and
      Exchange Commission declared the registration statement effective on December
      17, 2004.





On
      December 23, 2004 and December 30, 2004, the underwriters exercised their
      over-allotment option to purchase 600,000 Units at the initial public offering
      price of $6.00 per share. Including the over-allotment option, the aggregate
      initial offering proceeds totaled $27,600,000.





We
      paid a
      total of $2,070,000 in underwriting discounts and commissions, and approximately
      $839,000 has been or will be paid for costs and expenses related to the
      offering, including $480,000 for the underwriters' non-accountable expense
      allowance of 2% of the gross proceeds before the exercise of the underwriters
      over-allotment option.





After
      deducting the underwriting discounts and commissions and the offering expenses,
      the total net proceeds to us from the offering were approximately $24,691,000,
      of which $23,736,000 was deposited into a trust fund and the remaining proceeds
      are available to be used to provide for business, legal and accounting due
      diligence on prospective business combinations and continuing general and
      administrative expenses. Through December 31, 2005, we have used $446,326
      of the net proceeds that were not deposited into the trust fund to pay general
      and administrative expenses. The net proceeds deposited into the trust fund
      remain on deposit in the trust fund and have earned $707,412 in interest through
      December 31, 2005, including deferred interest of $141,416.





**Item
      6. Plan of Operation.**





The
      following discussion should be read in conjunction with our Financial Statements
      and related Notes thereto included elsewhere in this report.





We
      were
      formed on September 24, 2004 to serve as a vehicle to effect a merger, capital
      stock exchange, asset acquisition or other similar business combination with
      a
      currently unidentified operating business that we believe has significant growth
      potential. We intend to utilize the proceeds of our initial public offering,
      our
      capital stock, debt or a combination of cash, capital stock and debt, in
      effecting a business combination.





We
      consummated our Offering on December 23, 2004. Until consummation of the
      Offering, all of our activity related to our formation and the Offering. Since
      December 23, 2004, we have been searching for prospective target businesses
      to
      acquire.





Net
      loss
      of $13,059 reported for the period from September 24, 2004 (inception) through
      December 31, 2004 consists primarily of $2,375 expense for director and officer
      liability insurance, $3,750 expense for a monthly administrative services
      agreement, $11,686 for franchise and state capital stock taxes and $2,603 for
      other expenses. Interest accreted on the trust fund investment was $7,355,
      excluding $1,838 of deferred interest.





15


Net
      income of $71,666 reported for the year ended December 31, 2005 consists
      primarily of $57,000 expense for director and officer liability insurance,
      $90,000 expense for a monthly administrative services agreement, $74,453 for
      franchise and state capital stock taxes, $84,445 for consulting, legal and
      accounting expenses, $29,550 for federal income taxes, $114,220 for failed
      acquisition costs and $50,461 for other expenses. Interest on the trust fund
      investment was $558,661, excluding $139,578 of deferred interest, and interest
      earned on the money market account was $13,134.





$23,736,000
      of the net proceeds of the Offering, plus accrued interest thereon, is held
      in
      trust and the remaining proceeds are available to be used to provide for
      business, legal and accounting due diligence on prospective acquisitions and
      continuing general and administrative expenses. We will use substantially all
      of
      the net proceeds of our initial public offering to acquire a target business,
      including identifying and evaluating prospective acquisition candidates,
      selecting the target business, and structuring, negotiating and consummating
      the
      business combination. To the extent that our capital stock is used in whole
      or
      in part as consideration to effect a business combination, the proceeds held
      in
      the trust account as well as any other net proceeds not expended will be used
      to
      finance the operations of the target business. We
      believe that we have sufficient available funds outside of the trust account
      to
      operate for at least 24 months from the date of the Offering (December 23,
      2006), assuming a business combination is not consummated during that
      time. Over
      this time period, we anticipate approximately $180,000 of expenses for legal,
      accounting and other expenses attendant to the due diligence investigations,
      structuring and negotiating of a business combination, $180,000 for the
      administrative fee payable to 400 Building LLC ($7,500 per month for two years),
      $50,000 of expenses for the due diligence and investigation of a target
      business, $40,000 of expenses in legal and accounting fees relating to our
      SEC
      reporting obligations and $505,000 for general working capital that will be
      used
      for miscellaneous expenses and reserves, including approximately $114,000 for
      director and officer liability insurance premiums (for two years). We do not
      believe we will need to raise additional funds in order to meet the expenditures
      required for operating our business. However, we may need to raise additional
      funds through a private offering of debt or equity securities if it is required
      to consummate a business combination that is presented to us. We would only
      consummate such a fundraising simultaneously with the consummation of a business
      combination.





We
      are
      obligated, commencing December 17, 2004, to pay to 400 Building LLC, an
      affiliate of Arthur Spector, our
      chairman of the board, chief executive officer and president ,
      a
      monthly fee of $7,500 for general and administrative services. In addition,
      on
      September 29, 2004, Mr. Spector advanced $35,000 to us, on a non-interest
      bearing basis, for payment on our behalf of offering expenses. This loan was
      repaid in December 2004 out of proceeds of the Offering.





In
      connection with the Offering, we issued to the underwriters, for $100, an option
      to purchase up to a total of 300,000 units exercisable at $9.90 per unit. The
      units issuable upon exercise of this purchase option are identical to the units
      we sold in the Offering except that the warrants included in the option have
      an
      exercise price of $6.25. We estimated that the fair value of this option was
      approximately $621,000 ($2.07 per unit underlying such option) using a
      Black-Scholes option-pricing model. The fair value of the option granted to
      the
      underwriter was estimated as of the date of grant using the following
      assumptions: (1) expected volatility of 51.45%, (2) risk-free interest rate
      of
      3.59% and (3) expected life of 5 years.




16


*Off-balance
      sheet arrangements*





Options
      and warrants issued in conjunction with our initial public offering are
      equity-linked derivatives and, accordingly, represent off-balance sheet
      arrangements. The options and warrants meet the scope exception in paragraph
      11(a) of FAS 133 and are accordingly not accounted for as derivatives for
      purposes of FAS 133, but instead are accounted for as equity. See Note 5 to
      the
      financial statements for more information.






17


**Item
        7. Financial Statements.**
 
 **Report
        of Independent Registered Public Accounting Firm**
 
 To
        the
        Board of Directors
 Millstream
        II Acquisition Corporation
 
 We
        have
        audited the accompanying balance sheet of Millstream II Acquisition Corporation
        (a corporation in the development stage) as of December 31, 2005 and 2004,
        and the related statements of operations, stockholders' equity, and cash
        flows
        for the year ended December 31, 2005, for the period from September 24,
        2004 (inception) to December 31, 2004 and for the period from September 24,
        2004 (inception) to December 31, 2005. These financial statements are the
        responsibility of the Company's management. Our responsibility is to express
        an
        opinion on these financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Millstream II Acquisition
        Corporation as of December 31, 2005 and 2004, and the results of its
        operations and its cash flows for the year ended December 31, 2005, for the
        period from September 24, 2004 (inception) to December 31, 2004 and for the
        period from September 24, 2004 (inception) to December 31, 2005 in conformity
        with United States generally accepted accounting principles.
 
 The
        accompanying financial statements have been prepared assuming that Millstream
        II
        Acquisition Corporation will continue as a going concern.  As discussed in
        Note 1 to the financial statements, the Company will face a mandatory
        liquidation no later than December 23, 2006 if a business combination is
        not
        consummated, which raises substantial doubt about its ability to continue
        as a
        going concern.  The financial statements do not include any adjustments
        that might result from the outcome of this uncertainty.
 
 
 /s/
        GOLDSTEIN GOLUB KESSLER LLP
 
 
 New
        York,
        New York
 February
        18, 2006
 
 18
 **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **BALANCE
          SHEETS**
 
 **December
                    31,**
                  **2005**
                
                **December
                    31,**
                  **2004****ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                533,658
                
                $
                941,943Investments
                    held in trust
                
                
                24,443,182
                
                
                23,745,193Prepaid
                    expenses
                
                
                26,125
                
                
                62,125Deferred
                    income taxes
                
                
                141,000
                
                
                -Total
                    assets
                
                $
                25,143,965
                
                $
                24,749,261**LIABILITIES
                    AND STOCKHOLDERS’ EQUITY**Current
                    liabilities:Accounts
                    payable and accrued expenses
                
                $
                121,388
                
                $
                44,728Income
                    taxes payable
                
                
                106,800
                
                
                -Deferred
                    interest
                
                
                141,416
                
                
                1,838Total
                    liabilities
                
                
                369,604
                
                
                46,566CommitmentCommon
                    stock, subject to possible conversion, 919,540 shares
                  at
                    conversion value
                
                
                4,744,826
                
                
                4,744,826Stockholders’
                    Equity:Preferred
                    stock, $.0001 par value, authorized 1,000,000
                  shares;
                    none issued
                
                
                -
                
                
                -Common
                    stock, $.0001 par value, authorized 15,000,000
                  shares;
                    issued and outstanding 5,600,000 shares (which
                  includes
                    919,540 shares subject to possible conversion)
                
                
                560
                
                
                560Additional
                    paid-in capital
                
                
                19,970,368
                
                
                19,970,368Retained
                    earnings (deficit) accumulated during development
                  stage
                
                
                58,607
                
                
                (13,059
                )Total
                    stockholders’ equity
                
                
                20,029,535
                
                
                19,957,869Total
                    liabilities and stockholders’ equity
                
                $
                25,143,965
                
                $
                24,749,261
  The
          accompanying notes should be read in conjunction with the financial
          statements.
  19
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **STATEMENTS
          OF OPERATIONS**
  **Year**
                    **Ended**
                    **December
                      31, 2005**
                  
                  **September
                      24, 2004 (Inception) to**
                    **December
                      31,**
                    **2004**
                  
                  **September
                      24, 2004**
                    **(Inception)
                      to**
                    **December
                      31,**
                    **2005**General
                      and administrative expenses
                  
                  $
                  470,579
                  
                  $
                  20,414
                  
                  $
                  490,993Operating
                      loss
                  
                  
                  (470,579
                  )
                  
                  (20,414
                  )
                  
                  (490,993
                  )Other
                      income:Interest
                      income
                  
                  
                  13,134
                  
                  
                  -
                  
                  
                  13,134Interest
                      on trust fund investment
                  
                  
                  558,661
                  
                  
                  7,355
                  
                  
                  566,016Total
                      other income
                  
                  
                  571,795
                  
                  
                  7,355
                  
                  
                  579,150Income
                      (loss) before income taxes
                  
                  
                  101,216
                  
                  
                  (13,059
                  )
                  
                  88,157Income
                      tax provision
                  
                  
                  (29,550
                  )
                  
                  -
                  
                  
                  (29,550
                  )Net
                      income (loss)
                  
                  $
                  71,666
                  
                  $
                  (13,059
                  )
                  $
                  58,607
 
 Weighted
                    average shares of commonstock
                    outstandingBasic
                    and diluted
                
                
                5,600,000
                
                
                1,550,000
                
                
                4,770,588Earnings
                    per common shareBasic
                    and diluted
                
                $
                .01
                
                $
                (.01
                )
                $
                .01
 
 The
          accompanying notes should be read in conjunction with the financial
          statements.
  20
 
 **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **STATEMENTS
          OF STOCKHOLDERS’ EQUITY**
 
 **Retained****Earnings****(Deficit)****Accumulated****Additional**
                
                **during
                    the****Preferred**
                
                **Common
                    Stock**
                
                **Paid-In**
                
                **Development****Stock**
                
                ******Shares**
                
                ******Amount**
                
                ******Capital**
                
                ******Stage**
                
                ******Total**Sale
                    of 1,000,000 shares of common stock to initial stockholders for
                    an average
                    price of $0.025 per share, as adjusted, on September 24, 2004
                    (inception)
                
                $
                -
                
                
                1,000,000
                
                $
                100
                
                $
                24,900
                
                $
                -
                
                $
                25,000Sale
                    of 4,600,000 units to public stockholders, net of underwriters’ discount
                    and offering expenses (includes 919,540 shares subject to possible
                    redemption)
                
                
                -
                
                
                4,600,000
                
                
                460
                
                
                24,690,194
                
                
                -
                
                
                24,690,654Proceeds
                    subject to possible conversion of 919,540 shares
                
                
                -
                
                
                -
                
                
                -
                
                
                (4,744,826
                )
                
                -
                
                
                (4,744,826
                )Proceeds
                    from issuance of option
                
                
                -
                
                
                -
                
                
                -
                
                
                100
                
                
                -
                
                
                100Net
                    loss for the period****September
                    24, 2004 (inception) to December 31, 2004
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (13,059
                )
                
                (13,059
                )**Balance,
                    December 31, 2004**
                
                
                -
                
                
                5,600,000
                
                
                560
                
                
                19,970,368
                
                
                (13,059
                )
                
                19,957,869Net
                    income for the year ended
                  December
                    31, 2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                71,666
                
                
                71,666**Balance,
                    December 31, 2005**
                
                $
                -
                
                
                5,600,000
                
                $
                560
                
                $
                19,970,368
                
                $
                58,607
                
                $
                20,029,535
 
 The
          accompanying notes should be read in conjunction with the financial
          statements.
  21
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **STATEMENTS
          OF CASH FLOWS**
 
 **Year
                    Ended**
                  **December
                    31, 2005**
                
                **September
                    24,**
                  **2004
                    (Inception) to December 31, 2004**
                
                **September
                    24, 2004 (Inception) to December 31, 2005****Cash
                    flows from operating activities:**Net
                    income (loss)
                
                $
                71,666
                
                $
                (13,059
                )
                $
                58,607Adjustments
                    to reconcile net income (loss) to net cash used in
                  operating
                    activities:Interest
                    income on investments held in trust
                
                
                (698,239
                )
                
                (9,193
                )
                
                (707,432
                )Decrease
                    (increase) in prepaid expenses
                
                
                36,000
                
                
                (62,125
                )
                
                (26,125
                )Increase
                    in deferred income taxes
                
                
                (141,000
                )
                
                -
                
                
                (141,000
                )Increase
                    in accounts payable and accrued expenses
                
                
                109,061
                
                
                12,327
                
                
                121,388Increase
                    in income taxes payable
                
                
                106,800
                
                
                -
                
                
                106,800Increase
                    in deferred interest
                
                
                139,578
                
                
                1,838
                
                
                141,416Net
                    cash used in operating activities
                
                
                (376,134
                )
                
                (70,212
                )
                
                (446,346
                )**Cash
                    flows from investing activities:**Purchase
                    of treasury bills held in trust
                
                
                (72,649,538
                )
                
                (23,734,529
                )
                
                (96,384,067
                )Maturity
                    of treasury bills held in trust
                
                
                72,649,000
                
                
                -
                
                
                72,649,000Decrease
                    (increase) in cash held in trust
                
                
                788
                
                
                (1,471
                )
                
                (683
                )Net
                    cash provided by (used in) investing activities
                
                
                250
                
                
                (23,736,000
                )
                
                (23,735,750
                )**Cash
                    flows from financing activities:**Proceeds
                    from sale of shares of common stock to initial stockholders
                
                
                -
                
                
                25,000
                
                
                25,000Proceeds
                    from note payable, stockholder
                
                
                -
                
                
                35,000
                
                
                35,000Repayment
                    of note payable, stockholder
                
                
                -
                
                
                (35,000
                )
                
                (35,000
                )Proceeds
                    from public issuance of 4,600,000 units
                
                
                -
                
                
                27,600,000
                
                
                27,600,000Proceeds
                    from issuance of option
                
                
                -
                
                
                100
                
                
                100Payment
                    of costs of public offering
                
                
                (32,401
                )
                
                (2,876,945
                )
                
                (2,909,346
                )Net
                    cash (used in) provided by financing activities
                
                
                (32,401
                )
                
                24,748,155
                
                
                24,715,754Net
                    (decrease) increase in cash and cash equivalents
                
                
                (408,285
                )
                
                941,943
                
                
                533,658Cash
                    and cash equivalents at beginning of period
                
                
                941,943
                
                
                -
                
                
                -Cash
                    and cash equivalents at end of period
                
                $
                533,658
                
                $
                941,943
                
                $
                533,658
  Supplemental
                    schedule of non-cash financing activity:Accrual
                    of costs of public offering
                
                $
                -
                
                $
                32,401
                
                $
                -
 
 The
          accompanying notes should be read in conjunction with the financial
          statements.
 22
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **1.
          Organization and Business Operations**
 
 Millstream
          II Acquisition Corporation ("the Company") was incorporated in Delaware
          on
          September 24, 2004 as a blank check company whose objective is to acquire
          an
          operating business.
  The
          registration statement for the Company’s initial public offering ("the
          Offering") was declared effective on December 17, 2004. The Company consummated
          the Offering, including the over-allotment option, on December 23, 2004
          and
          December 30, 2004, respectively, and raised total net proceeds of approximately
          $24,691,000. The Company’s management has broad discretion with respect to the
          specific application of the net proceeds of the Offering, although substantially
          all of the net proceeds of the Offering are intended to be generally applied
          toward consummating a business combination with an operating business ("Business
          Combination"). There is no assurance that the Company will be able to
          successfully effect a Business Combination. An amount of $23,736,000 of
          the net
          proceeds was placed in an interest-bearing trust account ("Trust Account")
          until
          the earlier of (i) the consummation of a Business Combination or (ii)
          liquidation of the Company. Under the agreement governing the Trust Account,
          funds will be invested only in United States government securities (Treasury
          Bills) with a maturity of 180 days or less. This amount has been invested
          in
          United States Treasury Bills, which have been accounted for as trading
          securities (see Note 3). The remaining net proceeds (not held in the Trust
          Account) may be used to pay for business, legal and accounting due diligence
          on
          prospective acquisitions and continuing general and administrative expenses.
 
 The
          Company, after signing a definitive agreement for the acquisition of a
          target
          business, will submit such transaction for stockholder approval. In the
          event
          that stockholders owning 20% or more of the shares sold in the Offering
          vote
          against the Business Combination and exercise their conversion rights described
          below, the Business Combination will not be consummated. All of the Company’s
          stockholders prior to the Offering, including all of the officers and directors
          of the Company ("Initial Stockholders"), have agreed to vote their 1,000,000
          founding shares of common stock in accordance with the vote of the majority
          of
          all other stockholders of the Company ("Public Stockholders") with respect
          to
          any Business Combination. After consummation of a Business Combination,
          these
          voting safeguards will no longer be applicable.
  23
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **1.
          Organization and Business Operations (continued)**
 
 With
          respect to a Business Combination that is approved and consummated, any
          Public
          Stockholder who voted against the Business Combination may demand that
          the
          Company convert his shares to cash. The per share conversion price will
          equal
          the amount in the Trust Account, calculated as of two business days prior
          to the
          consummation of the Business Combination, divided by the number of shares
          of
          common stock held by Public Stockholders at the consummation of the Offering.
          Accordingly, Public Stockholders holding 19.99% of the aggregate number
          of
          shares owned by all Public Stockholders may seek conversion of their shares
          in
          the event of a Business Combination. Such Public Stockholders are entitled
          to
          receive their per share interest in the Trust Account computed without
          regard to
          the shares held by Initial Stockholders. Accordingly, a portion of the
          net
          proceeds from the Offering (19.99% of the amount held in the Trust Account)
          has
          been classified as common stock subject to possible conversion in the
          accompanying balance sheets and 19.99% of the related interest earned has
          been
          recorded as deferred interest.
 
 The
          Company’s Certificate of Incorporation, as amended, provides for mandatory
          liquidation of the Company in the event that the Company does not consummate
          a
          Business Combination within 18 months from the date of the consummation
          of the
          Offering (June 23, 2006), or 24 months from the consummation of the Offering
          (December 23, 2006) if certain extension criteria have been satisfied.
          There is
          no assurance that the Company will be able to successfully effect a Business
          Combination during this period.  This factor raises substantial doubt about
          the Company's ability to continue as a going concern. The accompanying
          financial
          statements are prepared assuming the Company will continue as a going concern.
          The financial statements do not include any adjustments that might result
          from
          the outcome of this uncertainty.  In
          the
          event of liquidation, it is likely that the per share value of the residual
          assets remaining available for distribution (including Trust Account assets)
          will be less than the initial public offering price per share in the Offering
          due to costs related to the Offering, general and administrative expenses
          incurred prior to the liquidation event and since no value would be attributed
          to the Warrants contained in the Units sold (see Note 5).
 
 **2.
          Summary of Significant Accounting Policies**
 
 **Use
          of Estimates**
 The
          preparation of financial statements in conformity with generally accepted
          accounting principles requires management to make estimates and assumptions
          that
          affect the reported amounts of assets and liabilities and disclosure of
          contingencies at the date of the financial statements and the reported
          amounts
          of expenses during the reporting period. Actual amounts could differ from
          those
          estimates.
 
 **Concentration
          of Credit Risk**
 Financial
          instruments that potentially subject the Company to credit risk consist
          of cash
          equivalents and short-term investments. The Company’s policy is to place
          investments with financial institutions evaluated as being creditworthy,
          or in
          short-term money market funds which are exposed to minimal interest rate
          and
          credit risk and in a highly rated United States Treasury Bills. At times,
          the
          Company has bank balances in excess of federally insured limits.
 24
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **2.
          Summary of Significant Accounting Policies (continued)**
 
 **Fair
          Value of Financial Instruments**
 The
          following methods and assumptions are used to estimate the fair value of
          each
          class of financial instruments for which it is practical to
          estimate:
 
 *Cash* :
          The
          carrying amount approximates the fair value.
 
 *Investment
          in United States Treasury Bills:* These
          investments are considered trading securities. The investment is carried
          at
          market value, which approximates cost plus accreted interest.
 
 **Deferred
          Interest**
 A
          portion
          (19.99%) of the interest earned on the Trust Account has been deferred
          on the
          balance sheet as it represents interest attributable to the common stock
          subject
          to possible conversion (See Note 1).
 
 **Income
          Taxes**
 Deferred
          income taxes are provided for the differences between the bases of assets
          and
          liabilities for financial reporting and income tax purposes. A valuation
          allowance is established when necessary to reduce deferred tax assets to
          the
          amount expected to be realized.
 
 **Earnings
          per Common Share**
 Basic
          earnings per share (“EPS”) are computed by dividing net income applicable to
          common stock by the weighted average common shares outstanding during the
          period. Diluted EPS reflects the additional dilution for all potentially
          dilutive securities such as stock warrants.
 
 **Recently
          Issued Accounting Standards**
 In
          December 2004, the Financial Accounting Standards Board issued Statement
          of
          Financial Accounting Standards No. 123 (revised 2004), *Share-Based
          Payment* (SFAS
          123R), which replaces Statement of Financial Accounting Standards No. 123, *Accounting
          for Stock-Based Compensation* (SFAS
          123) and supersedes Accounting Principles Board Opinion No. 25, *Accounting
          for Stock Issued to Employees* .
          SFAS
          123R requires all share-based payments to employees, including grants of
          employee stock options, to be recognized as compensation expense based
          on their
          fair value. This statement is effective for the Company starting January
          1,
          2006. The Company is currently evaluating the impact of this new standard
          on the
          Company’s operating results and financial position.
  Management
          does not believe that any other recently issued, but not yet effective,
          accounting standards if currently adopted would have a material effect
          on the
          accompanying financial statements.
 
  25
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **3.
          Investments Held in Trust**
 
 Investments
          held in trust at December 31, 2005 consist of a zero coupon United States
          Treasury Bill with a face value of $24,656,000 purchased at a discount
          of
          99.0268% due March 23, 2006 and carried on the Company’s financial statements at
          $24,442,479, which includes interest of $26,426 and trust cash of
          $703.
 
 Investments
          held in trust at December 31, 2004 consisted of two zero coupon United
          States
          Treasury Bills with face values of $21,416,000 and $2,611,000 purchased
          at
          discounts of 98.7816% and 98.7917%, respectively, due June 23, 2005 and
          carried
          on the Company’s financial statements at $23,745,193, which included interest of
          $9,193 and trust cash of $1,471.
 
 **4.
          Earnings per Share**
 
 The
          following table sets forth the computation of basic and diluted earnings
          per
          share:
 **Year
                    Ended December 31, 2005**
                
                **September
                    24, 2004 (Inception) to December 31, 2004**
                
                **September
                    24, 2004 (Inception) to December 31, 2005**Numerator:
                    Net income (loss)
                
                $
                71,666
                
                $
                (13,059
                )
                $
                58,607Denominator:
                    Average common shares
                  outstanding
                
                
                5,600,000
                
                
                1,550,000
                
                
                4,770,588Basic
                    and diluted earnings per share
                
                $
                .01
                
                $
                (
                    .01
                )
                $
                .01
 No
          computation for diluted earnings per share was prepared for the Redeemable
          Common Stock Purchase Warrants (see Note 5) to purchase an aggregate of
          9,200,000 shares of common stock at $5.00 per share and the underwriters’ option
          (see Note 5) to purchase 300,000 Units at an exercise price of $9.90 per
          Unit
          (with underlying warrants at $6.25 per share), respectively, that were
          outstanding at December 31, 2005 and 2004 because the shares underlying
          the
          conversion of the warrants are contingently issuable and the exercise price
          of
          the underwriters’ option is in excess of the related market value of the
          Units.
 
 **5.
          Stockholders’ Equity**
 
 **The
          Offering**
 The
          Company sold 4,600,000 units ("Units") in the Offering, which included
          all of
          the 600,000 Units subject to the underwriters’ over-allotment option. Each Unit
          consists of one share of the Company’s common stock, $.0001 par value, and two
          Redeemable Common Stock Purchase Warrants ("Warrants"). Each Warrant entitles
          the holder to purchase from the Company one share of common stock at an
          exercise
          price of $5.00 commencing the later of the completion of a Business Combination
          with a target business or December 17, 2005 and expiring December 16, 2008.
          The
          Warrants will be redeemable at a price of $.01 per Warrant upon 30 days
          notice
          after
  26
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **5.
          Stockholders’ Equity (continued)**
 
 **The
          Offering (continued)**
 the
          Warrants become exercisable, only in the event that the last sale price
          of the
          common stock is at least $8.50 per share for any 20 trading days within
          a 30
          trading day period ending on the third day prior to the date on which notice
          of
          redemption is given. In connection with this Offering, the Company issued
          an
          option, for $100, to the representative of the underwriters to purchase
          300,000
          Units at an exercise price of $9.90 per Unit (see Common Stock Commitments
          below).
 
 The
          Company accounted for the fair value of the option, inclusive of the receipt
          of
          the $100 cash payment, as an expense of the Offering resulting in a charge
          directly to stockholders’ equity. The Company estimated that the fair value of
          this option was approximately $621,000 ($2.07 per Unit) using a Black-Scholes
          option-pricing model. The fair value of the option granted to the underwriter
          was estimated as of the date of grant using the following assumptions:
          (1)
          expected volatility of 51.45%, (2) risk-free interest rate of 3.59% and
          (3)
          expected life of 5 years. The option may be exercised for cash or on a
          ‘‘cashless’’ basis, at the holder’s option, such that the holder may use the
          appreciated value of the option (the difference between the exercise prices
          of
          the option and the underlying Warrants and the market price of the Units
          and
          underlying securities) to exercise the option without the payment of any
          cash.
          The warrants underlying such Units are exercisable at $6.25 per share,
          but
          otherwise have the same terms and conditions as the Warrants. Separate
          trading
          of the Common Stock and Warrants underlying the Company’s Units commenced in
          January 2005.
 
 **Common
          Stock**
 The
          Company’s initial stockholders purchased 347,500 common shares for $24,947 and
          527,500 common shares for $53 on September 29, 2004. On December 7, 2004,
          the
          Board of Directors authorized a stock dividend of 0.1428571 shares of common
          stock for each share of common stock outstanding, bringing the initial
          outstanding shares to 1,000,000. All references in the accompanying financial
          statements to the number of shares of stock outstanding for the initial
          stockholders have been retroactively restated to reflect this
          transaction.
 
 **Preferred
          Stock**
 The
          Company is authorized to issue 1,000,000 shares of preferred stock, par
          value
          $.0001 per share, with such designations, voting and other rights and
          preferences as may be determined from time to time by the Board of Directors.
          As
          of December 31, 2005, no shares of preferred stock have been
          issued.
 
 **Common
          Stock Commitments**
 The
          Company has 10,100,000 shares of common stock commitments in the form of
          Warrants and the underwriters’ option, which are currently not exercisable. Only
          9,400,000 common shares are available for issuance under the current amount
          of
          authorized shares. The Company intends to increase its number of authorized
          shares in connection with a business combination and prior to the date
          in which
          the Warrants and the underwriters’ option become exercisable. The Company’s
          underwriters have committed that the Company will not be obligated to issue
          240,000 of the Units described in The Offering above if the Company is
          unable to
          increase its number of authorized shares. These 240,000 Units represent
          720,000
          shares of common stock commitments.
 
  27
  **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
  **6.
          Note Payable, Stockholder**
 
 The
          Company issued a $35,000 unsecured promissory note to an Initial Stockholder,
          who is also an officer, on September 29, 2004. The note was non-interest
          bearing
          and was repaid in December 2004 with proceeds from the Offering.
 
 **7.
          Income taxes**
 
 The
          provision for income taxes consists of the following:
 **For
                      the period ended**
                    **December
                      31,****2005**
                  
                  **2004**Current
                      federal
                  
                  $
                  170,550
                  
                  $
                  -Deferred
                      federal
                  
                  
                  (141,000
                  )
                  
                  -$
                  29,550
                  
                  $
                  -
  The
          total
          provision for income taxes differs from that amount which would be computed
          by
          applying the U.S. Federal income tax rate to income before provision for
          income
          taxes as follow:
 **For
                      the period ended**
                    **December
                      31,****2005**
                  
                  **2004**Statutory
                      federal income tax rate
                  
                  
                  34.0
                  %
                  
                  (34.0
                  %)Permanent
                      differences and other
                  
                  
                  (0.4
                  )
                  
                  -(Decrease)
                      increase in valuation allowance
                  
                  
                  (4.4
                  )
                  
                  34.0
                  %Effective
                      income tax rate
                  
                  
                  29.2
                  %
                  
                  -
  The
          tax
          effect of temporary differences that give rise to the net deferred tax
          asset is
          as follows:
 **December
                      31,****2005**
                  
                  **2004**Deferred
                      interest income
                  
                  $
                  48,000
                  
                  $
                  600State
                      net operating loss carryforwards
                  
                  
                  17,400
                  
                  
                  1,200Federal
                      net operating loss carryforwards
                  
                  
                  -
                  
                  
                  800Deferred
                      expenses
                  
                  
                  93,000
                  
                  
                  3,000Valuation
                      allowance
                  
                  
                  (17,400
                  )
                  
                  (5,600
                  )Net
                      deferred tax asset
                  
                  $
                  141,000
                  
                  $
                  -
 28
 **MILLSTREAM
          II ACQUISITION CORPORATION**
 **(a
          corporation in the development stage)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **7.
          Income taxes (continued)**
 
 At
          December 31, 2005, the Company has a state net operating loss carryforward
          of
          approximately $176,000 to offset future taxable income. The net operating
          loss
          carryforward expires in 2025. The Company has established a 100% valuation
          allowance against its deferred tax asset in 2005 and 2004 relating to the
          state
          net operating loss carryforward since its income earned on the funds held
          in the
          Trust Account are not taxable for state income tax purposes and, at this
          time,
          it has no other significant sources of income for state income tax purposes.
          During 2005, the Company began to generate Federal taxable income and therefore
          is no longer recording a valuation allowance against the remaining deferred
          tax
          assets.
 
 During
          the year ended December 31, 2005, the Company paid $63,750 in federal income
          taxes for 2005 and $63,288 to Pennsylvania for 2004 and 2005 franchise
          tax,
          which are included in general and administrative expenses.
 
 **8.**  **Commitment**
 
 The
          Company presently occupies office space provided by an affiliate of an
          Initial
          Stockholder, who is also an officer. Such affiliate has agreed that, until
          the
          acquisition of a target business by the Company, it will make such office
          space,
          as well as certain office and secretarial services, available to the Company,
          as
          may be required by the Company from time to time. The Company has agreed
          to pay
          the affiliate $7,500 per month for such services commencing December 17,
          2004.
          The Statement of Operations for the periods ended December 31, 2005 and
          2004
          include $90,000 and $3,750, respectively, related to this
          agreement.
  29
   **Item
          8. Changes In and Disagreements with Accountants on Accounting and Financial
          Disclosure** **.**
 
 Not
          applicable.
 
 **Item
          8A. Controls and Procedures.**
  Disclosure
            controls and procedures are controls and other procedures that are designed
            to
            ensure that information required to be disclosed in company reports filed
            or
            submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
            recorded, processed, summarized and reported, within the time periods
            specified
            in the Securities and Exchange Commission’s rules and forms. Disclosure controls
            and procedures include, without limitation, controls and procedures designed
            to
            ensure that information required to be disclosed in company reports filed
            or
            submitted under the Exchange Act is accumulated and communicated to management,
            including our chief executive officer, as appropriate to allow timely
            decisions
            regarding required disclosure.
 
 As
            required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief
            Executive
            Officer (principal executive, financial and accounting officer) carried
            out an
            evaluation of the effectiveness of the design and operation of our disclosure
            controls and procedures as of December 31, 2005. Based upon his evaluation,
            he
            concluded that our disclosure controls and procedures were
            effective.
 
 Our
            internal control over financial reporting is a process designed by, or
            under the
            supervision of, our chief executive officer and effected by our board
            of
            directors, management and other personnel, to provide reasonable assurance
            regarding the reliability of our financial reporting and the preparation
            of our
            financial statements for external purposes in accordance with generally
            accepted
            accounting principles (United States). Internal control over financial
            reporting
            includes policies and procedures that pertain to the maintenance of records
            that
            in reasonable detail accurately and fairly reflect the transactions and
            dispositions of our assets; provide reasonable assurance that transactions
            are
            recorded as necessary to permit preparation of our financial statements
            in
            accordance with generally accepted accounting principles (United States),
            and
            that our receipts and expenditures are being made only in accordance
            with the
            authorization of our board of directors and management; and provide reasonable
            assurance regarding prevention or timely detection of unauthorized acquisition,
            use or disposition of our assets that could have a material effect on
            our
            financial statements.
 
 During
            the most recently completed fiscal quarter, there has been no change
            in our
            internal control over financial reporting that has materially affected,
            or is
            reasonably likely to materially affect, our internal control over financial
            reporting.
 **Item
          8B. Other Information.**
 
 Not
          applicable.
 
 **PART
          III**
 
 **Item
          9. Directors, Executive Officers, Promoters and Control Persons: Compliance
          With
          Section 16(a) of the Exchange Act.**
 
 **Directors
          and Executive Officers**
  Our
          current directors and executive officers are as follows:
 
 **Name**
                **Age**
                
                **Position**Arthur
                    Spector
                65
                
                Chairman
                    of the Board, Chief Executive Officer and PresidentRobert
                    E. Keith, Jr.
                64
                
                DirectorDon
                    K. Rice
                57
                
                DirectorDr.
                    Heinz C. Schimmelbusch
                61
                
                Director
 30
 ***Arthur
          Spector*** has been
          our chairman of the board, chief executive officer and president since
          our
          inception. Mr. Spector has served as chairman of the board of NationsHealth,
          Inc. since its inception in August 2003 and served as its chief executive
          officer and president from August 2003 until August 2004. NationsHealth,
          Inc. is
          a Nasdaq listed company that, through its wholly owned subsidiary, NationsHealth
          L.L.C., provides medical products and pharmacy benefits to Medicare participants
          and other senior citizens. NationsHealth, Inc. was originally known as
          Millstream Acquisition Corporation, a blank check company with an objective
          to
          acquire an operating business with significant growth potential. In his
          role
          with Millstream Acquisition Corporation, Mr. Spector directed the completion
          of
          a public offering that raised gross proceeds of approximately $24.2 million
          in
          August 2003. From March 1995 to October 2002, Mr. Spector served as chairman
          of
          the board of Neoware Systems, Inc. ("Neoware Systems"), a manufacturer
          of
          sophisticated computer appliances and related software, and from May 1996
          until
          June 1997, he also served as its president and chief executive officer.
          Neoware
          Systems was originally known as Information Systems Acquisition Corp.,
          a blank
          check company with an objective to acquire an operating business in the
          information systems industry. Information Systems Acquisition Corp. was
          formed
          in 1992 and from its inception until it merged with Human Designed Systems,
          Inc., Mr. Spector was its chairman of the board, president and chief executive
          officer. In this role, Mr. Spector directed the completion of a public
          offering
          that raised gross proceeds of approximately $13.8 million. Mr. Spector
          has
          served as a director of Docucorp International, Inc., a public document
          automation company, since May 1997. Mr.
          Spector has also been a director of Metallurg Holdings, Inc. and Metallurg,
          Inc.
          since July 1998 and has been executive vice president of Metallurg Holdings,
          Inc. since July 1998 and treasurer since August 2000. He was elected vice
          chairman of the board of Metallurg Holdings, Inc. and Metallurg, Inc. in
          November 2002. Metallurg Holdings, Inc. is a holding company of Metallurg,
          Inc.,
          a company that produces and sells specialty metals, alloys and chemicals.
          From
          1994 to 2002, Mr. Spector served as a director of USDATA Corporation, a
          global
          supplier of component-based production software.  Mr.
          Spector received a B.S. from the Wharton School of Finance at the University
          of
          Pennsylvania and a J.D. from The University of Pennsylvania Law
          School.
  In
          addition to Mr. Spector’s experience described above, he has had extensive
          experience in mergers and acquisitions and managing private equity funds. Since
          January 1997, he has served as managing director of the general partner
          and of
          the management company of Safeguard International Fund, L.P., a private
          equity
          fund investing primarily in controlling positions in industrial companies
          in
          North America and Europe.  From 1995 to 1996, Mr. Spector served as
          director of acquisitions of Safeguard Scientifics, Inc., a public
          company that owns controlling interests in and operates numerous private
          companies. From
          1997 to 1998, Mr. Spector served as a managing director of TL Ventures
          LLC,
          whose present successor is TL Ventures L.P., a fund management company
          organized
          to manage the day-to-day operations of several of the TL Ventures funds
          which
          invest in companies in the internet, software, information technology,
          communications and life sciences industries.
 
 ***Robert
          E. Keith, Jr.*** ** has
          been
          a member of our board of directors since our inception. Since May 1989,
          Mr.
          Keith has been a managing director of TL Ventures, L.P., its predecessor
          entity
          and related entities that serve as the management companies for several
          of the
          TL Ventures funds. He has served as president of TL Ventures Inc., a successor
          to Technology Leaders Management, Inc., a private equity capital management
          company, since December 1991 and as its chief executive officer since December
          1996. Since October 2001, Mr. Keith has served as chairman of the board
          of
          directors of Safeguard Scientifics, Inc. and served as its vice chairman
          from
          February 1999 through September 2001. Mr. Keith also served as a member
          of the
          office of the chief executive of Safeguard Scientifics, Inc. from April
          2001
          through October 2001. Since August 1996, Mr. Keith has been the chairman
          of the
          management companies for, and a senior advisor to and co-founder of, EnerTech
          Capital Partners and EnerTech Capital Partners II, venture capital funds
          that
          invest in technology and service companies related to energy, communications
          and
          the broader utilities marketplace. Since March 1996, Mr. Keith has served
          as a
          director of Internet Capital Group, Inc., a public company that provides
          software solutions and related services to businesses, and served as its
          chairman of the board from March 1996 through December 2001. Mr. Keith
          also
          served as a member of the board of directors of NationsHealth, Inc. from
          August
          2003 to August 2004. Mr. Keith received a B.A. from Amherst College and
          J.D.
          from Temple University.
 
 31
 ***Don
          K. Rice*** has been
          a member of our board of directors since our inception. Mr.
          Rice
          was a co-founder and has been a managing partner of RSTW Partners since
          1989.
          RSTW Partners is a privately held firm that, through limited partnerships,
          invests primarily in the subordinated debt of middle market companies located
          throughout the United States. Since December 2005, Mr. Rice has also been
          the
          chairman of the board, chief executive officer, president and treasurer
          of
          Ascend Acquisition Corp., a blank check company that has not yet completed
          its
          initial public offering. Prior to forming RSTW Partners, from 1986 to December
          1988, Mr. Rice was affiliated with First Texas Merchant Banking Group,
          a firm
          which specialized in providing subordinated debt financing, and was its
          vice
          president from 1986 to 1988 and president and chief executive officer from
          May
          1988 to December 1988. He was also vice president of PruCapital, Inc.,
          an
          investment subsidiary of The Prudential Insurance Company of America, from
          March
          1984 to April 1986. Mr.
          Rice
          has served as a member of the board of directors of NationsHealth, Inc.
          since
          its inception in August 2003. Mr. Rice received a B.B.A. and M.B.A. from
          the
          University of Texas.
 
 ***Dr.
          Heinz C. Schimmelbusch*** ** has
          been
          a member of our board of directors since our inception. Since January
          1997, he has served as managing director of the general partner and of
          the
          management company of Safeguard International Fund, L.P. Since
          July 1998, Dr. Schimmelbusch has served as chairman of the board and a
          director
          of Metallurg, Inc. and has served as its chief executive officer since
          November
          2002. He has also served as president, chief executive officer and a director
          of
          Metallurg Holdings, Inc. since July 1998. Since June 2003, Dr. Schimmelbusch
          has
          served as a member of the board of directors of MMC Norilsk Nickel, a producer
          of metals, technical sulfur, hard coal and other materials for industrial
          needs
          with its securities listed on the London, Moscow and Berlin Stock Exchanges
          and
          the Over The Counter Bulletin Board. Dr. Schimmelbusch also
          served as a member of the board of directors of NationsHealth, Inc. from
          August
          2003 to August 2004. Dr.
          Schimmelbusch received a graduate degree and Ph.D. in economics from the
          University of Tübingen, Germany.
 
 These
          individuals will play a key role identifying and evaluating prospective
          acquisition candidates, selecting the target business, and structuring,
          negotiating and consummating its acquisition. Collectively, through their
          positions described above, our directors have extensive experience acting
          as
          managing directors of private equity funds that invested their funds in,
          or
          acquired control of, private companies.
 
 Our
          board
          of directors established an audit committee comprised of Messrs. Keith
          and Rice,
          with Mr. Keith acting as the chairman. Our audit committee appoints, retains,
          sets compensation of, and supervises our independent accountants, reviews
          the
          results and scope of the audit and other accounting related services and
          reviews
          our accounting practices and systems of internal accounting and disclosure
          controls.
 
 **Audit
          Committee Financial Expert**
 
 We
          do not
          have an audit committee financial expert serving on our audit committee.
          As our
          plan of operations involves identifying a target business and completing
          a
          business combination with such business, we presently do not have material
          operations and do not experience complex accounting issues. Accordingly,
          our
          board of directors has determined that it is not necessary for us to have
          an
          audit committee financial expert at this time.
 
 32
 **Code
          of Ethics**
 
 In
          December 2004, our board of directors adopted a code of ethics that applies
          to
          our directors, officers and employees. Requests for copies of our code
          of ethics
          should be sent in writing to Millstream II Acquisition Corporation, 435
          Devon
          Park Drive, Building 400, Wayne, Pennsylvania 19087.
 
 **Compliance
          with Section 16(a) of the Exchange Act**
 
 Section
          16(a) of the Securities Exchange Act requires our directors, executive
          officers
          and persons who are the beneficial owners of more than ten percent of our
          common
          stock (collectively, the "Reporting Persons") to file reports of ownership
          and
          changes in ownership with the Securities and Exchange Commission and to
          furnish
          us with copies of these reports.
 
 Based
          solely on copies of such forms received or written representations from
          certain
          Reporting Persons that no Form 5s were required for those persons, we believe
          that, during the fiscal year ended December 31, 2005, all filing requirements
          applicable to the Reporting Persons were complied with.
 
 **Item
          10. Executive Compensation.**
 
 No
          executive officer has received any cash compensation for services rendered
          to
          us. Commencing December 17, 2004 and ending upon the acquisition of a target
          business, we will pay 400 Building LLC, an affiliate of Arthur Spector,
          a fee of
          $7,500 per month for providing us with office space and certain office
          and
          secretarial services. However, this arrangement is solely for our benefit
          and is
          not intended to provide Mr. Spector compensation in lieu of salary. No
          other
          executive officer or director has a relationship with or interest in 400
          Building LLC. Other than this $7,500 per-month fee, no compensation of
          any kind,
          including finders and consulting fees, will be paid to any of our Founders,
          or
          any of their respective affiliates, for services rendered prior to or in
          connection with a business combination. However, our Founders will be reimbursed
          for any out-of-pocket expenses incurred in connection with activities on
          our
          behalf such as identifying potential target businesses and performing due
          diligence on suitable business combinations.
 
 Since
          our
          formation, we have not granted any stock options or stock appreciation
          rights or
          any awards under long-term incentive plans.
 
 **Item
          11. Security Ownership of Certain Beneficial Owners and Management and
          Related
          Stockholder Matters.**
 
 The
          following table sets forth information regarding the beneficial ownership
          of our
          common stock as of March 24, 2006, by:
 
 ·
                each
                    person known by us to be the owner of more than 5% of our outstanding
                    shares of common stock;
 
 ·
                each
                    of our executive officers and directors; and
 
 ·
                all
                    our executive officers and directors as a
                    group.
 
 33
 Unless
          otherwise indicated, we believe that all persons named in the table have
          sole
          voting and investment power with respect to all shares of common stock
          beneficially owned by them. As of March 24, 2006, 5,600,000 shares of our
          common
          stock were issued and outstanding.
 
 **Name
                    and Address of Beneficial Owner****(1)**
                
                **Amount
                    and Nature of Beneficial****Ownership****(2)**
                
                **Approximate
                    Percentage**
                  **of
                    Outstanding****Common Stock****(2)**Arthur
                    Spector(3)
                    (4)
                
                397,142
                
                7.1%Dr.
                    Heinz C. Schimmelbusch(4)
                
                68,572
                
                1.2%Robert
                    E. Keith, Jr.(4)(5)
                
                68,572
                
                1.2%Don
                    K. Rice(4)(6)
                
                68,572
                
                1.2%Spector
                    Family Trust(7)
                
                397,142
                
                7.1%Sapling,
                    LLC(8)
                
                325,200
                
                5.8%All
                    directors and executive officers as a group (4
                    individuals)
                
                602,858
                
                10.8%
 ___________________________________
 (1)
                  Unless
                      otherwise indicated, the business address of each of the individuals
                      is
                      435 Devon Park Drive, Building 400, Wayne, Pennsylvania
                      19087.
 (2)
                  Beneficial
                      ownership has been determined in accordance with Rule 13d-3 under the
                      Securities Exchange Act of 1934.
 (3)
                  Arthur
                      Spector is our chairman of the board, chief executive officer
                      and
                      president.
 (4)
                  Each
                      of these individuals is a director of ours.
 (5)
                  The
                      business address of Mr. Keith is 435 Devon Park Drive, Building
                      700,
                      Wayne, Pennsylvania 19087.
 (6)
                  The
                      business address of Mr. Rice is 517 Fishers Road, Bryn Mawr,
                      Pennsylvania
                      19010.
 (7)
                  The
                      Spector Family Trust is a trust established by Mr. Spector
                      and his wife
                      for the benefit of his descendents. Adam B. Spector and Jeremy
                      D. Spector,
                      Mr. Spector’s adult sons, are co-trustees of the
                      trust.
 (8)
                  The
                      business address of Sapling, LLC is 535 Fifth Avenue, 31stFloor, New York, New York 10017.
 All
          of
          the 1,000,000 shares of our common stock owned by our Founders have been
          placed
          in escrow with Continental Stock Transfer & Trust Company, as escrow agent,
          pursuant to an escrow agreement described below.
 
 34
 Messrs.
          Arthur Spector and the Spector Family Trust may be deemed to be our "parent"
          and
          "promoter," as these terms are defined under the Federal securities
          laws.
 
 **Item
          12. Certain Relationships and Related Transactions** **.**
 
 In
          September 2004, we issued 875,000 shares of our common stock to the individuals
          set forth below for $25,000 in cash, at an average purchase price of
          approximately $0.029 per share as follows:
 
 **Name**
                
                **Number
                    of Shares**
                
                **Relationship
                    to Us**Arthur
                    Spector
                
                347,500
                
                Chairman
                    of the Board, Chief Executive Officer and PresidentSpector
                    Family Trust
                
                347,500
                
                StockholderDr.
                    Heinz C. Schimmelbusch
                
                60,000
                
                DirectorRobert
                    E. Keith, Jr.
                
                60,000
                
                DirectorDon
                    K. Rice
                
                60,000
                
                Director
 
 On
          December 7, 2004, our board of directors authorized a stock dividend of
          0.1428571 shares of common stock for each outstanding share of common stock,
          effectively lowering the price to $0.025 per share.
 
 Pursuant
          to an escrow agreement between us, our Founders and Continental Stock Transfer
          & Trust Company, all of the Founder Shares were placed in escrow, with
          Continental acting as escrow agent, pursuant to an escrow agreement, until
          the
          earliest of:
 
 ·
                December
                    17, 2007;
 
 ·
                our
                    liquidation; or
 
 ·
                the
                    consummation of a liquidation, merger, stock exchange or other
                    similar
                    transaction which results in all of our stockholders having the
                    right to
                    exchange their shares of common stock for cash, securities or
                    other
                    property subsequent to our consummating a business combination
                    with a
                    target business.
 
 During
          the escrow period, these shares cannot be sold, but the Founders will retain
          all
          other rights as stockholders, including, without limitation, the right
          to vote
          their shares of common stock and the right to receive cash dividends, if
          declared. If dividends are declared and payable in shares of common stock,
          such
          dividends will also be placed in escrow. If we are unable to effect a business
          combination and liquidate, none of our Founders will receive any portion
          of the
          liquidation proceeds with respect to common stock owned by them prior to
          our
          initial public offering.
 
 We
          also
          entered into a registration rights agreement with the Founders pursuant
          to which
          the holders of the majority of the Founders Shares will be entitled to
          make up
          to two demands that we register these shares. The holders of the majority
          of
          these shares may elect to exercise these registration rights at any time
          after
          the date on which these shares of common stock are released from escrow.
          In
          addition, these stockholders have certain "piggy-back" registration rights
          on
          registration statements filed subsequent to the date on which these shares
          of
          common stock are released from escrow. We will bear the expenses incurred
          in
          connection with the filing of any such registration statements.
 
 35
 Each
          of
          our Founders also entered into a letter agreement with us and EarlyBirdCapital,
          Inc. pursuant to which, among other things:
 
 ·
                each
                    agreed to vote all Founders Shares in accordance with the majority
                    of the
                    holders of our shares of common stock sold in our initial public
                    offering
                    if we solicit approval of our stockholders for a business
                    combination;
 ·
                if
                    we fail to consummate a business combination by June 23, 2006
                    (or
                    by December 23, 2006under
                    certain limited circumstances), each agreed to take all reasonable
                    actions
                    within his power to cause us to liquidate as soon as reasonably
                    practicable;
 ·
                each
                    waived any and all rights he may have to receive any distribution
                    of cash,
                    property or other assets as a result of such liquidation with
                    respect to
                    his Founders Shares;
 ·
                each
                    agreed to present to us for our consideration, prior to presentation
                    to
                    any other person or entity, any suitable opportunity to acquire
                    an
                    operating business, until the earlier of our consummation of
                    a business
                    combination, our liquidation or until such time as he ceases
                    to be an
                    officer or director of ours, subject to any pre-existing fiduciary
                    obligations he might have;
 ·
                each
                    agreed that we could not consummate any business combination
                    which
                    involves a company which is affiliated with any of our Foundersunless
                    we obtain an opinion from an independent investment banking firm
                    reasonably acceptable to EarlyBirdCapital, Inc. that the business
                    combination is fair to our stockholders from a financial
                    perspective;
 ·
                each
                    agreed that he and his affiliates will not be entitled to receive
                    and will
                    not accept any compensation for services rendered to us prior
                    to the
                    consummation of our business combination;
                    and
 ·
                each
                    agreed that he and his affiliates will not be entitled to receive
                    or
                    accept a finder’s fee or any other compensation in the event he or his
                    affiliates originate a business
                    combination.
 
 400
          Building LLC, an affiliate of Arthur Spector, has agreed that commencing
          December 17, 2004 and ending upon the acquisition of a target business,
          it will
          make available to us a small amount of office space and certain office
          and
          secretarial services, as we may require from time to time. We have agreed
          to pay
          400 Building LLC $7,500 per month for these services. As of December 31,
          2005, we have paid 400 Building LLC $93,750.
 
 Arthur
          Spector advanced $35,000 to us to cover expenses related to the Offering.
          The
          loan was payable without interest on the earlier of September 29, 2005
          or the
          consummation of the Offering. The loan was repaid in December 2004 from
          the
          proceeds of the Offering.
 
 36
 We
          have
          and will reimburse our officers and directors for any reasonable out-of-pocket
          business expenses incurred by them in connection with certain activities
          on our
          behalf such as identifying and investigating possible target businesses
          and
          business combinations.
 
 Other
          than the $7,500 per-month administrative fee and reimbursable out-of-pocket
          expenses payable to our officers and directors, no compensation or fees
          of any
          kind, including finders and consulting fees, will be paid to any of our
          Founders, or to any of their respective affiliates for services rendered
          to us
          prior to or with respect to the business combination.
 
 All
          ongoing and future transactions between us and any of our officers and
          directors
          or their respective affiliates, including loans by our officers and directors,
          will be on terms believed by us to be no less favorable than are available
          from
          unaffiliated third parties and such transactions or loans, including any
          forgiveness of loans, will require prior approval in each instance by a
          majority
          of our uninterested “independent” directors (to the extent we have any) or the
          members of our board who do not have an interest in the transaction, in
          either
          case who had access, at our expense, to our attorneys or independent legal
          counsel.
 
 **Item
          13. Exhibits and Reports on Form 8-K.**
 
 (a)
          The
          following Exhibits are filed as part of this report.
 
 Exhibit
                    No.
                Description3.1
                Amended
                    and Restated Certificate of Incorporation. (1)3.2
                By-laws.
                    (1)4.1
                Specimen
                    Unit Certificate. (1)4.2
                Specimen
                    Common Stock Certificate. (1)4.3
                Specimen
                    Warrant Certificate. (1)4.4
                Form
                    of Unit Purchase Option granted to EarlyBirdCapital, Inc.
                    (1)4.5
                Form
                    of Warrant Agreement between Continental Stock Transfer & Trust
                    Company and the Registrant. (1)10.1
                Letter
                    Agreement among the Registrant, EarlyBirdCapital, Inc. and Arthur
                    Spector
                    (1)10.2
                Letter
                    Agreement among the Registrant, EarlyBirdCapital, Inc. and the
                    Spector
                    Family Trust (1)10.3
                Letter
                    Agreement among the Registrant, EarlyBirdCapital, Inc. and Dr.
                    Heinz C.
                    Schimmelbusch (1)10.4
                Letter
                    Agreement among the Registrant, EarlyBirdCapital, Inc. and Robert
                    E.
                    Keith, Jr. (1)
  37
 10.5
                Letter
                    Agreement among the Registrant, EarlyBirdCapital, Inc. and Don
                    K. Rice
                    (1)10.6
                Form
                    of Investment Management Trust Agreement between Continental
                    Stock
                    Transfer & Trust Company and the Registrant. (1)10.7
                Form
                    of Stock Escrow Agreement between the Registrant, Continental
                    Stock
                    Transfer & Trust Company and the Initial Stockholders.
                    (1)10.8
                Form
                    of Letter Agreement between 400 Building LLC and Registrant regarding
                    administrative support. (1)10.9
                Promissory
                    Note, dated September 29, 2004, in the principal amount of $35,000
                    issued
                    to Arthur Spector. (1)10.10
                Registration
                    Rights Agreement among the Registrant and the Initial Stockholders.
                    (1)10.11
                Warrant
                    Purchase Agreement among Arthur Spector and EarlyBirdCapital,
                    Inc.
                    (1)31
                Certification
                    of Chairman, Chief Executive Officer and President pursuant to
                    Section 302
                    of the Sarbanes-Oxley Act of 2002.32
                Certification
                    of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.
 
 (1)
                Incorporated
                    by reference to the Registrant’s Registration Statement on Form S-1 or
                    amendments thereto (SEC File No.
                    333-119937).
 
 **Item
          14. Principal Accountant Fees and Services.**
 
 The
          firm
          of Goldstein Golub Kessler LLP acts as our principal accountant. Through
          September 30, 2005, Goldstein Golub Kessler LLP (“the Firm”) had a continuing
          relationship with American Express Tax and Business Services Inc. (“TBS”), from
          which it leased auditing staff who were full time, permanent employees
          of TBS
          and through which its partners provide non-audit services. Subsequent to
          September 30, 2005, this relationship ceased and the Firm established a
          similar
          relationship with RSM
          McGladrey, Inc. (“RSM”). The
          Firm
          has no full time employees and therefore, none of the audit services performed
          were provided by permanent full-time employees of the Firm. The Firm manages
          and
          supervises the audit and audit staff, and is exclusively responsible for
          the
          opinion rendered in connection with this examination.
 
 Other
          services, which do not include Financial Information Systems Design and
          Implementation fees, have been provided by TBS or RSM.
 
 The
          following is a summary of fees paid to our principal accountant for services
          provided.




38


**Audit
      Fees**





During
      2005, our principal accountant charged us $10,093 for services they performed
      in
      connection with the audit of our 2004 financial statements and Form 10-KSB
      filing, and $14,586 for work performed in connection with our Form 10-QSB
      filings for the quarters ended March 31, 2005, June 30, 2005 and September
      30,
      2005. We expect to be billed $12,500 - $15,000 in connection with the audit
      of
      the December 31, 2005 financial statements. In addition, our principal
      accountant charged us $1,500 for review of certain issues regarding a potential
      acquisition.




Our
      principal accountant charged us $25,000 for services they performed in
      connection with our initial public offering, including the financial statements
      included in the Current Report of Form 8-K filed with the Securities and
      Exchange Commission on December 23, 2004. Of the $25,000 billed for this work,
      $8,250 was paid in December 2004 and the balance was paid in February
      2005.





**Audit-Related
      Fees**





During
      2005, our principal accountant did not render assurance and related services
      reasonably related to the performance of the audit or review of financial
      statements.





**Tax
      Fees**





During
      2005, RSM charged us $2,630 for preparation of our 2004 federal and state tax
      returns.





During
      2004, RSM did not render services to us for tax compliance, tax advice and
      tax
      planning.





**All
      Other Fees**





During
      2005 and 2004, there were no fees billed for products and services provided
      by
      the principal accountant other than those set forth above.





**Audit
      Committee Approval**





All
      of
      the services listed above were approved by our audit committee prior to their
      performance.






39


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.








MILLSTREAM
                II ACQUISITION CORPORATIONBy:
            /s/
                Arthur SpectorArthur
                SpectorChairman,
                President and Chief Executive OfficerDate:
                March 30, 2006





In
      accordance with the Exchange Act, this report had been signed below by the
      following persons on behalf of the registrant in the capacities and on the
      dates
      indicated.





/s/
                Arthur SpectorArthur
                SpectorChairman,
                President and Chief Executive Officer (Principal executive and financial
                and accounting officer)Date:
                March 30, 2006





/s/
                Robert E. Keith, Jr.Robert
                E. Keith, Jr.DirectorDate:
                March 30, 2006





/s/
                Don K. RiceDon
                K. RiceDirectorDate:
                March 30, 2006





/s/
                Dr. Heinz SchimmelbuschDr.
                Heinz SchimmelbuschDirectorDate:
                March 30, 2006




40