**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-KSB**


(Mark
      One)




**x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**




For
      the
      year ended October 31, 2006




**o
      TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**




For
      the
      transition period from _____________ to ______________




*Commission
      File No. 000-50956*




**PHARMA-BIO
      SERV, INC.**


(Name
      of
      small business issuer as specified in its charter)




Delaware
            
            20-0653570(State
                of Incorporation)
            
            (I.R.S. EmployerIdentification
                No.)




373
      Mendez Vigo, Suite 110, Dorado, Puerto Rico 00646


(Address
      of principal executive offices)




787-278-2709


(Issuer's
      telephone number)




Securities
      registered under Section 12(b) of the Exchange Act: None




Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, par value
      $0.0001 per share









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. x YES o
      NO




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-KSB. o




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




Revenues
      for the Registrant’s most recent fiscal year: $14,229,831




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant was approximately $8,100,000 based upon the
      closing sale price as quoted on the OTC Bulletin Board of $0.80 on January
      25,
      2007.




The
      number of shares outstanding of the registrant's Common Stock as of January
      20,
      2007 was 18,315,001.





Transitional
      Small Business Disclosure Format (Check one):  YES o NO x




Documents
      incorporated by reference: None








**PHARMA-BIO
      SERV, INC.**


**FORM
      10-KSB**


**FOR
      THE YEAR ENDED OCTOBER 31, 2006**




**TABLE
      OF CONTENTS**




Page**PART
                I**ITEM
                1
            DESCRIPTION
                OF BUSINESS
            1ITEM
                2
            DESCRIPTION
                OF PROPERTY
            13ITEM
                3
            LEGAL
                PROCEEDINGS
            13ITEM
                4
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            13**PART
                II**ITEM
                5
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            13ITEM
                6
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS
            14ITEM
                7
            FINANCIAL
                STATEMENTS
            23ITEM
                8
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            42ITEM
                8A
            CONTROLS
                AND PROCEDURES
            42ITEM
                8B
            OTHER
                INFORMATION
            42**PART
                III**ITEM
                9
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(A) OF THE EXCHANGE ACT
            43ITEM
                10
            EXECUTIVE
                COMPENSATION
            45ITEM
                11
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDERS MATTERS
            47ITEM
                12
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            48ITEM
                13
            EXHIBITS
            49ITEM
                14
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            50**SIGNATURES**









**PART
      I**





**FORWARD
      LOOKING STATEMENTS**




This
      report on Form 10-KSB contains certain forward-looking statements that are
      based
      on current expectations. In light of the important factors that can materially
      affect results, including those set forth in this paragraph and below, the
      inclusion of forward-looking information herein should not be regarded as a
      representation by the Company or any other person that the objectives or plans
      of the Company will be achieved. The Company may be unable to expand its
      customer base and to replace customers upon the completion of contracts, and
      may
      encounter competitive, technological, financial and business challenges making
      it more difficult than expected to continue to develop and market its services;
      the market may not accept the Company's existing and future services; changes
      relating to the business of our clients; tax, economic, industry trends and
      other factors relating to Puerto Rico; our ability to retain existing key
      management personnel; our ability to make acquisitions and other material
      adverse changes affecting our operations or business. Assumptions relating
      to
      budgeting, marketing, and other management decisions are subjective in many
      respects and thus susceptible to interpretations and periodic revisions based
      on
      actual experience and business developments, the impact of which may cause
      us to
      alter our marketing and other budgets, which may in turn affect our financial
      position and results of operations. You should not place undue reliance on
      forward-looking statements contained herein, which speak solely as of the date
      of this Form 10-KSB, and the forward looking statements are qualified in their
      entirety by reference to the material contained in "Risk Factors" and
      "Management's Discussion and Analysis of Financial Condition and Results of
      Operations" contained in this annual report. We assume no responsibility to
      update any forward-looking statements as a result of new information, future
      events, or otherwise.




**ITEM
      1**  **DESCRIPTION
      OF BUSINESS**





**Introduction**




We
      are a
      Puerto Rico based company established by Elizabeth Plaza as a sole
      proprietorship in 1993 and incorporated in 1997 to offer consulting services
      to
      the pharmaceutical industry. We have successfully grown our business operation
      by providing quality, value-added consulting services to the major
      pharmaceutical, biotechnology, medical device and chemical manufacturing
      companies principally in Puerto Rico.




Our
      mission is to provide high quality services to the pharmaceutical and related
      industries to maintain or improve their quality standards and competitive value.
      We assist our clients in complying with government regulations by offering
      a
      full range of consulting services in the areas relating to compliance with
      the
      regulations of the Food and Drug Administration (the “FDA”) and matters relating
      to the introduction of new pharmaceutical products, project management,
      technology transfers, training services and computer systems. We provide
      validation, regulatory compliance and value-added consulting services as problem
      solving solutions to our customers in the pharmaceutical, chemical (bulk
      manufacturing), biotechnology and medical devices industries in Puerto
      Rico.




Our
      engineering and life science professionals include former quality assurance
      managers or directors from pharmaceutical companies, and experienced and
      well-trained professionals with bachelors, masters and doctorate degrees in
      health sciences and engineering. Our objective is to offer a flexible, common
      sense and cost effective approach to meet our clients’ needs, strategies and
      budget objectives.




Prior
      to
      the acquisition of Plaza, Lawrence offered consulting and business advisory
      services to companies to help them provide business solutions for interacting
      with their customers. In this connection, Lawrence worked with companies to
      develop business and information technology strategies, technology solutions
      and
      integrated marketing programs. We are no longer engaged in this business and
      we
      have no continuing obligations under any contracts to which Lawrence is a
      party.









**Organization;
      Reverse Acquisition**




Plaza
      Consulting Group, Inc. (“Plaza”) is a Puerto Rico corporation incorporated in
      1997. Pharm-Bio Serv, Inc. is a Delaware corporation, organized in 2004 under
      the name Lawrence Consulting Group, Inc. The corporate name was changed to
      Pharma-Bio Serv, Inc. in February 2006. Our executive offices are located at
      Sardinera Beach Building Suite 2, Marginal Costa de Oro, Dorado, Puerto Rico
      00646, (787) 278-2709. Our website is www.pharmaservpr.com. Information on
      our
      website or any other website is not part of this annual report.




On
      January 25, 2006, pursuant to an agreement and plan of merger among Lawrence,
      Plaza Acquisition Corp., Plaza, and Elizabeth Plaza, the sole stockholder of
      Plaza, Plaza Acquisition Corp. was merged into Plaza, with the result that
      Plaza
      became our wholly-owned subsidiary and our sole business became the business
      of
      Plaza. The acquisition of Plaza was accounted for as a reverse acquisition,
      with
      Plaza being the accounting acquiring party. The accounting rules for reverse
      acquisitions require that beginning with the date of the merger, January 25,
      2006, our balance sheet includes the assets and liabilities of Plaza and our
      equity accounts were recapitalized to reflect the net equity of Pharma-Bio.
      In
      addition, our historical operating results will be the operating results of
      Plaza. This transaction is referred to in this annual report as the reverse
      acquisition. See “Item 12. Certain Relationships and Related
      Transactions”.




References
      to “we,” “us,” “our” and similar words refer to Pharma-Bio Serv, commencing with
      the acquisition of Plaza and the consummation of the private placement which
      occurred contemporaneously with the acquisition, and, with respect to historical
      information, these terms refer solely to Plaza.





**Risk
      Factors**





**Risks
      That Relate to our Business**





***Because
      our business is concentrated in the pharmaceutical industry in Puerto Rico,
      any
      changes in that industry could impair our ability to generate
      business.***





Since
      most of our business is performed in Puerto Rico for pharmaceutical,
      biotechnology, medical device and chemical manufacturing companies, our ability
      to generate revenue and profit would be impaired by such factors as changes
      in
      taxes in Puerto Rico, or regulatory, tax, political or economic conditions
      which
      discourage these businesses from operating in Puerto Rico and changes in U.S.
      government regulations which affect the need for services such as those provided
      by Plaza.





Because
      our business is dependent upon a small number of clients, the loss of a major
      client could impair our ability to operate profitably.





Our
      business has been dependent upon a small number of clients. During the years
      ended October 31, 2006 and 2005, a very small number of clients accounted for
      a
      disproportionately large percentage of our revenue. For the year ended October
      31, 2006, four customers accounted for approximately 73.0% of revenue. For
      the
      year ended October 31, 2005, two of these four customers accounted for
      approximately 62.2% of revenue, and for the year ended October 31, 2004, these
      two customers accounted for approximately 64.9% of revenue. The loss of or
      significant reduction in the scope of work performed for any major customer
      could impair our ability to operate profitably. The scope of work for our
      largest customer has declined significantly in the year ended October 31, 2006,
      and we cannot assure we will not sustain significant decreases in revenue from
      our major customers or that we will be able to replace any decline in revenue.
      In June 2006, our largest customer announced that it is closing one of its
      two
      facilities in Puerto Rico and reducing the personnel level at the second
      facility. As a result, we expect that our revenue from this client will continue
      to decline.




-2-




***We
      may be unable to pass on increased labor cost to our
      clients.***





The
      principal components of our costs of revenue are employee compensation
      (salaries, wages, taxes and benefits) and expenses relating to the performance
      of the services. We face increasing labor costs which we seek to pass on to
      our
      customers through increases in our rates. We may not be able to pass these
      cost
      increases to our clients, and, to the extent that we are not able to pass these
      increases to our clients, our gross margin will be reduced.





***Our
      cash requirements include payments totaling $8.25 million due to Elizabeth
      Plaza, which may impair our ability to develop our
      business.***





Pursuant
      to the merger agreement, we are required to make three payments, each in the
      amount of $2.75 million, on January 25, 2007, 2008 and 2009. These payments
      are
      not contingent upon our earnings, earnings before interest, taxes, depreciation
      and amortization or any other financial criteria. We may not have resources
      other than our operations from which to make the payments. We cannot assure
      you
      that we will have available cash from which we can make these payments and,
      even
      if we do have the available cash, our growth may be impaired if we use our
      cash
      for that purpose.





***Because
      the pharmaceutical industry is subject to government regulations, changes in
      government regulations relating to this industry may affect the need for our
      services.***





Because
      government regulations affect all aspects of the pharmaceutical, biotechnology,
      medical device and chemical manufacturing industries, including regulations
      relating to the testing and manufacturing of pharmaceutical products and the
      disposal of materials which are or may be considered toxic, any change in
      government regulations could have a profound effect upon not only these
      companies but companies, such as us, that provide services to these industries.
      If we are not able to adapt and provide necessary services to meet the
      requirements of these companies in response to changes in government
      regulations, our ability to generate business may be impaired.





***The
      willingness of companies in the pharmaceutical and related industries to conduct
      business in Puerto Rico could significantly impair our business by reducing
      the
      need for our services.***





Since
      our
      business is presently conducted almost exclusively in Puerto Rico, our ability
      to generate revenue and income is dependent upon the willingness of our clients
      and potential clients to maintain or increase their operations in Puerto Rico.
      Our clients may consider factors such as tax benefits, Puerto Rico’s economy and
      other economic factors.





***Changes
      in tax benefits may affect the willingness of companies to continue or expand
      their operations in Puerto Rico.***





Until
      1996, the Internal Revenue Code provided certain tax benefits to pharmaceutical
      companies operating in Puerto Rico by enabling their Puerto Rico operations
      to
      operate free from federal income taxes. Partly as a result of the tax benefits,
      numerous pharmaceutical companies established facilities in Puerto Rico. In
      1996, this tax benefit was eliminated, although companies that had facilities
      in
      Puerto Rico could continue to receive these benefits for ten years, at which
      time the benefits expire. Although some tax benefits remain, the change in
      the
      tax law may affect the willingness of pharmaceutical companies to continue
      or to
      expand their Puerto Rico operations, and we are aware of one pharmaceutical
      company that has decided to close its Puerto Rico operations as a result of
      the
      change in the tax laws. To the extent that pharmaceutical companies choose
      to
      develop and manufacture products outside of Puerto Rico, our ability to generate
      new business may be impaired.




-3-




***Puerto
      Rico’s economy, including its recent governmental financial crisis, may affect
      the willingness of businesses to commence or expand operations in Puerto
      Rico.***





As
      a
      result of Puerto Rico’s recent governmental financial crisis, which resulted in
      the closing of government offices, businesses may be reluctant to commence
      or
      expand their operations in Puerto Rico. Further, since Puerto Rico’s economy is
      petroleum-based, the high price of oil, combined with Puerto Rico’s high level
      of debt, may make Puerto Rico a less attractive place to expand existing
      operations or commence new business activities. To the extent that companies
      in
      the pharmaceutical and related industries decide not to commence new operations
      or contract or not to expand their existing operations in Puerto Rico, the
      market for our services may decline.





***Other
      factors, including economic factors, may affect the decision of businesses
      to
      continue or expand their operations in Puerto Rico.***





Companies
      in the pharmaceutical and related industries for which we perform service are
      subject to economic pressures which affect their global operations and which
      may
      influence the decision to reduce or increase the scope of their operations
      in
      Puerto Rico. These companies consider a wide range of factors in making such
      a
      decision, and may be influences by a need to consolidate operations, to reduce
      expenses, to increase their business in geographical regions where there are
      large customer bases, to tax, regulatory and political considerations and many
      other factors. In June 2006, the client that was our largest client in the
      year
      ended October 31, 2005 announced that it is significantly reducing the scope
      of
      its operations in Puerto Rico by closing one of its two facilities in Puerto
      Rico and reducing its staff at the remaining facility. As a result, our revenue
      from this client has significantly declined in the year ended October 31, 2006
      from the prior year, and we anticipate that another major pharmaceutical company
      may reduce its operations in Puerto Rico. We can not assure you that other
      customers and potential customers will not make similar or more extensive
      reductions or terminate their operations in Puerto Rico entirely, which could
      significantly impair our ability to generate revenue.





***If
      we are unable to protect our clients’ intellectual property, our ability to
      generate business will be impaired.***





Our
      services either require us to develop intellectual property for clients or
      provide our personnel with access to our clients’ intellectual property. Because
      of the highly competitive nature of the pharmaceutical, biotechnology, medical
      device and chemical manufacturing industries and the sensitivity of our clients’
intellectual property rights, our ability to generate business would be impaired
      if we fail to protect those rights. Although all of our employees are required
      to sign non-disclosure agreements, any disclosure of a client’s intellectual
      property by an employee may subject us to litigation and may impair our ability
      to generate business either from the affected client or other potential clients.
      In addition, we are required to enter into confidentiality agreements and our
      failure to protect the confidential information of our clients may impair our
      business relationship.





***We
      may be subject to liability if our services or solutions for our clients
      infringe upon the intellectual property rights of
      others.***





It
      is
      possible that in performing services for our clients, we may inadvertently
      infringe upon the intellectual property rights of others. In such event, the
      owner of the intellectual property may commence litigation
      seeking damages and an injunction against both us and our client, and the client
      may bring a claim against us. Any infringement litigation would be costly,
      regardless of whether we ultimately prevail. Even if we prevail, we will incur
      significant expenses and our reputation would be hurt, which would affect our
      ability to generate business and the terms on which we would be engaged, if
      at
      all.




-4-




***We
      may be held liable for the actions of our employees when on
      assignment.***





We
      may be
      exposed to liability for actions taken by our employees while on assignment,
      such as damages caused by their errors, misuse of client proprietary information
      or theft of client property. Due to the nature of our assignments, we cannot
      assure you that we will not be exposed to liability as a result of our employees
      being on assignment.





***To
      the extent that we perform services pursuant to fixed-price or incentive-based
      contracts, our cost of services may exceed our revenue on the
      contract.***





Some
      of
      our revenue is derived from fixed price contracts. Our costs of services may
      exceed revenue of these contracts if we do not accurately estimate the time
      and
      complexity of an engagement. Further, we are seeking contracts by which our
      compensation is based on specified performance objectives, such as the
      realization of cost savings or specified performance objectives. Our failure
      to
      achieve these objectives would reduce our revenue and could impair our ability
      to operate profitably.





Our
      profit margin is largely a function of the rates we are able to recover for
      our
      services and the utilization rate of our professionals. Accordingly, if we
      are
      not able to maintain our pricing for our services or an appropriate utilization
      rate for our professionals without corresponding cost reductions, our profit
      margin and profitability will suffer. The rates we are able to recover for
      our
      services are affected by a number of factors, including:





·
            Our
                clients’ perception of our ability to add value through our
                services;





·
            Our
                ability to complete projects on
                time;





·
            Pricing
                policies of competitors;





·
            Our
                ability to accurately estimate, attain and sustain engagement revenues,
                margins and cash flows over increasingly longer contract periods;
                and





·
            General
                economic and political conditions.





Our
      utilization rates are also affected by a number of factors,
      including:





·
            Seasonal
                trends, primarily as a result of our hiring
                cycle;





·
            Our
                ability to move employees from completed projects to new engagements;
                and





·
            Our
                ability to manage attrition of our
                employees.





***Because
      most of our contracts may be terminated on little or no advance notice, our
      failure to generate new business could impair our ability to operate
      profitably.***





Our
      contracts can be terminated by our clients with short notice. Our clients
      typically retain us on a non-exclusive, engagement-by-engagement basis, and
      the
      client may terminate, cancel or delay any engagement or the project for which
      we
      are engaged, at any time and on short notice. As a result, we need to develop
      new business on an ongoing basis. Since our operations are generally limited
      to
      companies operating in Puerto Rico and, to a lesser extent, Puerto Rico
      businesses that operate elsewhere, the termination, cancellation, expiration
      or
      delay of contracts could have a significant impact on our ability to operate
      profitably.




-5-




Because
      of the competitive nature of the pharmaceutical, biotechnology, medical device
      and chemical manufacturing consulting market, we may not be able to compete
      effectively if we cannot efficiently respond to changes in the structure of
      the
      market and developments in technology.





Because
      of recent consolidations in the pharmaceutical, biotechnology, medical device
      and chemical manufacturing consulting business, we are faced with an increasing
      number of larger companies that offer a wider range of services and have better
      access to capital than we have. We believe that larger and better-capitalized
      competitors have enhanced abilities to compete for both clients and skilled
      professionals. In addition, one or more of our competitors may develop and
      implement methodologies that result in superior productivity and price
      reductions without adversely affecting their profit margins. We cannot assure
      you that we will be able to compete effectively in an increasingly competitive
      market.





***Because
      we are dependent upon our management, our ability to develop our business may
      be
      impaired if we are not able to engage skilled
      personnel.***





Our
      success to date has depended in large part on the skills and efforts of
      Elizabeth Plaza, our president, chief executive officer and founder. The loss
      of
      the services of Ms. Plaza could have a material adverse effect on the
      development and success of our business. Although we entered into an employment
      agreement with Ms. Plaza, the agreement, as amended, only requires her to
      continue as an employee through December 31, 2007 and as a consultant thereafter
      through January 31, 2009, and it does not guarantee that she will continue
      to be
      employed by us. During the term of her employment, we will have to identify
      and
      hire a person to serve as president and chief executive officer upon Ms. Plaza’s
      retirement. Our failure to hire a qualified person in a timely manner will
      impair our ability to grow. In addition, because of the highly technical nature
      of the work that we perform for our clients in the pharmaceutical,
      biotechnology, medical device and chemical manufacturing industries, we need
      to
      hire highly skilled personnel who are familiar with the needs of these companies
      in order to perform the services which we provide. Our future success will
      depend in part upon our ability to attract and retain additional qualified
      management and technical personnel. Competition for such personnel is intense
      and we compete for qualified personnel with numerous other employers, including
      consulting firms, some of which have greater resources than we have, as well
      as
      pharmaceutical companies, all of which have significantly greater financial
      and
      other resources than we do. We may experience increased costs in order to retain
      and attract skilled employees. Our failure to attract additional personnel
      or to
      retain the services of key personnel and independent contractors could have
      a
      material adverse effect on our ability to operate profitably.





***We
      may not be able to continue to grow unless we consummate acquisitions or enter
      markets outside of Puerto Rico.***





An
      important part of our growth strategy is both to acquire other businesses which
      can increase the range of services and products that we can offer and to
      establish offices in countries where we do not presently operate, either by
      acquisition or by internal growth. If we fail to make any acquisitions or
      otherwise expand our business, our future growth may be limited. As of the
      date
      of this report, we do not have any agreement or understanding, either formal
      or
      informal, as to any acquisition.





***Because
      we are now required to pay income tax, our past operations, which do not reflect
      income tax, may not be indicative of our future
      results.***





Prior
      to
      January 25, 2006, we operated as an N Corporation under the Puerto Rico Internal
      Revenue Code. An N corporation is similar to an S corporation under the Internal
      Revenue Code in that the corporation itself is not subject to tax and all
      taxable income is taxed to the stockholder. Upon the completion of the reverse
      acquisition on January 25, 2006, we became subject to Puerto Rico income tax,
      which provides for corporate income tax at our tax bracket at the rates ranging
      from 39% to 41.5%. Had we been subject to income tax for the years ended October
      31, 2006 and 2005, our net income would have been approximately $2.0 million
      for
      the year ended October 31, 2006 and $4.0 million for the year ended October
      31,
      2005.




-6-




***If
      we identify a proposed acquisition, we may require substantial cash to fund
      the
      cost of the acquisition.***





Any
      acquisitions we make may be made with cash or our securities or a combination
      of
      cash and securities. To the extent that we require cash, we may have to borrow
      the funds or sell equity securities. We have no commitments from any financing
      source and we may not be able to raise any cash necessary to complete an
      acquisition. If we seek to expand our business internally, we will incur
      significant start-up expenses without any assurance of our ability to penetrate
      the market.





***The
      issuance of securities, whether in connection with an acquisition or otherwise,
      may result in significant dilution to our
      stockholders.***





If
      we are
      required to issue securities either as payment of all or a portion of the
      purchase price of an acquisition or in order to obtain financing for the
      acquisition or for other corporate purposes could result in dilution to our
      stockholders. The amount of such dilution will be dependent upon the terms
      on
      which we issue securities. The issuance of securities at a price which is less
      than the exercise price of warrants or the conversion price of securities could
      result in additional dilution if we are required to reduce the exercise price
      or
      conversion price of the then outstanding options or warrants or other
      convertible securities.





***If
      we make any acquisitions, they may disrupt or have a negative impact on our
      business.***





If
      we
      make acquisitions or establish operations in countries outside of Puerto Rico,
      we could have difficulty integrating the acquired companies’ personnel and
      operations with our own. In addition, the key personnel of the acquired business
      may not be willing to work for us. We cannot predict the effect expansion may
      have on our core business. Regardless of whether we are successful in making
      an
      acquisition, the negotiations could disrupt our ongoing business, distract
      our
      management and employees and increase our expenses. In addition to the risks
      described above, acquisitions are accompanied by a number of inherent risks,
      including, without limitation, the following:





·
            the
                difficulty of integrating acquired products, services or
                operations;





·
            the
                potential disruption of the ongoing businesses and distraction of
                our
                management and the management of acquired
                companies;





·
            the
                potential loss of contracts from clients of acquired
                companies.





·
            the
                difficulty of maintaining profitability due to increased labor and
                expenses from acquired company.





·
            difficulties
                in complying with regulations in other countries that relate to both
                the
                pharmaceutical or other industry to which we provide services as
                well as
                our own operations;




-7-




·
            difficulties
                in maintaining uniform standards, controls, procedures and
                policies;





·
            the
                potential impairment of relationships with employees and customers
                as a
                result of any integration of new management
                personnel;





·
            the
                potential inability or failure to achieve additional sales and enhance
                our
                customer base through cross-marketing of the products to new and
                existing
                customers;





·
            the
                effect of any government regulations which relate to the business
                acquired;





·
            potential
                unknown liabilities associated with acquired businesses or product
                lines,
                or the need to spend significant amounts to retool, reposition or
                modify
                the marketing and sales of acquired products or the defense of any
                litigation, whether of not successful, resulting from actions of
                the
                acquired company prior to our
                acquisition;





·
            difficulties
                in disposing of the excess or idle facilities of an acquired company
                or
                business and expenses in maintaining such facilities;
                and





·
            potential
                expenses under the labor, environmental and other laws of other
                countries.





Our
      business could be severely impaired if and to the extent that we are unable
      to
      succeed in addressing any of these risks or other problems encountered in
      connection with an acquisition, many of which cannot be presently identified.
      Further, the commencement of business in other countries may be subject to
      significant risks in areas which we are not able to prepare for in
      advance.





***Our
      quarterly revenues, operating results and profitability will vary from quarter
      to quarter, which may result in increased volatility of our stock
      price.***





Our
      quarterly revenues, operating results and profitability have varied in the
      past
      and are likely to vary significantly from quarter to quarter, making them
      difficult to predict. This may lead to volatility in our share price. The
      factors that are likely to cause these variations are:





·
            Seasonality,
                including number of workdays and holiday and summer
                vacations;





·
            The
                business decisions of clients regarding the use of our
                services;





·
            Periodic
                differences between clients’ estimated and actual levels of business
                activity associated with ongoing engagements, including the delay,
                reduction in scope and cancellation of
                projects;





·
            The
                stage of completion of existing projects and/or their
                termination;





·
            Our
                ability to move employees quickly from completed projects to new
                engagements and our ability to replace completed contracts with new
                contracts with the same clients or other
                clients.





·
            The
                introduction of new services by us or our
                competitors;




-8-




·
            Changes
                in pricing policies by us or our
                competitors;





·
            Our
                ability to manage costs, including personnel costs, support-services
                costs
                and severance costs;





·
            Acquisition
                and integration costs related to possible acquisitions of other
                businesses.





·
            Changes
                in estimates, accruals and payments of variable compensation to our
                employees; and





·
            Global
                economic and political conditions and related risks, including acts
                of
                terrorism.





***Because
      of our cash requirements, we may be unable to pay
      dividends.***





Except
      for payments to Elizabeth Plaza during the period when she was our sole
      stockholder, including $8.0 million paid in the year ended October 31, 2005,
      we
      have not paid any dividends on our common stock and do not anticipate paying
      cash dividends in the foreseeable future. We intend to retain any earnings
      to
      finance the growth of our business and to pay the deferred payments of $8.25
      million owed to Elizabeth Plaza, and we may never pay cash
      dividends.





**Risks
      Concerning our Securities**





***Because
      there is a limited market in our common stock, stockholders may have difficulty
      in selling our common stock and our common stock may be subject to significant
      price swings.***





There
      is
      a very limited market for our common stock. Since trading commenced in December
      2006, there has been little activity in our common stock and on some days there
      is no trading in our common stock. There is little stock in the public market,
      and most of our common stock has been registered for sale pursuant to the
      Securities Act by the investors in our January 2006 private placement. Because
      of the limited market for our common stock, the purchase or sale of a relatively
      small number of shares may have an exaggerated effect on the market price for
      our common stock. We cannot assure stockholders that they will be able to sell
      common stock or, that if they are able to sell their shares, that they will
      be
      able to sell the shares in any significant quantity at the quoted
      price.





***The
      exercise of outstanding options and warrants may have a dilutive effect on
      the
      price of our common stock.***





To
      the
      extent that outstanding stock options and warrants are exercised, dilution
      to
      our stockholders will occur. Moreover, the terms upon which we will be able
      to
      obtain additional equity capital may be adversely affected, since the holders
      of
      the outstanding options and warrants can be expected to exercise them at a
      time
      when we would, in all likelihood, be able to obtain any needed capital on terms
      more favorable to us than the exercise terms provided by the outstanding options
      and warrants.





***Because
      we are not subject to compliance with rules requiring the adoption of certain
      corporate governance measures, our stockholders have limited protections against
      interested director transactions, conflicts of interest and similar
      matters.***





The
      Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by
      the
      Commission, the New York and American Stock Exchanges and the Nasdaq Stock
      Market as a result of Sarbanes-Oxley, require the implementation of various
      measures relating to corporate governance. These measures are designed to
      enhance the integrity of corporate management and the securities markets and
      apply to securities which are listed on those exchanges or the Nasdaq Stock
      Market. Because we are not presently required to comply with many of the
      corporate governance provisions and because we chose to avoid incurring the
      substantial additional costs associated with such compliance any sooner than
      necessary, we have not yet adopted all of these measures. Until we comply with
      such corporate governance measures, regardless of whether such compliance is
      required, the absence of such standards of corporate governance may leave our
      stockholders without protections against interested director transactions,
      conflicts of interest and similar matters and investors may be reluctant to
      provide us with funds necessary to expand our operations.




-9-




**Our
      Business**





We
      offer
      consulting services to the pharmaceutical industry. Our engineering and life
      science professionals include former quality assurance managers or directors
      from pharmaceutical companies, and experienced and well-trained professionals
      with bachelors, masters and doctorate degrees in health sciences and
      engineering. Our objective is to offer a flexible, common sense and cost
      effective approach to meet our clients’ needs, strategies and budget
      objectives.





We
      have
      established quality systems for our employees which include:




·
            Training
                Programs - including a Current Good Manufacturing Practices exam
                prior to
                recruitment and quarterly
                refreshers;




·
            Recruitment
                Full Training Program - including employee manual, dress code, time
                sheets
                and good projects management and control procedures, job descriptions,
                and
                firm operating and administration
                procedures;




·
            Safety
                Program - including OSHA and health (medical surveillance, certificate
                of
                good health, drug screening, background checks including conduct
                certificates, alcohol and smoke free
                policy);




·
            Code
                of Ethics - A code of ethics and business conduct is used and enforced
                as
                one of the most significant company controls on personal
                behavior.




In
      addition, we have implemented procedures to respond to client complaints and
      customer satisfaction survey procedures. As part of our employee performance
      appraisal annual process, our clients receive an evaluation form for employee
      project performance feedback, including compliance with our code of
      ethics.




In
      January 2006, we acquired certain assets for a purchase price of $300,000.
      The
      acquired assets include a client list and a validation compliance service
      business. The purchase price was paid in three installments of $100,000. We
      have
      also hired nine former employees of that business.




**Business
      Strategy and Objectives**




We
      have a
      well-established and consistent relationship with the major pharmaceutical,
      biotechnology, medical device and chemical manufacturing companies in Puerto
      Rico. Our business strategy is based on a commitment to provide premium quality
      and professional consulting services and reliable customer service to our
      customer base. Our business strategy and objectives are as follows:




·
            Continue
                growth in consulting services in each technical service, quality
                assurance, regulatory compliance, validation, engineering, safety
                and
                environmental and manufacturing departments by achieving greater
                market
                penetration from our marketing and sales
                efforts;




-10-




·
            Continue
                to enhance our technical consulting services through an increase
                in
                professional staff through internal growth and acquisitions that
                provides
                the best solutions to our customers’
needs;




·
            Motivate
                our professionals and support staff by implementing a compensation
                program
                which includes both individual performance and overall company performance
                as elements of compensation;




·
            Create
                a pleasant corporate culture and emphasize operational quality safety
                and
                timely service;




·
            Continue
                to maintain our reputation as a trustworthy and highly ethical partner;
                and




·
            Efficiently
                manage our operating and financial costs and
                expenses.




**Technical
      Consulting Services**




We
      have
      established a reputation as a premier technical consulting services firm to
      the
      pharmaceutical, biotechnology, medical device and chemical manufacturing
      industries in Puerto Rico. These services include regulatory compliance,
      validation, technology transfer, engineering, safety and environmental,
      training, project management and process support. We have approximately 20
      clients that are among the largest pharmaceutical, chemical manufacturing,
      medical device and biotechnology companies in Puerto Rico. We attend
      exhibitions, conferences, conventions and seminars as either exhibitors,
      sponsors or conference speakers.





**Marketing**




We
      conduct our marketing activities primarily within the local Puerto Rico
      marketplace. We actively utilize our project managers and leaders who are
      currently managing consulting service contracts at various client locations
      to
      also market consulting services to their existing and past client relationships.
      Our senior management is also actively involved in the marketing process,
      especially in marketing to major accounts. Our senior management and staff
      also
      concentrate on developing new business opportunities and focus on the larger
      customer accounts (by number of professionals or dollar volume) and responding
      to prospective customers’ requests for proposals.




**Principal
      Customers**





Four
      customers accounted for 10% or more of our revenue during the year ended October
      31, 2006, two of which also accounted for more than 10% of our revenue during
      the year ended October 31, 2005. In spite of the fact
      that just a few customers represent a significant source of revenue, our
      functions are not a continuous process, accordingly, the client base for which
      our services are typically rendered, on a project-by-project basis, changes
      regularly. The
      following table sets forth information as to revenue and percentage of revenue
      for these years (dollars in thousands) for our principal clients, all of which
      are major pharmaceutical companies:





Years
                Ended October 31,Customer
            
            2006
            
            2005GlaxoSmithKline
            
            $
            4,248
                (29.9
            %)
            $
            637
                (3.7
            %)Schering-Plough
            
            
            2,935
                (20.6
            %)
            
            7,523
                (43.2
            %)Johnson
                & Johnson
            
            
            1,727
                (12.1
            %)
            
            969
                (5.6
            %)Lilly
                del Caribe
            
            
            1,445
                (10.2
            %)
            
            3,312
                (19.0
            %)




-11-





**Competition**




We
      are
      engaged in a highly competitive and fragmented industry. Some of our competitors
      are, on an overall basis, larger than us or are subsidiaries of larger
      companies, and therefore may possess greater resources than us. Furthermore,
      because the technical professional aspects of our business do not usually
      require large amounts of capital, there is relative ease of market entry for
      a
      new entrant possessing acceptable professional qualifications. Accordingly,
      we
      compete with regional, national, and international firms. Within the Puerto
      Rico
      marketplace, certain competitors, including local competitors, may possess
      greater resources than we do as well as better access to clients and potential
      clients.




Our
      competitors for validation and compliance consulting services consist of large
      public and private companies such as Fluor Corporation, Foster Wheeler Corp.,
      Siemens, Skanska Pharmaceutical, and Washington Group International, as well
      as
      smaller validation companies located in Puerto Rico and mainland United
      States.  Although we are the largest validation consulting firm in Puerto
      Rico, as measured by number of professionals dedicated to providing validation
      and compliance consulting services in Puerto Rico, these companies, which offer
      consulting services similar to those we offer, have significantly more resources
      than we have and may have relationships with pharmaceutical, biotechnology
      and
      chemical manufacturing companies in the United States or in other parts of
      the
      world.




Competition
      for validation and consulting services is based primarily on reputation, track
      record, experience, quality of service and price. We believe that we enjoy
      significant competitive advantages over other consulting service firms because
      of our historical market share within Puerto Rico (14 years), brand name,
      reputation and track record with many of the major pharmaceutical,
      biotechnology, medical device and chemical manufacturing companies in Puerto
      Rico.




Because
      of recent consolidations in the pharmaceutical consulting business in Puerto
      Rico, we are faced with an increasing number of larger companies that offer
      a
      wider range of services than we do and which also have better access to capital.
      We believe that larger and better-capitalized competitors have enhanced
      abilities to compete for both clients and skilled professionals. In addition,
      one or more of our competitors may develop and implement methodologies that
      result in affecting their, and thus, potentially, our profit.




The
      market of qualified and/or experienced professionals that are capable of
      providing technical consulting services is very competitive and consists
      primarily of our competitors as well as companies in the pharmaceutical,
      chemical, biotechnology and medical device industries who are our clients and
      potential clients. In seeking qualified personnel we market our name recognition
      in the Puerto Rico market, our reputation with our client, salary and benefits,
      quality training and a low turnover of qualified employees.




**Intellectual
      Property Rights**




We
      have
      no proprietary software or products. We rely on non-disclosure agreements with
      our employees to protect the proprietary software and other proprietary
      information of our clients. Any unauthorized use or disclosure of this
      information could harm our business.




-12-




**Personnel**




We
      currently employ twelve administrative and technical staff employees and
      approximately 140 technical consultants who provide consulting services to
      several of our clients. Most of our technical consultants are employees,
      although we do engage independent consultants on a contract basis. In general,
      when we hire independent consultants, it is for specific projects where we
      do
      not expect to require their services on a long-term basis. We may replace the
      independent consultants with our own employees or hire them if we see a longer
      term requirement. None of our employees are represented by a labor union, and
      we
      consider our employee relations to be good. Our subsidiary, Plaza Consulting
      Group, was recognized and awarded by Hewitt Associates, 8 th place as
      one of the “Puerto Rico 20 best employers” in 2006.





**ITEM
                2****DESCRIPTION
                OF PROPERTY**




In
      November 2004, we entered into a three-year lease with Plaza Professional
      Center, Inc., a company controlled by Elizabeth Plaza, for facilities used
      as
      our main offices. The rent is $38,400 per year. We plan to move our resources
      facilities to a building owned by Plaza Professional Center located at Dorado,
      Puerto Rico. The annual minimum rent for the planned new facilities under a
      proposed lease would be approximately $225,000. Upon the relocation, the lease
      of the present facilities will be cancelled.





We
      also
      lease office space in Limerick, Pennsylvania, at a monthly rental of $1,000.
      This lease expires on July 31, 2007, but the agreement may be terminated earlier
      by giving a prior 90 days written notice. The lease may be renewed for an
      additional term of three years at monthly rental of $1,050 during the first
      year, $1,100 during the second year, and $1,150 during the third year of the
      lease renewal term.




We
      believe that our present facilities, including our new facility in Puerto Rico,
      are adequate to meet our needs and that, if we require additional space, it
      is
      available on commercially reasonable terms. The proposed facilities include
      space for expansion.





**ITEM
                3****LEGAL
                PROCEEDINGS**




From
      time
      to time, we may be a party to legal proceedings incidental to our business.
      We
      do not believe that any of these proceedings will have a material adverse effect
      on our business or financial condition.





**ITEM
                4****SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**




None.




**PART
      II**





**ITEM
                5****MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER
                MATTERS**




**Market
      Information**




Prior
      to
      December 4, 2006, there was no market for our common stock. Since December
      4,
      2006, our common stock has been traded on the OTC Bulletin Board under the
      symbol PBSV. During the period from December 4, 2006 through January 22, 2007,
      the closing high bid price was $1.55 per share and the closing low bid price
      was
      $0.55 per share. Such quotations reflect inter-dealer prices, without retail
      markup, markdown or commission, and may not represent actual
      transactions.




On
      January 26, 2007, the closing bid price of our common stock was $0.74.




-13-




As
      of
      January 16, 2007, we had approximately 106 record holders of our common
      stock.




Prior
      to
      the reverse acquisition, we were taxed as an N Corporation under the Puerto
      Rico
      Internal Revenue Code, which is similar to that of an S Corporation under the
      Internal Revenue Code. As a result, all of our income was taxed to our then
      sole
      stockholder, Elizabeth Plaza. While we were taxed as an N Corporation we made
      distributions to Ms. Plaza, including approximately $834,000 during the year
      ended October 31, 2006, and approximately $8.0 million during the year ended
      October 31, 2005. Other than the distributions to Ms. Plaza which were made
      during the period that we were an N Corporation, we did not pay dividends on
      our
      common stock. We plan to retain future earnings, if any, for use in our
      business. We do not anticipate paying dividends on our common stock in the
      foreseeable future.




**Equity
      Compensation Plan Information**




The
      following table summarizes the equity compensation plans under which shares
      of
      our common stock may be issued as of October 31, 2006.





Plan
                Category
            
            Number
                of shares to be issued upon exercise of outstanding options andwarrants
            
            Weighted-average
                exercise price per share of outstanding optionsand
                warrants
            
            Number
                of shares remaining available for future issuance under equity
                compensationplansEquity
                compensation plans approved by security holders
            
            
            1,687,500
            
            $
            0.7344
            
            
            812,500Equity
                compensation plans not approved by security holders
            
            
            3,939,892
            
            $
            0.3065
            
            
            16,500





The
      shares of common stock issuable pursuant to the equity plan that was approved
      by
      stockholders is the 2005 long-term incentive plan, which was approved by
      stockholders in April 2006.





The
      equity compensation plans not approved by security holders are (i) warrants
      to
      purchase 1,439,892 which were issued to brokers in connection with the January
      2006 private placement, (ii) warrants to purchase 2,500,000 shares of common
      stock issued to San Juan Holdings for services relating to the acquisition
      of
      Plaza, and (iii) approximately 16,500 shares of common stock issuable to
      employees.





**ITEM
                6****MANAGEMENT’S
                DISCUSSION AND ANALYSIS**





**Overview**




The
      following discussion of our results of operations and financial condition should
      be read in conjunction with our financial statements and the related notes
      appearing elsewhere in this prospectus. The following discussion includes
      forward-looking statements. For a discussion of important factors that could
      cause actual results to differ from results discussed in the forward-looking
      statements, see “Forward Looking Statements.”




As
      a
      result of the reverse acquisition that closed on January 25, 2006, Plaza is
      treated as the accounting acquirer and the results of operations for periods
      prior to January 25, 2006 reflect only the operations of Plaza.





We
      are a
      validation and compliance consulting service firm in Puerto Rico. The validation
      and compliance consulting service market in Puerto Rico consists of local
      validation and compliance consulting firms, United States dedicated validation
      and compliance consulting firms and large publicly traded and private domestic
      and foreign engineering and consulting firms. We provide a broad range of
      compliance and validation consulting services. We market our services to
      pharmaceutical, chemical, biotechnology and medical devices and allied products
      companies in Puerto Rico, the United States and Europe through their Puerto
      Rico
      operations. Our staff includes more than 140 experienced engineering and life
      science professionals, and includes former quality assurance managers or
      directors, and experienced and well-trained professionals with bachelors,
      masters and doctorate degrees in health sciences and engineering.




-14-




Our
      revenue is derived from time and materials contracts (representing approximately
      90% of total revenues), where the clients are charged for the time, materials
      and expenses incurred on a particular project, and to a lesser extent
      (approximately 10% of total revenues) from fixed-fee contracts or from “not to
      exceed” contracts, which are generally short-term contracts, in which the value
      of the contract to us cannot exceed a stated amount. For time and materials
      contracts, our revenue is principally a function of the number of its compliance
      and validation professional employees and the number of hours billed per
      professional. To the extent that our revenue is based on fixed-fee or “not to
      exceed” contracts, our ability to operate profitably is dependent upon our
      ability to estimate accurately the costs that we will incur on a project and
      to
      the management and monitoring of the project progress. If we underestimate
      our
      costs on any contract, we would sustain a loss on the contract.




We
      believe the most significant factors to achieving future business growth are
      our
      ability to (a) continue to provide quality value-added validation and compliance
      services to our clients in the Puerto Rico marketplace; (b) recruit and retain
      highly educated and experienced validation and compliance professionals; (c)
      further expand our products and services to address the expanding compliance
      needs of the clients; and (d) expand our market presence into the United States,
      Latin America and Europe in order to respond to the international validation
      and
      compliance demands of our clients.




Our
      business has been dependent upon a small number of clients. During the years
      ended October 31, 2006 and 2005, a very small number of clients accounted for
      a
      disproportionately large percentage of our revenue. For the year ended October
      31, 2006, four customers accounted for approximately 73.0% of revenue. For
      the
      year ended October 31, 2005, two of these four customers accounted for
      approximately 62.2% of revenue. In
      spite
      of the fact that just a few customers represent a significant source of revenue,
      our functions are not a continuous process, accordingly, the client base for
      which our services are typically rendered, on a project-by-project basis,
      changes regularly.  However,
      the loss of or significant reduction in the scope of work performed for any
      major customer could impair our ability to operate profitably. In particular,
      we
      had a contract with one of our largest customers which expired on December
      31,
      2005. Although this contract was divided in a number of smaller contracts and
      extended with termination dates varying through December 2006, the level of
      business has significantly declined from the prior year. In June 2006, this
      customer announced the closing of one of its two facilities located in Puerto
      Rico and a reduction of staff in the second facility. The revenues from this
      major customer were as follows:




Year
                ended
            
            Operating
                facility
            
            Closed
                facility
            
            TotalOctober
                31, 2006
            
            $
            1,013,792
            
            $
            1,921,433
            
            $
            2,935,225October
                31, 2005
            
            
            2,210,444
            
            
            5,312,190
            
            
            7,522,634




Although
      our business is affected by seasonal factors such as vacation and holiday work
      policies, we do not believe that our business is seasonal. However, because
      our
      business is based on performing services under contracts which relate to
      specific projects, there may be a lag between the completion of one project
      and
      the commencement of the following project. This lag may cause some decline
      in
      revenues and a related decline in gross margin.




-15-




On
      January 9, 2006, we acquired, for $300,000, from the individual who was our
      executive vice president and chief operating officer during February and March
      2006, certain assets of Integrated Validation Service, a United States-based
      business that performs consulting services for the pharmaceutical and biotech
      industries. These assets include a client list and the validation compliance
      service business that was operated by that individual. The purchase price was
      paid in three installments, each in the amount of $100,000. We also hired nine
      former employees of the business. This acquisition was made pursuant to our
      strategy to expand our operations beyond Puerto Rico with a view to lessening
      our dependence upon a small number of Puerto Rico pharmaceutical companies.
      Revenues from these operations for the year ended October 31, 2006 were
      approximately $678,000. We cannot give assurance that any significant revenues
      will be derived from these operations.




The
      principal components of our costs of revenue are employee compensation
      (salaries, wages, taxes and benefits) and expenses relating to the performance
      of the services. We face increasing labor costs which we seek to pass on to
      our
      customers through increases in our rates. However, there is often a delay
      between the increase in our costs and the increases in our billing rate, which
      may result in a reduced gross margin during that period. Although we have been
      successful in the past in being able to increase our billing rates to reflect
      our increased labor costs, we cannot give any assurance that we will continue
      to
      be able to do so.





On
      January 25, 2006, we acquired Plaza in a transaction which was accounted for
      as
      a reverse acquisition, with Plaza being deemed the accounting acquirer. Pursuant
      to the acquisition agreement, we paid Elizabeth Plaza, the sole stockholder
      of
      Plaza, $10,000,000 plus 1,150,000 shares of our common stock. In addition,
      Ms.
      Plaza is to receive three payments, each in the amount of $2,750,000, payable
      on
      January 25, 2007, 2008 and 2009. The first payment, net of imputed interest,
      is
      a current liability at October 31, 2006, and, together with the costs incurred
      by Pharma-Bio in connection with the acquisition of Plaza and the additional
      cash payment due Ms. Plaza, is a significant factor in the reduction in the
      Company's working capital at October 31, 2006, as discussed under "Liquidity
      and
      Capital Resources." We also paid Ms. Plaza $88,161 because Plaza’s net tangible
      book value exceeded $5,500,000 and $125,227 to reimburse Ms. Plaza for taxes
      which she paid personally on our income during the period December 1, 2005
      to
      January 24, 2006. See “Item 12. Certain Relationships and Related
      Transactions”.





**Critical
      Accounting Policies and Estimates**




The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with generally accepted accounting principles (“GAAP”) in the United
      States. We believe the following are the critical accounting policies that
      impact the financial statements, some of which are based on management’s best
      estimates available at the time of preparation. Actual experience may differ
      from these estimates.




Cash
      and
      cash equivalents - For purposes of the statements of cash flows, cash and cash
      equivalents include liquid investments with original maturities of three months
      or less.




Revenue
      Recognition - We recognize revenues from time and material contracts by applying
      the proportional performance model, whereby revenue is recognized as performance
      occurs. In the case of fixed-fee or “not to exceed” contracts, which are
      generally short-term contracts, revenue is recognized similarly, except that
      certain milestones also have to be reached before revenue is recognized. With
      respect to fixed-fee contracts, revenue is recognized based on the percentage
      that services rendered bears to the estimated services to be performed over
      the
      contract. If we determine that a fixed-fee or “not to exceed” contract will
      result in a loss, we recognize the estimated loss in the period in which such
      determination is made.




-16-




Bad
      Debt
      - Bad debts are accounted for using the direct write-off method whereby an
      expense is recognized only when a specific account is determined to be
      uncollectible. The effect of using this method approximates that of the
      allowance method.





Property
      and Equipment - Owned property and equipment, and leasehold improvements are
      stated at cost. Equipment and vehicles under capital leases are stated at the
      lower of fair market value or net present value of the minimum lease payments
      at
      the inception of the leases.




Depreciation
      of owned assets, and amortization of assets under capital leases and leasehold
      improvements, are provided using the straight-line basis over the shorter of
      the
      estimated useful lives of the assets or lease term. Major renewals and
      betterments that extend the life of the assets are capitalized, while
      expenditures for repairs and maintenance are expensed when
      incurred.




We
      evaluate for impairment our long-lived assets to be held and used, and
      long-lived assets to be disposed of, whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be
      recoverable.





Income
      Taxes -- We elected from our inception until January 25, 2006, to be covered
      under the provisions of Subchapter N of Subtitle A of the Puerto Rico Internal
      Revenue Code (the “Puerto Rico Code”), which is similar to Subchapter S of the
      Internal Revenue Code in that we paid no income taxes since the taxable income
      was taxed to our stockholder. Under the provisions of the Puerto Rico Code,
      we
      paid the Puerto Rico Secretary of Treasury, on behalf of its stockholder, an
      amount equal to 33% of our taxable income. These payments, and any income tax
      withheld, are included in the amount of distributions to stockholder in our
      financial statements.




Commencing
      with the acquisition of Plaza on January 25, 2006, we are taxed based on our
      taxable income under the applicable provisions of the Puerto Rico Code and
      the
      Internal Revenue Code. The financial statements for the year ended October
      31,
      2006 reflect a provision for income taxes based on the applicable provisions
      of
      the Puerto Rico Code, since the income was earned in Puerto Rico, and, pursuant
      to the Puerto Rico Code, we did not pay income tax for periods prior to January
      25, 2006.




Concentration
      of credit risk -- Financial instruments which potentially subject us to
      concentrations of credit risk consist principally of cash deposits and trade
      accounts receivable. We maintain our cash deposits in two high quality financial
      institutions. While we attempt to limit any financial exposure, our deposit
      balances frequently exceed federally insured limits; however, no losses have
      been experienced on these accounts.




Our
      revenues are concentrated in the pharmaceutical industry in Puerto Rico.
      Approximately $10.3 million, or 72.8%, of the revenues in the year ended October
      31, 2006 were generated by four customers. The same customers had an outstanding
      balance at October 31, 2006 representing 73.0% of the total receivables.
      Approximately $10.8 million, or 62.2% of revenue, for the year ended October
      31,
      2005, was generated by two of these customers. These two customers had
      outstanding balances at October 31, 2005 representing 63% of the total
      receivables. We assess the financial strength of our clients and, as a
      consequence, believe that our trade accounts receivable credit risk exposure
      is
      limited.




Retirement
      Plan -- We adopted a qualified profit sharing plan in January 2002 (amended
      on
      November 30, 2003) in accordance with the applicable provisions of the Puerto
      Rico Code, for employees who meet certain age and service period requirements.
      We make contributions to this plan as required by the provisions of the plan
      document, amounting to $40,439 and $35,908 for the years ended October 31,
      2006
      and 2005, respectively.




Stock
      Option Plan --During the year ended October 31, 2004, we granted stock options
      with an exercise price equal to the book value of the common stock as of October
      31, 2003, which we deemed to be the fair value of our common stock. The options
      expired ten years from the date of grant and generally vested over a three-year
      period. In connection with our acquisition of Plaza, these options were
      cancelled and we granted the option holders options to purchase an aggregate
      of
      776,186 shares of common stock in respect of the cancelled options and we issued
      options to purchase an additional 623,814 shares of common stock to employees
      of
      Plaza, including those whose options were cancelled. In addition, options to
      purchase 75,000 shares of common stock were granted to our directors pursuant
      to
      a provision of the plan that provided for the automatic grant of an option
      to
      purchase 25,000 shares upon the initial election of an independent director.
      We
      have subsequently granted options to purchase other 473,724 shares to employees
      and independent directors. However, as of January 15, 2007, there were
      approximately 1,348,000 outstanding options, since some options expired because
      of certain employment terminations. All of our outstanding options have an
      exercise price of $0.7344, a term of five years and are exercisable in
      installments.




-17-




Fair
      value of financial instruments - The carrying value of our financial instruments
      (excluding obligations under capital leases): cash, accounts receivable,
      accounts payable and accrued liabilities, are considered reasonable estimates
      of
      fair value due to the short period to maturity. We believe, based on current
      rates, that the fair value of its obligations under capital leases approximates
      the carrying amount.




Use
      of
      estimates - The preparation of financial statements in conformity with
      accounting principles generally accepted in the United States of America,
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements, and the reported amounts
      of
      revenue and expenses during the reporting period. Actual results could differ
      from those estimates.





**New
      Accounting Pronouncements**




In
      September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      No. 157 “Fair Value Measurement”. This Statement defines fair value, establishes
      a framework for measuring fair value in generally accepted accounting principles
      (GAAP), and expands disclosures about fair value measurements. This Statement
      applies under other accounting pronouncements that require or permit fair value
      measurements, the FASB having previously concluded in those accounting
      pronouncements that fair value is the relevant measurement attribute.
      Accordingly, this Statement does not require any new fair value measurements.
      However, for some entities, the application of this Statement will change
      current practice. The
      changes to current practice resulting from the application of this Statement
      relate to the definition of fair value, the methods used to measure fair value,
      and the expanded disclosures about fair value measurements.




FASB
      issued Statement No. 157 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. Earlier
      application is encouraged, provided that the reporting entity has not yet issued
      financial statements for that fiscal year, including financial statements for
      an
      interim period within that fiscal year. The
      provisions of this Statement should be applied prospectively as of the beginning
      of the fiscal year in which this Statement is initially applied, except for
      certain exceptions stated in the Statement. The implementation of this Statement
      will have no significant effect on our financial statements.





In
      June
      2006, The FASB issued Interpretation No. 48 “Accounting for Uncertainty in
      Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes” *.* FIN 48
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. Earlier application of the provisions
      of this Interpretation is encouraged if the enterprise has not yet issued
      financial statements, including interim financial statements, in the period
      this
      Interpretation is adopted. We do not expect that the application of this
      standard will have any effect on the Company's results of operations or its
      financial condition.




-18-




In
      December 2004, the FASB issued a revision of FASB Statement No. 123 “Accounting
      for Stock-Based Compensation.” This Statement, No. 123R, supersedes APB Opinion
      No. 25 “Accounting for Stock Issued to Employees” and its related implementation
      guide. This Statement establishes standards for the accounting for transactions
      in which an entity exchanges instruments for goods and services. It also
      addresses transactions in which an entity incurs in liabilities in exchange
      of
      goods and services that are based on the fair value of the entity’s equity
      instruments. This Statement focuses primarily on accounting for transactions
      in
      which an entity obtains employees services in share-based payment transactions.
      We are required to comply with Statement 123R beginning with the first interim
      or annual reporting period of the first fiscal year that begins after December
      15, 2005. As a result of the implementation of Statement 123R, the grant of
      options will be treated as compensation based on the value of the option, which
      will increase our selling, general and administrative expenses.




Other
      recently issued FASB Statements or Interpretations, SEC Staff Accounting
      Bulletins, and AICPA Emerging Issue Task Force Consensuses have either being
      implemented or are not applicable to the Company.




**Results
      of Operations**




The
      following table sets forth our statements of operations for the years ended
      October 31, 2006 and 2005, in dollars (dollars in thousands) and as a percentage
      of revenue:




Years
                Ended October 31,Consolidated
            
            Plaza-Only2006
            
            2005Revenue
            
            $
            14,230
            
            
            100.0
            %
            $
            17,413
            
            
            100.0
            %Cost
                of revenue
            
            
            8,116
            
            
            57.0
            %
            
            9,401
            
            
            54.0
            %Gross
                profit
            
            
            6,114
            
            
            43.0
            %
            
            8,012
            
            
            46.0
            %Selling,
                general and administrative costs
            
            
            2,031
            
            
            14.3
            %
            
            1,521
            
            
            8.7
            %Interest
                expense
            
            
            393
            
            
            2.8
            %
            
            11
            
            
            0.1
            %Depreciation
                and amortization
            
            
            195
            
            
            1.4
            %
            
            90
            
            
            0.5
            %Income
                before income taxes
            
            
            3,495
            
            
            24.5
            %
            
            6,390
            
            
            36.7
            %Income
                tax expense1
            
            
            1,160
            
            
            8.2
            
            
            --
            
            
            --Net
                income1
            
            
            2,335
            
            
            16.3
            %
            
            6,390
            
            
            36.7
            %





(1)
            We
                were treated as an N Corporation under the Puerto Rico Internal Revenue
                Code, which is similar to an S Corporation under the Internal Revenue
                Code, prior to the reverse acquisition. As a result, we did not pay
                any
                income tax. Since January 25, 2006, we have been subject to income
                tax in
                Puerto Rice. If we had not been treated as an N Corporation during
                the
                fiscal years ended October 31, 2006 and 2005, our income before income
                taxes would have been taxed at rates ranging from 39% to 41.5%. The
                following table shows the income before income taxes, pro forma income
                taxes and pro forma net income for these periods in dollars (dollars
                in
                thousands) and as a percentage of
                revenue:





-19-





Years
                Ended October 31,Consolidated
            
            Plaza-Only2006
            
            2005Income
                before income taxes
            
            $
            2,335
            
            
            16.3
            %
            $
            6,390
            
            
            36.7
            %Pro
                forma income tax expense
            
            
            358
            
            
            2.5
            %
            
            2,492
            
            
            14.3
            %Pro
                forma net income
            
            $
            1,977
            
            
            13.8
            %
            $
            3,898
            
            
            22.4
            %




Revenues .
      Revenues for the year ended October 31, 2006 were $14.2 million, a decrease
      of
      $3.2 million, or 18.4%, from the revenue of $17.4 million in the prior year.
      The
      decrease reflected a decline in revenue of $6.4 million from two of our largest
      customers, following completion of contract with these customers. One of these
      customers has announced that it is significantly reducing the scope of its
      operations by closing one of its two facilities in Puerto Rico and reducing
      personnel at the second. The decrease in revenue from these two customers was
      partially offset by an increase of $4.3 million from two other customers that
      generated revenues of $1.6 million in the year ended October 31, 2005.




Cost
      of Revenues; Gross Margin .
      Our
      gross margin decreased from 46% to 43% during the year ended October 31, 2006
      as
      compared to the prior year. The reduction of gross margin was attributable
      to
      increased labor costs, which is the main component of our cost of revenues.
      Although we try to pass on the increased costs, we are not always able to do
      so
      in a timely manner, and there are often delays between the time we incur
      increased labor costs and the time we are able to increase our charges to
      customers. The increased labor costs are the result of the limited supply of
      available, qualified professionals and the constant demand for such persons
      from
      competing consulting firms and their customers, which condition is not expected
      to change in the ensuing fiscal year.




Selling,
      General and Administrative Expenses .
      Total
      expenses were approximately $2.0 million during the year ended October 31,
      2006,
      an increase of approximately $510,000, or 33.5%, from the prior year. Such
      increase resulted mainly from expenses incurred since the completion of the
      reverse acquisition on January 25, 2006, the expenses related to executive
      salaries not previously incurred, as well as to legal and related expenses
      associated with SEC filings.





Interest
      Expense .
      Since
      January 25, 2006, we have been recognizing approximately $125,000 quarterly
      corresponding to imputed interest expense incurred in connection with the
      long-term obligations to Ms. Plaza which originated as a result of the reverse
      acquisition. This expense will decrease as annual payments are made commencing
      in January 2007.




Income
      Tax Expense .
      The
      increase in the income tax expense results from a change in our tax status.
      We
      became a regular corporation taxpayer effective January 25, 2006. Prior to
      that,
      we were covered under the provisions of Subchapter N of Subtitle A of the Puerto
      Rico Internal Revenue Code which are similar to Subchapter S of the Internal
      Revenue Code in that our taxable income was taxed to the stockholders. The
      statutory tax rate in Puerto Rico is 39%, but adjusted to 41.5% for 2006 and
      2007.




Net
      Income . As a
      result of our decline in revenues, combined with a lower gross margin resulting
      from the increase in labor costs, the increase in selling, general and
      administrative expenses, the recognition of imputed interest and the change
      of
      our tax status, our net income for the year ended on October 31, 2006 decreased
      to approximately $2.3 million, or $0.22 per share (basic) and $0.13 per share
      (diluted), a decline of approximately $4.1 million, or 64%, from $6.4 million
      net income, or $3.65 per share (basic) and $1.58 per share (diluted), for the
      year ended October 31, 2005.




-20-




The
      basic
      and diluted income per share are also affected by the securities issued in
      connection with the private placement that was completed contemporaneously
      with
      the reverse acquisition. At that time, the Company issued shares of series
      A
      preferred stock which were convertible into 15,998,800 shares of common stock.
      The series A preferred stock was automatically converted into the 15,998,800
      shares on April 25, 2006, when the Company increased its authorized capital
      stock. As a result, the shares of common stock that were issued upon conversion
      of the series A preferred stock are included in determining diluted earnings
      per
      share from January 25, 2006 until April 24, 2006 and in determining basic
      earnings per share thereafter.





**Liquidity
      and Capital Resources**





Liquidity
      is a measure of our ability to meet potential cash requirements, including
      planned capital expenditures. At October 31, 2006, we had working capital of
      approximately $4.9 million, a decrease of approximately $0.9 million from the
      working capital at October 31, 2005 of approximately $5.8 million. Although
      we
      generated approximately $1.6 million from operations during the year ended
      October 31, 2006, this increase was offset by the current obligation of
      approximately $2.7 million payable to Elizabeth Plaza in connection with the
      acquisition of Plaza. We also have long-term obligations to Ms. Plaza for annual
      payments of $2.75 million due in January 2008 and 2009.





We
      raised
      gross proceeds of $11.75 million from the sale of series A preferred stock
      and
      warrants, and used $10 million to pay Ms. Plaza the cash portion of the purchase
      price of the Plaza stock and most of the balance to pay offering expenses and
      closing expenses. We also paid Ms. Plaza an additional $213,388 under the terms
      of the Plaza Agreement.





For
      the
      year ended October 31, 2006, we made distributions of approximately $834,000
      to
      or on behalf of Elizabeth Plaza Plaza in respect of income on which she was
      taxed personally since we were at the time an N Corporation. No distributions
      have been made to Ms. Plaza with respect to any of our income since the
      effectiveness of the reverse acquisition on January 25, 2006.




Our
      primary cash needs consist of payment of compensation to its professional
      employees, overhead expenses and payments due to Ms. Plaza pursuant to the
      terms
      of the acquisition of Plaza. In addition, since January 25, 2006, we have been
      subject to income tax in Puerto Rico. Our taxable income in Puerto Rico is
      taxed
      at rates ranging from 39% to 41.5% of taxable income. We have a line of credit
      of $250,000, which bears interest at 2.00% over the prime rate and that was
      unused at October 31, 2006.





Management
      believes that based on current levels of operations and anticipated growth,
      cash
      flows from operations, high quality customer receivables will be sufficient
      to
      fund anticipated expenses and satisfy other possible long-term contractual
      commitments, including our obligations to pay Ms. Plaza $2.75 million early
      2007
      pursuant to the agreement relating to the acquisition of Plaza, for the next
      twelve months.





While
      uncertainties relating to competition, the industries and geographical regions
      served by us and other regulatory matters exist within the consulting services
      industry, management is not aware of any trends or events likely to have a
      material adverse effect on liquidity or its financial statements. However,
      as
      stated above, one of our largest clients has significantly reduced the scope
      of
      its operations in Puerto Rico and other companies in the industries which we
      serve may take similar actions. To the extent that these factors result in
      a
      continued decline in our revenue, our liquidity may be affected if we are not
      able to expand our potential customer base both in and outside of Puerto
      Rico.




-21-




**Off-Balance
      Sheet Arrangements**




Pharma-Bio
      was not involved in any significant off-balance sheet arrangement during the
      fiscal year ended October 31, 2006.


-22-




**ITEM
                7****FINANCIAL
                STATEMENTS**




**INDEX
      TO FINANCIAL STATEMENTS**





PageReport
                of Independent Registered Public Accounting Firm on October 31, 2006
                financial statements - Horwath Vélez & Co., PSC
            
            
            24Report
                of Independent Registered Public Accounting Firm on October 31, 2005
                financial statements - Kevane Soto Pasarell Grant Thornton
                LLP
            
            
            25Balance
                Sheet as of October 31, 2006
            
            
            26Statements
                of Income for the Years Ended October 31, 2006 and 2005
            
            
            27Statements
                of Cash Flows for the Years Ended October 31, 2006 and
                2005
            
            
            28Statements
                of Changes in Stockholders’ Equity for the years Ended October 31, 2006
                and 2005
            
            
            29Notes
                to Financial Statements
            
            
            30




-23-




**INDEPENDENT
      AUDITORS' REPORT**




To
      the
      Board of Directors and Stockholders of


Pharma-Bio
      Serv, Inc.


Dorado,
      Puerto Rico





We
      have
      audited the accompanying consolidated balance sheet of **Pharma-Bio
      Serv, Inc.** as of
      October 31, 2006, and the related consolidated statements of operations, changes
      in stockholders' equity and cash flows for the year then ended. 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 audit. The financial statements of **Plaza
      Consulting Group, Inc.** (which
      was involved in a reverse merger with Lawrence Consulting Group, Inc., now
      Pharma-Bio Serv, Inc.) for the year ended October 31, 2005 were audited by
      other
      auditors whose report dated December 30, 2005 expressed an unqualified opinion
      on those statements.




We
      conducted our audit 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 consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audit provides
      a
      reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of **Pharma-Bio
      Serv, Inc.** as of
      October 31, 2006, and the results of its operations and its cash flows for
      the
      year then ended in conformity with accounting principles generally accepted
      in
      the United States of America.




S/
      HORWATH VÉLEZ & CO, PSC


Puerto
      Rico





January
      26, 2007


Puerto
      Rico Society of Certified Public Accountants


Stamp
      number 2194702 was


affixed
      to the original of this report.




-24-




**REPORT
      OF INDEPENDENT REGISTERED ACCOUNTING FIRM**





**To
      the Stockholder of**


**Plaza
      Consulting Group, Inc.:**




We
      have
      audited the accompanying balance sheets of **PLAZA
      CONSULTING GROUP, INC.** as of
      October 31, 2005 and 2004, and the related statements of income, changes in
      stockholder’s equity and cash flows for the years then ended. 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 generally accepted auditing standards
      as
      established by the Auditing Standards Board (United States) and in accordance
      with the auditing 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. The Company is not required to have, nor were we engaged
      to perform, an audit of its internal control over the financial reporting.
      Our
      audit included consideration of internal control over financial reporting as
      a
      basis for designing audit procedures that are appropriate in the circumstances,
      but not for the purpose of expressing an opinion on the effectiveness of the
      Company’s internal control over financial reporting. Accordingly, we express no
      such opinion. An audit also includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements, assessing
      the accounting principles used and significant use of 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 **Plaza
      Consulting Group, Inc.** as
      of
      October 31, 2005 and 2004, and the results of its operations, and its cash
      flows
      for the years then ended, in conformity with accounting principles generally
      accepted in the United States of America.








/s/
      Kevane Soto Pasarell Grant Thornton LLP


**KEVANE
      SOTO PASARELL GRANT THORNTON LLP**




San
      Juan,
      Puerto Rico,


December
      30, 2005, except for Note E,


as
      to
      which the date is January 9, 2006, and


the
      second paragraph of Note I, as to which date is January 25, 2006.




-25-


**PHARMA-BIO
        SERV, INC.** **Consolidated
          Balance Sheet** **At
            October 31, 2006**


Assets:Current
                  assetsCash
                  and cash equivalents
              
              $
              2,275,035Accounts
                  receivable
              
              
              5,801,089Other
              
              
              466,223Total
                  current assets
              
              
              8,542,347Property
                  and equipment
              
              
              394,722Other
                  assets, mainly intangible assets
              
              
              203,267Total
                  Assets
              
              $
              9,140,336Liabilities
                  and Stockholders' Equity:Current
                  liabilitiesCurrent
                  portion-obligations under capital leases
              
              $
              38,873Accounts
                  payable and accrued expenses
              
              
              1,086,094Due
                  to affiliate - current
              
              
              2,705,000Income
                  taxes
              
              
              121,702Total
                  current liabilities
              
              
              3,951,669Long-term
                  liabilitiesDue
                  to affiliate
              
              
              4,899,961Other
                  long-term liabilities
              
              
              141,648Total
                  long-term liabilities
              
              
              5,041,609Total
                  Liabilities
              
              
              8,993,278Stockholders'
                  Equity:Preferred
                  Stock, $0.0001 par value; authorized10,000,000
                  shares; none outstanding
              
              
              -Common
                  Stock, $0.0001 par value; authorized 50,000,000 shares;issued
                  and outstanding 18,315,001 shares
              
              
              1,831Retained
                  earnings
              
              
              145,227Total
                  Stockholders' Equity
              
              
              147,058Total
                  Liabilities and Stockholders' Equity
              
              $
              9,140,336




See
      notes
      to financial statements.


-26-


**PHARMA-BIO
        SERV, INC.** **Statements
          of Income** **For
            the Years Ended October 31, 2006 and 2005**
  **Years
                  ended October 31,****Consolidated**
              
              **Plaza-Only****2006**
              
              **2005**REVENUES
              
              $
              14,229,831
              
              $
              17,412,869COST
                  OF REVENUES
              
              
              8,116,207
              
              
              9,400,909GROSS
                  PROFIT
              
              
              6,113,624
              
              
              8,011,960SELLING,
                  GENERAL ANDADMINISTRATIVE
                  EXPENSES
              
              
              2,030,737
              
              
              1,520,755INTEREST
                  EXPENSE
              
              
              392,742
              
              
              10,721DEPRECIATION
                  AND AMORTIZATION
              
              
              194,977
              
              
              90,332INCOME
                  BEFORE INCOME TAX
              
              
              3,495,168
              
              
              6,390,152INCOME
                  TAX
              
              
              1,159,828
              
              
              -NET
                  INCOME
              
              $
              2,335,340
              
              $
              6,390,152BASIC
                  EARNINGS PER COMMON SHARE
              
              $
              0.22
              
              $
              3.65DILUTED
                  EARNINGS PER COMMON SHARE
              
              $
              0.13
              
              $
              1.58WEIGHTED
                  AVERAGE NUMBER OF COMMONSHARES
                  OUTSTANDING - BASIC
              
              
              10,508,938
              
              
              1,750,000WEIGHTED
                  AVERAGE NUMBER OF COMMONSHARES
                  OUTSTANDING - DILUTED
              
              
              17,880,269
              
              
              4,045,752




See
      notes
      to financial statements.


-27-


**PHARMA-BIO
        SERV, INC.** **Statements
          of Cash Flows** **For
            the Years Ended October 31, 2006 and 2005**
  **Years
                  ended October 31,****Consolidated**
              
              **Plaza-Only****2006**
              
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income for the period
              
              $
              2,335,340
              
              $
              6,390,152Loss
                  (gain) on disposition of property and equipment
              
              
              3,664
              
              
              (3,319
              )Depreciation
                  and amortization
              
              
              194,977
              
              
              90,332Bad
                  debts expense
              
              
              -
              
              
              51,277Imputed
                  interest expense
              
              
              379,961
              
              
              -Increase
                  in accounts receivable
              
              
              (870,275
              )
              
              (182,706
              )Increase
                  in other assets
              
              
              (468,084
              )
              
              (18,275
              )Decrease
                  in liabilities
              
              
              (17,725
              )
              
              (129,253
              )NET
                  CASH PROVIDED BY OPERATING ACTIVITIES
              
              
              1,557,858
              
              
              6,198,208CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              
              (104,922
              )
              
              (92,340
              )Cash
                  acquired as part of the Plaza acquisition
              
              
              28,943
              
              
              -NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              (75,979
              )
              
              (92,340
              )CASH
                  FLOW FROM FINANCING ACTIVITIES:Net
                  proceeds from the sale of preferred stock
              
              
              10,000,000
              
              
              -Payment
                  for purchase of Plaza stock
              
              
              (9,900,000
              )
              
              -Payment
                  for non-compete covenant
              
              
              (100,000
              )
              
              -Payments
                  on capital lease obligations
              
              
              (35,459
              )
              
              (41,154
              )Payments
                  to affiliate
              
              
              (213,388
              )
              
              -Distributions
                  to stockholder
              
              
              (749,554
              )
              
              (7,309,882
              )NET
                  CASH USED IN FINANCING ACTIVITIES
              
              
              (998,401
              )
              
              (7,351,036
              )NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              483,478
              
              
              (1,245,168
              )CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD
              
              
              1,791,557
              
              
              3,036,725CASH
                  AND CASH EQUIVALENTS - END OF PERIOD
              
              $
              2,275,035
              
              $
              1,791,557PAYMENTS
                  OF:Income
                  tax
              
              $
              1,038,126
              
              $
              -Interest
              
              $
              12,781
              
              $
              10,721NONCASH
                  INVESTING AND FINANCING ACTIVITIES:Conversion
                  of preferred stock to common stock
              
              $
              1,483
              
              $
              -Acquisition
                  of vehicles under capital leases
              
              $
              -
              
              $
              170,355Retirement
                  of vehicles in trade-ins
              
              $
              -
              
              $
              38,855Application
                  of down payment to acquisition price ofproperty
                  and equipment
              
              $
              37,655
              
              $
              -Income
                  tax withheld by clients but used as a credit in theincome
                  tax return of a stockholder (noncash distribution)
              
              $
              84,561
              
              $
              649,436Debt
                  incurred in the acquisition of certain assets fromanother
                  company
              
              $
              200,000
              
              $
              -Debt
                  payable to officer originated in the acquisition ofPlaza,
                  net of $1,025,000 imputed interest
              
              $
              7,225,000
              
              $
              -




See
      notes
      to financial statements.


-28-




**PHARMA-BIO
          SERV, INC.**
 **STATEMENTS
          OF CHANGES IN STOCKHOLDERS' EQUITY** **FOR
            THE YEARS ENDED OCTOBER 31, 2006 AND 2005**





**Additional****Common
                Stock**
            
            **Preferred
                Stock**
            
            **Paid-in**
            
            **Retained****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Earnings**
            
            **Total**BALANCE
                AT OCTOBER 31, 2004 (PLAZA-ONLY)
            
            
            50,000
            
            $
            1,000
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            7,548,735
            
            $
            7,549,735NET
                INCOME
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            6,390,152
            
            
            6,390,152DISTRIBUTIONS
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,959,318
            )
            
            (7,959,318
            )BALANCE
                AT OCTOBER 31, 2005 (PLAZA-ONLY)
            
            
            50,000
            
            
            1,000
            
            
            -
            
            
            -
            
            
            -
            
            
            5,979,569
            
            
            5,980,569RECLASSIFICATION
                OF $0.02 COMMON STOCK
            
            
            (50,000
            )
            
            (1,000
            )
            
            -
            
            
            -
            
            
            1,000
            
            
            -
            
            
            -ISSUANCE
                  OF $0.0001 COMMON STOCK IN CONNECTIONWITH
                  RECLASSIFICATION OF EQUITY
            
            
            275,900
            
            
            28
            
            
            -
            
            
            -
            
            
            20,947
            
            
            -
            
            
            20,975TWO-FOR-ONE
                SHARE DISTRIBUTION
            
            
            275,900
            
            
            28
            
            
            -
            
            
            -
            
            
            (28
            )
            
            -
            
            
            -ISSUANCE
                OF $0.0001 COMMON STOCK
            
            
            1,750,000
            
            
            174
            
            
            -
            
            
            -
            
            
            844,385
            
            
            -
            
            
            844,559ISSUANCE
                OF $0.0001 PREFERRED STOCK
            
            
            -
            
            
            -
            
            
            1,175,000
            
            
            118
            
            
            10,171,383
            
            
            -
            
            
            10,171,501ISSUANCE
                  OF STOCK WARRANTS TO PURCHASE 2,500,000SHARES
                  OF COMMON STOCK AT $0.06
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,686,000
            
            
            (1,686,000
            )
            
            -ISSUANCE
                  OF STOCK WARRANTS TO PURCHASE 1,600,000SHARES
                  OF COMMON STOCK AT $0.06
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            800
            
            
            (800
            )
            
            -CAPITAL
                PAYMENT
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,724,487
            )
            
            (5,647,284
            )
            
            (18,371,771
            )CONVERSION
                OF PREFERRED STOCK TO COMMON STOCK
            
            
            15,998,800
            
            
            1,600
            
            
            (1,175,000
            )
            
            (118
            )
            
            -
            
            
            (1,482
            )
            
            -ADDITIONAL
                  SHARES FROM CONVERSION OF PREFERREDSTOCK
                  TO COMMON STOCK
            
            
            14,401
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            (1
            )
            
            -NET
                INCOME
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,335,340
            
            
            2,335,340DISTRIBUTIONS
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (834,115
            )
            
            (834,115
            )BALANCE
                AT OCTOBER 31, 2006 (CONSOLIDATED)
            
            
            18,315,001
            
            $
            1,831
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            145,227
            
            $
            147,058





See
      notes
      to financial statements.


-29-


**PHARMA-BIO
      SERV, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**YEARS
      ENDED OCTOBER 31, 2006 AND 2005**




**NOTE
      A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**




**BASIS
      OF PRESENTATION**




Pharma-Bio
      Serv, Inc. (“Pharma-Bio”) is a Delaware corporation organized on January 14,
      2004, under the name Lawrence Consulting Group, Inc. ("Lawrence"). Pharma-Bio
      is
      the parent company of Plaza Consulting Group, Inc. ("Plaza"), a Puerto Rico
      corporation, which operates in Puerto Rico and the United States under the
      name
      of Pharma Serv and is engaged in providing technical compliance consulting
      services primarily to the pharmaceutical, chemical, medical device and
      biotechnology industries. Pharma-Bio and Plaza are collectively referred to
      as
      the “Company.”




On
      January 25, 2006, Pharma-Bio acquired Plaza in a transaction which is accounted
      for as a reverse acquisition. Although Pharma-Bio, then known as Lawrence,
      is
      the Company that made the acquisition, for accounting purposes, Plaza is treated
      as the acquiring company. As a result, the financial statements reflect the
      financial position, results of operations and cash flows of Plaza prior to
      January 25, 2006 and the combined operations of Pharma-Bio and Plaza from and
      after January 25, 2006.




All
      intercompany transactions and balances have been eliminated in
      consolidation.




On
      February 22, 2006, Pharma-Bio changed its fiscal year to the fiscal year ended
      October 31, which is Plaza’s fiscal year. The change in fiscal year is reflected
      in the Form 10-QSB for the quarter ended January 31, 2006. The change of fiscal
      year results from the acquisition of Plaza, which was accounted for as a reverse
      acquisition.




**REVERSE
      ACQUISITION**




On
      January 25, 2006, pursuant to a plan and agreement of merger (the "Plaza
      Agreement") dated as of October 31, 2005, among Pharma-Bio, Plaza Acquisition
      Corp., a wholly-owned subsidiary of Pharma-Bio ("Acquisition Company"), Plaza
      and Elizabeth Plaza, the sole stockholder of Plaza, Pharma-Bio acquired Plaza.
      The acquisition was effected by the merger of Acquisition Company into Plaza.
      Pursuant to the Plaza Agreement, Ms. Plaza, as the sole stockholder of Plaza,
      received at the closing $10,000,000 plus 1,150,000 shares of Pharma-Bio's common
      stock. In addition, the Plaza Agreement provides for us to make three annual
      payments to Ms. Plaza, each in the amount of $2,750,000, payable on January
      25,
      2007, 2008 and 2009. See Note G with respect to payments made and obligations
      due to related parties. .




At
      the
      closing, all of the present officers and directors of Pharma-Bio resigned from
      their respective positions, except that Mr. Dov Perlysky, who was president
      and
      a director of Pharma-Bio, resigned as an officer, but continued as a director.
      At the closing, Pharma-Bio elected four directors, including Ms. Plaza. The
      other three are independent directors.




Pharma-Bio
      raised the funds necessary to make the $10,000,000 payment due to Ms. Plaza
      through the private placement of units consisting of shares of a series A preferred stock and warrants to purchase 7,999,400 common stock. The series
      A
      preferred stock was automatically converted into 15,998,800 shares of common
      stock upon an increase in Pharma-Bio's authorized common stock. See Note
      C.




The
      acquisition of Plaza and the private placement resulted in a change of control
      of Pharma-Bio. As a result of the reverse acquisition accounting treatment,
      Plaza is deemed to be the acquiring company for accounting purposes. The
      transaction was accounted for as a reverse acquisition because former owners
      of
      Plaza, together with the purchasers in the private placement who purchased
      the
      series A preferred stock and warrants in connection with the acquisition of
      Plaza, gained control of Pharma-Bio. Effective on the acquisition date,
      Pharma-Bio's balance sheet includes the assets and liabilities of Plaza and
      its
      equity accounts have been recapitalized to reflect the equity of Pharma-Bio.
      Financial statements for the year ended October 31, 2005 are those of
      Plaza-Only.




-30-




**SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




**Use
      of Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from these
      estimates.




**Fair
      Value of Financial Instruments**




The
      carrying value of the Company's financial instruments (excluding obligations
      under capital leases and amounts due affiliate): cash, accounts receivable,
      accounts payable and accrued liabilities, are considered reasonable estimates
      of
      fair value due to the short-term nature. Management believes, based on current
      rates, that the fair value of its obligations under capital leases and amounts
      due to affiliate approximates the carrying amount.




**Revenue
      Recognition**




Revenue
      is primarily derived from: (1) time and materials contracts (representing
      approximately 90% of total revenues), which is recognized by applying the
      proportional performance model, whereby revenue is recognized as performance
      occurs, and (2) short-term fixed-fee contracts or "not to exceed" contracts
      (approximately 10% of total revenues), which revenue is recognized similarly,
      except that certain milestones also have to be reached before revenue is
      recognized. In the case of fixed-fee contracts, which mostly are short-term
      contracts, revenue is recognized based on the percentage that the services
      rendered bears to the estimated services to be performed over the contract.
      If
      the Company determines that a fixed-fee or “not to exceed” contract will result
      in a loss, the Company recognizes the estimated loss in the period in which
      such
      determination is made.




**Cash
      and Cash Equivalents**




For
      purposes of the statements of cash flows, cash and cash equivalents include
      liquid investments with original maturities of three months or
      less.




**Accounts
      Receivable**




Accounts
      receivable are recorded at their estimated realizable value. Accounts are deemed
      past due when payment has not been received within the stated time period.
      The
      Company's policy is to review individual past due amounts periodically and
      write
      off amounts for which all collection efforts are deemed to have been exhausted.
      Due to the nature of the Company’s customers, bad debts are accounted for using
      the direct write-off method whereby an expense is recognized only when a
      specific account is determined to be uncollectible. The effect of using this
      method approximates that of the allowance method.




**Income
      Taxes**




The
      Company follows the provisions of Statement of Financial Accounting Standards
      Board No. 109, "Accounting for Income Taxes," which requires an asset and
      liability approach method of accounting for income taxes. This method measures
      deferred income taxes by applying enacted statutory rates in effect at the
      balance sheet date to the differences between the tax basis of assets and
      liabilities and their reported amounts on the financial statements. The
      resulting deferred tax assets or liabilities are adjusted to reflect changes
      in
      tax laws as they occur. A valuation allowance is provided when it is more likely
      than not that a deferred tax asset will not be realized.




-31-




Plaza,
      from its inception until January 24, 2006, was covered under the provisions
      of
      Subchapter N of Subtitle A of the Puerto Rico Internal Revenue Code (the "Puerto
      Rico Code"), which is similar to Subchapter S of the Internal Revenue Code
      in
      that its taxable income is taxed to the stockholders and therefore there is
      no
      income tax liability for that period. As a result of the completion of the
      reverse acquisition, Plaza and Pharma-Bio are no longer eligible for treatment
      as a Subchapter N corporation. See Note F.




Although
      Ms. Plaza is responsible for the taxes on the Plaza's taxable income for the
      period from December 1, 2005 to January 24, 2006, pursuant to the Plaza
      Agreement, the Company agreed to reimburse Ms. Plaza for the income taxes
      applicable to said taxable income. The reimbursement amounts to $125,227 and
      was
      paid on June 15, 2006.




**Property
      and equipment**




Owned
      property and equipment, and leasehold improvements are stated at cost. Equipment
      and vehicles under capital leases are stated at the lower of fair market value
      or net present value of the minimum lease payments at the inception of the
      leases..




Depreciation
      of owned assets, and amortization of assets under capital leases and leasehold
      improvements, are provided using the straight-line basis over the shorter of
      the
      estimated useful lives of the assets or lease term. Major renewals and
      betterments that extend the life of the assets are capitalized, while
      expenditures for repairs and maintenance are expensed when
      incurred.




The
      Company evaluates for impairment its long-lived assets to be held and used,
      and
      long-lived assets to be disposed of, whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be
      recoverable.




**Intangible
      assets**




Definite-lived
      intangible assets, such as customer lists and covenants not to compete, are
      amortized on a straight-line basis over their estimated useful lives. The
      Company continually evaluates the reasonableness of the useful lives of these
      assets.




-32-




**Stock-based
      Compensation**




Through
      year ended October 31, 2006, the Company has elected to use the intrinsic value
      method of accounting for stock options issued to employees under its stock
      option plans in accordance with APB Opinion No. 25 and related interpretations
      whereby the amount of stock-based compensation expense is calculated as the
      difference between the excess fair market value over the exercise price on
      the
      date of issuance. For purposes of pro forma disclosures the amount of
      stock-based compensation is calculated using the fair value method of accounting
      for stock options issued to employees. The Company's pro forma information
      is as
      follows:





Years
                Ended October 31,Consolidated
            
            Plaza-Only2006
            
            2005Net
                income
            
            $
            2,335,340
            
            $
            6,390,150Less:
                Stock-based employee compensation under fair value method, net of
                tax
                effect
            
            
            87,750
            
            
            -Pro
                forma net income attributable to common stockholders
            
            $
            2,247,590
            
            $
            6,390.150Basic
                earnings per share of common stock:As
                reported
            
            $
            0.22
            
            $
            3.65Pro
                forma
            
            $
            0.21
            
            $
            3.65Diluted
                earnings per share of common stockAs
                reported
            
            $
            0.13
            
            $
            1.58Pro
                forma
            
            $
            0.13
            
            $
            1.58Weighted
                average number of common shares outstanding - basic
            
            
            10,508,938
            
            
            1,750,000Weighted
                average number of common shares outstanding - diluted
            
            
            17,880,269
            
            
            4,045,752





During
      the fourth quarter, the Company revised the pro forma compensation under the
      fair value method based on a more thorough analysis of the estimated options for which
      the requisite service will be rendered.




**Income
      Per Share of Common Stock**




Basic
      income per share of common stock is calculated by dividing net income by the
      weighted average number of shares of common stock outstanding. Diluted income
      per share includes the dilution of common stock equivalents. Pursuant to reverse
      acquisition accounting treatment, the weighted average number of shares
      outstanding in the computation of basic income per share was derived by
      weighting (i) for the period prior to the reverse acquisition transaction,
      the
      number of shares outstanding represented the 1,150,000 shares received by the
      former stockholder of Plaza and the shares 600,000 shares received by San Juan
      Holdings, Inc., and (ii) for the period after the transaction, the number of
      shares outstanding represented the shares of Pharma-Bio that are outstanding.
      Diluted income per share includes the dilution of common equivalents.
      Accordingly, the series A preferred stock was deemed outstanding from the date
      of issuance until April 25, 2006, when the Company’s restated certificate of
      incorporation was filed with the Secretary of State of Delaware and the shares
      of series A preferred stock were automatically converted into common stock.
      The
      warrants were deemed to be outstanding from the date of issuance to the end
      of
      the reporting period, except for stock warrants issued to the investment banker
      for Plaza as a result of the reverse acquisition, which were deemed to be
      outstanding through all periods prior to the reverse acquisition.




The
      weighted average shares of common stock outstanding (basic and diluted) were
      calculated using the treasury stock method for the respective
      periods.




**NOTE
      B - RECENT ACCOUNTING PRONOUNCEMENTS**




1.
      In
      September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      No. 157 “Fair Value Measurement”. This Statement defines fair value, establishes
      a framework for measuring fair value in generally accepted accounting principles
      (GAAP), and expands disclosures about fair value measurements. This Statement
      applies under other accounting pronouncements that require or permit fair value
      measurements, the FASB having previously concluded in those accounting
      pronouncements that fair value is the relevant measurement attribute.
      Accordingly, this Statement does not require any new fair value measurements.
      However, for some entities, the application of this Statement will change
      current practice. The
      changes to current practice resulting from the application of this Statement
      relate to the definition of fair value, the methods used to measure fair value,
      and the expanded disclosures about fair value measurements.




-33-




This
      Statement is effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years. Earlier application is encouraged, provided that the reporting entity
      has
      not yet issued financial statements for that fiscal year, including financial
      statements for an interim period within that fiscal year. The
      provisions of this Statement should be applied prospectively as of the beginning
      of the fiscal year in which this Statement is initially applied, except for
      certain exceptions stated in the Statement.




The
      implementation of this Statement will have no significant effect on the
      Company’s financial statements.




2.
      In
      June 2006, The FASB issued Interpretation No. 48 “Accounting for Uncertainty in
      Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes” *.* FIN 48
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. Earlier application of the provisions
      of this Interpretation is encouraged if the enterprise has not yet issued
      financial statements, including interim financial statements, in the period
      this
      Interpretation is adopted. Management
      does not expect that the application of this standard will have any effect
      on
      the Company's results of operations or its financial condition.




3.
      In
      December 2004, the FASB published Statement No. 123R requiring that the
      compensation cost relating to share-based payment transaction be recognized
      in
      financial statements. That cost will be measured based on the fair value of
      the
      equity or liability instruments issued. Statement No. 123R covers a wide range
      of share-based compensation arrangements, including share option restricted
      plans, performance-based awards, share appreciation rights, and employee share
      purchase plans. Statement No. 123(R) replaces FASB Statement No. 123 "Accounting
      for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting
      for Stock Issued to Employees." Statement No. 123, as originally issued in
      1995,
      established as preferable a fair-value-based method of accounting for
      share-based payment transactions with employees. However, that Statement
      permitted entities the option of continuing to apply the guidance in Opinion
      No.
      25, as long as the footnotes to the financial statements disclosed what net
      income would have been had the preferable fair-value-based method been
      used.




This
      Statement No. 123R is effective as of the beginning of the first interim or
      annual reporting period of the first fiscal year that begins after December
      15,
      2005. One of the effects of the application of FASB123R is to treat the value
      (as properly determined) of the options as compensation to the grantees, thus
      increasing the Company's selling, general and administrative
      expenses.




4.
      Other
      recently issued FASB Statements or Interpretations, SEC Staff Accounting
      Bulletins, and AICPA Emerging Issue Task Force Consensuses have either been
      implemented or are not applicable to the Company.




-34-




**NOTE
      C - CAPITAL TRANSACTIONS**




On
      January 24, 2006, Pharma-Bio effected a two-for-one share distribution with
      respect to its common stock pursuant to which Pharma-Bio issued one share of
      common stock for each share outstanding on the record date, January 24, 2006.
      All share and per share information in these financial statements give
      retroactive effect to this share distribution.




On
      January 25, 2006, contemporaneously with the consummation of the acquisition,
      Pharma-Bio sold, in a private placement, 47 units, each unit consisting of
      25,000 shares of series A preferred stock, warrants to purchase 85,100 shares
      of
      common stock at $1.10 per share and warrants to purchase 85,100 shares of common
      stock at $1.65 per share. In the private placement, Pharma-Bio issued an
      aggregate of 1,175,000 shares of series A preferred stock (which were
      convertible into an aggregate of 15,998,800 shares of common stock), warrants
      to
      purchase 3,999,700 shares of common stock at $1.10 per share, and warrants
      to
      purchase 3,999,700 shares of common stock at $1.65 per share, to 42 accredited
      investors. Pharma-Bio paid brokerage commissions of 10% of the gross purchase
      price and an aggregate non-accountable expense allowance of 3% of the gross
      purchase price with respect to the units sold. In certain cases, the broker
      waived the commission and non-accountable expense allowance, and the investor
      paid the purchase price less the commission and non-accountable expense
      allowance. The purchase price for the 47 units sold was $11,750,000.
      Broker-dealers waived commission and non-accountable expense allowance with
      respect to $628,750, Pharma-Bio paid commissions and non-accountable expense
      allowances totaling $898,750, and Pharma-Bio issued warrants to purchase an
      aggregate of 1,439,892 shares of common stock. The warrants have an exercise
      price of $0.7344 per share and a term of three years.




Each
      share of series A preferred stock was automatically converted into 13.616 shares
      of common stock, or an aggregate of 15,998,800 shares of common stock upon
      the
      filing on April 25, 2006, of a restated certificate of incorporation which
      increased the authorized capital stock to 10,000,000 shares of preferred stock
      and 50,000,000 shares of common stock.




The
      subscription agreement pursuant to which the series A preferred stock and
      warrants were issued required Pharma-Bio to file a registration statement within
      60 days after the effective date of the merger between Plaza and Plaza
      Acquisition Corp. The effective date of the merger was January 25, 2006,
      therefore, the 60-day term expired on March 26, 2006. Since Pharma-Bio failed
      to
      file the registration statement by that date, Pharma-Bio was required to issue
      .0003 shares of common stock for each share of common stock issued upon
      conversion of the series A preferred stock for each day of delay. Pharma-Bio
      was
      three days late, therefore, 14,401 shares of common stock were issued to the
      former holders of the series A preferred stock.




The
      warrants issued in the private placement expire five years from the closing
      date
      and are callable by Pharma-Bio if the closing price of the common stock is
      at
      least twice the exercise price of the warrants for twenty consecutive trading
      days.




**NOTE
      D - PROPERTY AND EQUIPMENT**




The
      balance of property and equipment at October 31, 2006 consists of:





Useful
                life(years)
            
            Amount
                _Vehicles
                under capital leases
            
            
            5
            
            $
            221,434Leasehold
                improvements
            
            
            5
            
            
            64,895Computers
            
            
            3
            
            
            169,409Equipment
            
            
            3-5
            
            
            124,747Furniture
                and fixtures
            
            
            10
            
            
            67,907Total
            
            
            
            
            
            648,392Less:
                Accumulated depreciation and amortization
            
            
            
            
            
            (253,670
            )Property
                and equipment, net
            
            
            
            
            $
            394,722




-35-




**NOTE
      E - OTHER ASSETS**




At
      October 31, 2006, non-current other assets include the following:





Intangible
                assets:Covenant
                not to compete, net of accumulated amortization of $18,333
            
            $
            81,667Customer-related
                intangibles, net of accumulated amortization of $41,667
            
            
            108,333Other
            
            
            13,267$
            203,267




Covenant
      not to compete represents the portion of the payment made pursuant to the Plaza
      Agreement in connection with the purchase of the Plaza stock that was allocated
      to a non-competition covenant. Under this agreement, the sole stockholder of
      Plaza agreed not to compete with the Company for a period of five years. This
      amount is amortized on the straight-line method over the term of the
      non-competition covenant (5 years).




Customer-related
      intangible assets consist mainly of a customer list which Plaza acquired along
      with certain other assets from a business which performs in the United States
      consulting services similar to those performed by the Company in Puerto Rico.
      The value of the customer list is being amortized on the straight-line method
      over its estimated useful life of 3 years.




All
      of
      the intangibles assets were originated during the year ended October 31, 2006;
      therefore, there was no amortization of intangible assets in prior periods.
      The
      amortization expense for the year ended on October 31, 2006 amounted to
      $60,000.




**NOTE
      F - INCOME TAXES**




The
      Company's taxable income is subject to the Puerto Rico income tax at the 20%
      to
      39% rates provided by the 1994 Puerto Rico Internal Revenue Code, as amended.
      However, on August 1, 2005, Puerto Rico Act No. 41 was approved, which imposes
      an additional 2.5% special tax to all corporations and partnerships having
      a net
      taxable income over $20,000. The Act was effective for taxable years commencing
      after December 31, 2004 and ending on or before December 31, 2006; however,
      on
      November 10, 2006, Puerto Rico Act No. 244 was approved to impose the additional
      2.5% special tax to taxable years commencing after December 31, 2004 and before
      January 1, 2007. Therefore, the Company's maximum effective tax rate will be
      41.5% for its fiscal years ending on October 31, 2006 and October 31, 2007.
      The
      maximum effective tax rate for all other years will be 39%.




For
      federal income tax purposes, the Company only reports operations conducted
      in
      the United States. The resulting federal income taxes, if any, are credited
      against the Puerto Rico income taxes, with certain limitations. Through October
      31, 2006, operations in the United States are not significant.




Provision
      for income tax is computed at statutory rates applied to income calculated
      in
      accordance with the accounting practices described herein and as shown in the
      financial statements. Deferred income tax assets and liabilities are computed
      for differences between the financial statements and tax bases of assets and
      liabilities that will result in taxable or deductible amounts in the future,
      based on enacted tax laws and rates applicable to the periods in which the
      differences are expected to affect taxable income.




-36-




The
      reasons for the difference between the provision for income tax applicable
      to
income before provision for income taxes and the amount computed by applying
      the
      statutory tax rate in Puerto Rico, were as follows:




Years
                ended October 31,2006
            
            2005Theoretical
                income tax expense by application of statutory rates to the book
                pre-tax
                income
            
            $
            1,450,495
            
            $
            2,492,159Effect
                of income subject to taxation under Subchapter N (taxable income
                taxed to
                stockholders)
            
            
            (358,037
            )
            
            (2,492,159
            )Permanent
                difference
            
            
            67,371
            
            
            -Income
                tax expense
            
            $
            1,159,828
            
            $
            -0-




Because
      Plaza was treated as an N Corporation under the Puerto Rico Internal Revenue
      Code during the year ended October 31, 2005 and the period from November 1,
      2005
      through January 24, 2006, its income was taxed to its stockholder during those
      periods, and Plaza did not pay income tax. Had income tax been paid at the
      statutory rate, Plaza’s net income would have been $1,977,303, or $0.19 per
      share (basic) and $0.11 per share (diluted), for the year ended October 31,
      2006; $3,897,993, or $2.23 per share (basic) and $0.96 per share (diluted),
      for
      the year ended October 31, 2005.




**NOTE
      G - RELATED PARTY TRANSACTIONS; DUE TO AFFILIATE**




On
      January 25, 2006, pursuant to the Plaza Agreement, Elizabeth Plaza, as the
      sole
      stockholder and affiliate of Plaza, received at the closing $10,000,000 plus
      1,150,000 shares of Pharma-Bio's common stock. In addition, the Company agreed
      to pay Mrs. Plaza, three payments of $2,750,000, including imputed interest
      determined in accordance with Section 1274 of the Internal Revenue Code, on
      January 25, 2007, 2008 and 2009 as follows:


2007
              
              $
              2,750,0002008
              
              
              2,750,0002009
              
              
              2,750,000Total
                  payments
              
              
              8,250,000Less:
                  imputed interest
              
              
              (645,039
              )Present
                  value of minimum payments
              
              
              7,604,961Current
                  portion
              
              
              (2,705,000
              )Long-term
                  portion
              
              $
              4,899,961




-37-




In
      January 2007, Elizabeth Plaza agreed to accept the first installment of
      $2,750,000 in two payments, one in January 2007 and the second in February
      2007.




As
      a
      condition to closing, Plaza was required to have a net tangible book value
      of
      not less than $5,500,000, of which at least $2,000,000 was in cash, as of
      November 30, 2005. Subject to the requirement that Plaza have at least
      $2,000,000 in cash as of November 30, 2005, the purchase price was to be
      adjusted upward or downward depending on the net tangible book value, determined
      as provided in the Plaza agreement. This provision resulted in an additional
      payment to Ms. Plaza in the amount of $88,161, which was paid during the third
      quarter of 2006.




The
      Plaza
      Agreement also provides that Plaza, rather than Ms. Plaza, is responsible for
      the income tax from December 1, 2005 through the closing date, which was January
      25, 2006. Because of the status of Plaza as an N Corporation under the Puerto
      Rico Internal Revenue Code, Plaza's net income from December 1, 2005 to January
      24, 2006 was taxed to Ms. Plaza. The income tax payable by Ms. Plaza for Plaza's
      taxable income for that period amounts to $125,227. Plaza reimbursed Ms. Plaza
      the $125,227 during the third quarter of 2006. The $88,161 payment described
      in
      the preceding paragraph and the $125,227 payment described in this paragraph
      are
      treated as additional payments on account of the purchase price of Plaza stock
      from Mrs. Plaza.




Pursuant
      to the Puerto Rico Internal Revenue Code, the Company's clients are required
      to
      withhold a percentage of its fees (usually 3%, but sometimes 7%) as withheld
      income tax and remit such amount to the Puerto Rico Department of the Treasury.
      Such payment is treated as a payment on account to the Company's income tax
      obligations. Prior to January 25, 2006, Plaza was an N Corporation, and the
      Company's taxable income was taxed to Ms. Plaza, as sole stockholder.
      Accordingly, such withheld taxes were treated as a distribution to Ms. Plaza,
      as
      the Company's sole stockholder since Ms. Plaza was the person entitled to take
      the credit for the income tax withheld by the Company's clients in her personal
      income tax return. The amounts withheld prior to January 25, 2006 are recognized
      in the financial statements as non-cash distributions.




San
      Juan
      Holdings represented Plaza and Elizabeth Plaza in connection with the reverse
      acquisition. For such services, Pharma-Bio issued 600,000 shares of common
      stock
      and warrants to purchase 2,500,000 shares of common stock, with an exercise
      price of $0.06 per share, to San Juan Holdings. In Pharma-Bio's private
      placement of series A preferred stock and warrants, San Juan Holdings purchased
      three units. The purchase price for the three units was $750,000. The broker,
      which is an affiliate of San Juan Holdings, waived the commission and
      non-accountable expense allowance with respect to such sales, and as a result,
      San Juan Holdings purchased the three units for a net payment of $652,500.
      Pharma-Bio also paid an affiliate of San Juan Holdings a broker's commission
      and
      non-accountable expense allowance of $195,000 for sales made to other purchasers
      in the private placement, and Pharma-Bio issued to the affiliate three-year
      warrants to purchase an aggregate of 275,724 shares of common stock at an
      exercise price of $0.7344 per share.




**NOTE
      H - COMMITMENTS**




1.
      Contracts




On
      January 25, 2006, the Company entered into employment agreements with Elizabeth
      Plaza and Nelida Plaza. The agreement with Elizabeth Plaza initially provided
      that Ms. Plaza will serve as president and chief executive officer of the
      Company for a period of 18 months, for which she will receive a salary at the
      annual rate of $250,000. For 18 months thereafter, Ms. Plaza will serve as
      a
      consultant for which she will receive compensation at the annual rate of
      $75,000. During the term of her employment, the Company will also provide Ms.
      Plaza with an automobile allowance at the annual rate of $24,828, discretionary
      bonuses and stock options or other equity-based incentives as shall be
      determined by the compensation committee's board of directors, except that
      her
      bonus shall not be less than 4% nor more than 50% of her salary. If the Company
      terminates Ms. Plaza's employment other than for cause or as a result of her
      death or disability, the Company is required to pay Ms. Plaza the balance of
      her
      compensation for her employment terms and her consulting term and other
      benefits, including a pro rata portion of the bonus that would have been paid
      to
      her, and her obligations under her non-competition provision terminate. In
      January 2007, Elizabeth Plaza’s employment agreement was amended to extend her
      employment term through December 31, 2007, and the consulting term will
      immediately commence following the employment term and end on January 31,
      2009.




-38-




The
      Company's agreement with Nelida Plaza provides that Ms. Plaza will serve as
      vice
      president for a term of three years for which she will receive annual
      compensation at the annual rate of $150,000. She is also entitled to such bonus
      compensation as is determined by the compensation committee, not to exceed
      50%
      of her salary. The Company also agreed to make the lease payments on the
      automobile she currently leases. Such payments are at the annual rate of
      approximately $11,600. If the Company terminates Ms. Plaza's employment other
      than for cause or as a result of her death or disability, the Company is
      required to pay Ms. Plaza the balance of her compensation for her employment
      terms and her consulting term and other benefits, including a pro rata portion
      of the bonus that would have been paid to her, and her obligations under her
      non-competition provision, terminate.




On
      January 26, 2006, the Company entered into a one-year consulting agreement
      with
      Dov Perlysky, pursuant to which the Company agreed to pay Mr. Perlysky a 5%
      commission on business generated by Mr. Perlysky's efforts. This agreement
      replaced his prior employment agreement. This agreement terminated on January
      26, 2007. No commission was paid to Mr. Perlysky pursuant to this
      agreement.





On
      April
      3, 2006, the Company entered into an employment agreement with its Chief
      Financial Officer (CFO) pursuant to which the Company will pay him an annual
      salary of $80,000. The agreement has a one-year term, which may be extended
      for
      up to two years. The Company granted the CFO stock options to purchase 90,000
      shares of common stock at $0.7344 per share, which was the fair market value
      on
      the date of grant.




2.
      Lease
      commitments




Capitalized
      lease obligations - As of October 31, 2006, the Company owned vehicles acquired
      under non-cancelable capital leases with a cost of $221,434 and accumulated
      amortization of $66,861. Amortization expense for these assets amounted to
      $44,805 and $33,968 in the years ended October 31, 2006 and 2005, respectively.
      The following is a schedule, by year, of future minimum lease payments under
      the
      capitalized leases together with the present value of the net minimum lease
      payments at October 31, 2006:


2007
              
              $
              48,2402008
              
              
              48,2402009
              
              
              71,2402010
              
              
              32,239Total
                  minimum lease payments
              
              
              199,959Less:
                  Amount of imputed interest
              
              
              (
                  19,438
              )Present
                  value of minimum lease payments
              
              
              180,521Current
                  portion of obligation under capital leases
              
              
              (38,873
              )Long-term
                  portion
              
              $
              141,648
  -39-


Operating
      facilities - The Company conducts its administrative operations in office
      facilities which are leased under different rental agreements with the following
      terms:


Description
              
              Monthly
                  Rent
              
              Commitment
                  TermMain
                  resources facilities
              
              $
              3,200
              
              
              Ending
                  in October 2007Housing
                  for employees
              
              $
              1,850
              
              
              Ending
                  in November 2006Limerick
                  office space
              
              $
              1,000
              
              
              Ending
                  in July 2007




The
      first
      lease listed in the table is with an affiliate of the chief executive officer.
      The Company has plans to move its main resources facilities to a building owned
      by the same affiliated entity. The annual minimum rent for the planned new
      facilities would amount to approximately $225,000, including rent for a space
      necessary for expansion.




In
      June
      2006, the Company entered into a new lease agreement for new office facilities
      in Limerick, Pennsylvania, at a monthly rental of $1,000. The lease term of
      the
      new lease agreement expires on July 31, 2007, but the agreement may be
      terminated earlier by giving a prior 90 days written notice. The new lease
      agreement may be renewed for an additional term of three years at monthly rental
      of $1,050 during the first year, $1,100 during the second year, and $1,150
      during the third year of the lease renewal term.





Rent
      expense during the years ended October 31, 2006 and 2005 was $98,936 and
      $71,026, respectively.




**NOTE
      I - STOCK OPTIONS**




In
      October 2005, the Company's board of directors adopted, and on April 25, 2006,
      the Company’s stockholders approved, the 2005 Long-Term Incentive Plan, covering
      2,500,000 shares of common stock. The 2005 plan provides for the grant of
      incentive and non-qualified options, stock grants, stock appreciation rights
      and
      other equity-based incentives to employees, including officers, and consultants.
      The 2005 plan is to be administered by a committee of independent directors.
      In
      the absence of a committee, the plan is administered by the board of directors.
      Independent directors are not eligible for discretionary options. However,
      each
      newly elected independent director receives at the time of his or her election,
      a five-year option to purchase 25,000 shares of common stock at the market
      price
      on the date of his or her election. In addition, the plan provides for the
      annual grant of an option to purchase 5,000 shares of common stock on the first
      trading day of January of each year, commencing January 2007. The options to
      directors have a term of five years and become exercisable cumulatively as
      to
      50% of the shares subject to the option six months from the date of grant and,
      as to the remaining 50%, 18 months from the date of grant. Pursuant to this
      provision, on January 25, 2006, options to purchase 25,000 shares at $0.7344
      per
      share, being the fair market value on the date of grant, were automatically
      granted to each of the three independent directors. Options intended to be
      incentive stock options must be granted at an exercise price per share which
      is
      not less than the fair market value of the common stock on the date of grant
      and
      may have a term which is not longer than ten years. If the option holder holds
      at least 10% of our common stock, the exercise price must be at least 110%
      of
      the fair market value on the date of grant and the term of the option cannot
      exceed five years.




Pursuant
      to the Plaza Agreement, all outstanding options issued by Plaza were terminated,
      and the Company granted incentive stock options to purchase an aggregate of
      1,400,000 shares of common stock at an exercise price of $0.7344 per share
      to
      the holders of such terminated Plaza options pursuant to the Company's 2005
      Long-Term Incentive Plan. Of the total options to purchase 1,400,000 shares
      of
      common stock, options to purchase 776,186 shares of common stock were granted
      to
      18 employees whose options to purchase Plaza common stock were cancelled. The
      options to purchase the remaining 623,814 shares of common stock were granted
      to
      both the 18 former holders of Plaza options and 23 additional Plaza employees.
      The Company subsequently granted options to purchase other 473,724 shares to
      employees and independent directors. The new options have an exercise price
      of
      $0.7344, a term of five years and are exercisable in installments. As of January
      15, 2007, there were approximately 1,348,000 outstanding options, since some
      options expired because of certain employment terminations.




-40-




Pursuant
      to the Plaza Agreement, Pharma-Bio agreed that it would issue 100 shares of
      common stock to each of Plaza's eligible employees. Such shares will not be
      issued until Pharma-Bio is eligible to use a Form S-8 registration statement
      in
      connection with the issuance of such shares. Approximately 16,500 shares of
      common stock may be issued pursuant to this program.




**NOTE
      J - CONCENTRATION OF RISKS**




The
      Company's cash balances are maintained in a bank checking account and a money
      market account.




Management
      deems all its accounts receivables to be fully collectible, and, as such, does
      not maintain any allowances for uncollectible receivables.




The
      Company's revenues, and the related receivables, are concentrated in the
      pharmaceutical industry in Puerto Rico. A small number of customers have
      accounted for a significant percentage of its revenue .
      In
      spite of the fact that just a few customers represent a significant source
      of
      revenue, our functions are not a continuous process, accordingly, the client
      base for which our services are typically rendered, on a project-by-project
      basis, changes regularly. Four customers accounted for 10% or more of revenues
      during the year
      ended on October 31, 2006, two of which also accounted for more than 10% of
      revenues during the year ended October 31, 2005. The following table sets forth
      information as to revenues and percentage of revenues for these years (dollars
      in thousands) for the Company's principal clients, all of which are
      pharmaceutical companies:




Years
                Ended October 31,Customer
            
            2006
            
            2005GlaxoSmithKline
            
            $
            4,248
                (29.9
            %)
            $
            637
                (3.7
            %)Schering-Plough
            
            
            2,935
                (20.6
            %)
            
            7,523
                (43.2
            %)Johnson
                & Johnson
            
            
            1,727
                (12.1
            %)
            
            969
                (5.6
            %)Lilly
                del Caribe
            
            
            1,445
                (10.2
            %)
            
            3,312
                (19.0
            %)




Schering-Plough,
      Lilly del Caribe, GlaxoSmithKline and Johnson & Johnson had outstanding
      balances at October 31, 2006 representing 19%, 11%, 32% and 11%, respectively,
      of the total receivables.




The
      Company assesses the financial strength of its customers and, as a consequence,
      believes that its trade accounts receivable credit risk exposure is limited.
      However, the loss or significant decline in business from any of its major
      customers could have a material effect upon its revenue and income.




In
      June
      2006, Schering-Plough announced the closing of one of its two facilities in
      Puerto Rico and the reduction of staff in the second. The accompanying
      statements of operations include revenues from the closed facility as follows:




**Years
                Ended October 31,**
            
            **Revenues**2006
            
            $
            1,921,4332005
            
            $
            5,312,190




The
      receivables at October 31, 2006 from the closed facility amounted to
      approximately $604,000, but the credit risk exposure on these receivables is
      not
      significant. The Company does not anticipate any problem in connection with
      the
      collection of said outstanding balance.




**NOTE
      K - RETIREMENT PLAN**




The
      Company has a qualified profit sharing plan in accordance with the provision
      of
      Section l165(a)(3)(A) of the Puerto Rico Code, for employees who meet certain
      age and service period requirements. The Company makes contributions to this
      plan as required by the provisions of the plan document. Contributions for
      the
      years ended October 31, 2006 and 2005 were $40,439 and $35,908,
      respectively.




-41-




**ITEM
                8****CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None.





**ITEM
                8A****CONTROLS
                AND PROCEDURES**




As
      of the
      end of the period covered by this report, our chief executive officer and chief
      financial officer evaluated the effectiveness of our disclosure controls and
      procedures. Based on their evaluation, the chief executive officer and chief
      financial officer concluded that our disclosure controls and procedures are
      effective in alerting them to material information that is required to be
      included in the reports that we file or submit under the Securities Exchange
      Act
      of 1934 and that information required to be disclosed in the reports that we
      file or submit under the Securities Exchange Act of 1934 is accumulated and
      communicated to our management, including our chief executive officer and chief
      financial officer, to allow timely decisions regarding required disclosure.




During
      the quarterly period covered by this report, there were no changes in the
      Company's internal controls over financial reporting that materially affected,
      or are reasonably likely to materially affect, the Company's internal controls
      over financial reporting.




**ITEM
                8B****OTHER
                INFORMATION**




On
      January 29, 2007, **** we
      entered into an agreement with Elizabeth Plaza, amending her employment
      agreement to provide that her executive term would be extended until December
      31, 2007 and thereafter she would continue as a consultant through January
      31,
      2009. Except for this amendment, Ms. Plaza’s employment agreement is
      unchanged.


-42-




**PART
      III**





**ITEM
                9****DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT**




**Directors
      and Executive Officers**




The
      following table sets forth certain information with respect to our directors
      and
      executive officers.




Name
            
            Age
            
            PositionElizabeth
                Plaza
            
            42
            
            President,
                chairman of the board and directorNélida Plaza
            
            38
            
            Vice
                president and secretaryManuel
                O. Morera
            
            50
            
            Chief
                financial officer and vice president - finance and
                administrationDov
                Perlysky
            
            43
            
            DirectorKirk
                Michel1
            
            50
            
            DirectorHoward
                Spindel1
            
            61
            
            DirectorIrving
                Wiesen1
            
            51
            
            Director







1
            Member
                of the audit and compensation
                committees.




Elizabeth
      Plaza has been president and sole director of Plaza since 1997, when the Company
      was incorporated after operating as a sole proprietorship since 1993, and she
      has been our president and chief executive officer since January 25, 2006.
      Ms.
      Plaza holds a B.S. in Pharmaceutical Sciences, magna cum laude, from the School
      of Pharmacy of the University of Puerto Rico. She was a 40 under 40 Caribbean
      Business Award recipient in 2002, the 2003 recipient of Ernst & Young’s
      Entrepreneur of the Year Award in Health Science, one of the 2003 recipients
      of
      the Puerto Rico Powerful Business Women Award, elected as Executive of the
      Year
      by the Puerto Rico Industrial Association in 2004. Ms. Plaza is a licensed
      pharmacist.




Nélida
      Plaza has been vice president of operations of Plaza since January 2004 and
      has
      been our vice president and secretary since January 25, 2006. In July 2000,
      Ms.
      Plaza joined Plaza as a project management consultant. Prior thereto, she was
      a
      unit operations leader and safety manager at E.I. Dupont De Nemours where she
      was involved with the development, support and audit of environmental, safety
      and occupational health programs. Ms. Plaza holds a M.S. in Environmental
      Management from the University of Houston in Clear Lake and a B.S. in Chemical
      Engineering from the University of Puerto Rico. Nélida Plaza was recognized by
      Casiano Communications as one of the 40 under 40 distinguished executives in
      Puerto Rico.




Manuel
      O.
      Morera has been our chief financial officer and vice president - finance and
      administration since April 2006, and was working for us on a part-time basis
      since March 24, 2006. Mr. Morera is a certified public accountant. From 1997
      until April 2006, Mr. Morera was in private practice as an accountant, tax
      and
      business counselor. From 1983 until 1997, Mr. Morera was a senior auditor,
      audit
      supervisor, manager and senior manager with the accounting firm of Horwath
      Vélez
      PSC, formerly Laventhol and Horwath Co. Mr. Morera is a cum laude graduate
      in
      business administration (accounting) from the University of Puerto Rico.




-43-




Dov
      Perlysky has been our president and a director since 2004 and has been the
      managing member of Nesher, LLC a private investment firm since 2000. On January
      25, 2006, in connection with the reverse acquisition, Mr. Perlysky resigned
      as
      president and became a consultant to us. From 1998 until 2002, Mr. Perlysky
      was
      a vice president in the private client group of Laidlaw Global Securities,
      a
      registered broker-dealer. He received his B.S. in Mathematics and Computer
      Science from the University of Illinois in 1985 and a Masters in Management
      from
      the JL Kellogg Graduate School of Northwestern University in 1991. Mr. Perlysky
      is a director of Engex, Inc., a closed-end mutual fund.




Kirk
      Michel, a director since January 25, 2006, has been a managing director of
      KEMA
      Advisors, Inc., a boutique financial advisory firm located in Hillsborough,
      North Carolina since 2002. KEMA Advisors provides financial advisory services
      to
      middle market companies and governmental agencies. From 1995 to 2002, Mr. Michel
      was the co-founder and a managing director of Bahia Group Holdings, LLC which
      provided corporate finance, public finance and merger and acquisition services
      to middle market companies and governmental agencies. Mr. Michel holds a M.B.A.
      degree from the Columbia University Graduate School of Business and a B.A.
      in
      Economics from Northwestern University.




Howard
      Spindel, a director since January 25, 2006, has been a consultant with
      Integrated Management Solutions, a securities industry consulting and
      recruitment firm which he founded, since 1985. In this capacity, he has also
      acted as a financial and operations principal, general securities principal,
      registered representative and options principal for several broker-dealers
      during this period. He is also a director of Engex, Inc., a closed-end mutual
      fund. Mr. Spindel received a B.S. in accounting from Hunter
      College.




Irving
      Wiesen, a director since January 25, 2006, has practiced as an attorney
      specializing in food and drug law and regulation in the pharmaceutical and
      medical device industries for more than twenty-five years. For more than the
      past five years he has been of counsel to the New York law firms, Ullman,
      Shapiro and Ullman, LLP and Cohen, Tauber, Spievack & Wagner. Prior to that,
      Mr. Wiesen was a partner in the New York food and drug law firm, Bass &
Ullman, and also served as division counsel of Boehringer Ingelheim
      Pharmaceuticals, Inc. Mr. Wiesen represents pharmaceutical, medical device
      and
      biotechnology companies in all aspects of FDA regulation, corporate practice
      and
      compliance, litigation and allied commercial transactions. Mr. Wiesen received
      his J.D. degree from the New York University School of Law and holds an M.A.
      in
      English Literature form Columbia University and a B.A., cum laude, from Yeshiva
      University.




Elizabeth
      Plaza and Nélida Plaza are sisters. There is no other family relationship among
      our officers and directors.




**Board
      Committees**




The
      board
      of directors has three committees, the audit committee, the compensation
      committee and the mergers and acquisition committee. Kirk Michel, Howard Spindel
      and Irving Wiesen, each of whom is an independent director, are the members
      of
      the audit and compensation committees. Mr. Spindel is the audit committee
      financial expert. Dov Perlysky, Kirk Michel and Irving Wiesen are the members
      of
      the mergers and acquisition committee. The mergers and acquisition committee
      was
      formed to assist us with our business strategy and objectives as they relate
      to
      acquisitions discussed above.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act requires our executive officers and
      directors, and persons who own more than 10% of our common stock, to file
      reports regarding ownership of, and transactions in, our securities with the
      Securities and Exchange Commission and to provide us with copies of those
      filings. Based solely on our review of the copies of such forms received by
      us,
      or written representations from certain reporting persons,  the
      following officers, directors and 10% stockholders were late in filing a Form
      3
      or 4: Each of Ms. Elizabeth Plaza, Ms. Nelida Plaza, Mr. Kirk Michel, Mr. Howard
      Spindel and Mr. Irving Wiesen had a Form 3 which was due on February 4, 2006.
      These Form 3s were filed during the period February 21, 2006 through February
      27, 2006. Mr. Dov Perlysky did not file a Form 3. He did, however, file a Form
      4
      on December 28, 2006 for transactions which occurred on January 25, 2006. Mr.
      Morera has not filed a Form 3.




-44-




**Code
      of Ethics**





We
      have
      adopted a Code of Ethics that applies to all its senior management and
      directors. A copy of this code of ethics is filed as an exhibit to this annual
      report.




**ITEM
                10****EXECUTIVE
                COMPENSATION**




**Summary
      Compensation Table**




Set
      forth
      below is information for our chief executive officer and the only other officer
      whose compensation exceeded $100,000 for the fiscal year ended October 31,
      2006.





Annual
                Compensation
            
            Long-Term
                Compensation (Awards)
              Options
            
            All
                otherName
                and Position
            
            FiscalYear
            
            Salary
            
            Bonus
            
            (number)
            
            CompensationElizabeth
                Plaza, president and
              chief
                executive officer
            
            
            2006
              2005
            
            $
            173,378
              —
            
            
            —
              —
            
            
            —
              —
            
            $
            34,423
              281,521Nélida
                Plaza, vice president
            
            
            2006
              2005
            
            
            130,120
              84,723
            
            
            —
              —
            
            
            131,455
              —
            
            
            17,094
              54,688





Prior
      to
      the reverse acquisition, Plaza Consulting Group, which was then wholly owned
      by
      Elizabeth Plaza, had granted Nélida Plaza an option to purchase 500 shares of
      its common stock at an exercise price of $138.19 per share. At the consummation
      of the reverse merger in January 2006, we granted Ms. Nélida Plaza options to
      purchase 131,455 shares of common stock at an exercise price of $.7344 per
      share, the fair market value on the date of grant, of which an option to
      purchase 94,083 shares of our common stock was issued to replace the Plaza
      Consulting option.




No
      bonuses were paid to any of the officers and no stock or other equity
      compensation was provided to any of the officers during the years ended October
      31, 2006 and 2005.




Other
      compensation for Elizabeth Plaza represents payment of personal expenses which
      we paid on behalf of Ms. Plaza, who was the sole stockholder of Plaza up to
      January 25, 2006. It also includes a $2,069 monthly payment of a lease
      obligation of the Company for the vehicle assigned to her.




-45-




Other
      compensation paid to Nélida Plaza includes the following:





Years
                Ended October 31,Description
            
            2006
            
            2005Housing
            
            $
            4,428
            
            $
            25,175Life
                insurance
            
            
            2,005
            
            
            12,034Tuition
                for her child
            
            
            —
            
            
            11,280Car
                allowance
            
            
            1,000
            
            
            6,000Payments
                of lease obligation forthe
                vehicle assigned to her
            
            
            9,660
            
            
            —Other
            
            
            —
            
            
            199$
            17,094
            
            $
            54,688





Payments
      for housing, child tuition and car allowances to the above executive officers
      were discontinued after December 31, 2005.





Prior
      to
      the reverse acquisition, Plaza was taxed as a Subchapter N corporation under
      the
      Puerto Rico tax law, which is similar to treatment as an S Corporation under
      the
      Internal Revenue Code. As a result, Elizabeth Plaza was taxed on Plaza’s income.
      Up to December 2005, we did not pay Elizabeth Plaza any salary. We made
      distributions to Ms. Plaza in the amount of $834,000 for the year ended October
      31, 2006 and approximately $8.0 million for the year ended October 31,
      2005.





As
      a
      result of our acquisition of Plaza, Plaza’s status as a Subchapter N corporation
      terminated on January 25, 2006, the date of our acquisition of Plaza. Ms. Plaza
      is responsible for any taxes which are payable as a result of the Plaza’s loss
      of its Subchapter N status under the Puerto Rico tax laws. However, we, and
      not
      Ms. Plaza, are responsible for any taxes on the Plaza’s taxable income during
      the period from the December 1, 2005 to January 24, 2006, which amounted to
      $125,227, and was paid on June 15, 2006 **.**





**Employment
      Agreements**





On
      January 25, 2006, we entered into employment agreements with Elizabeth Plaza
      and
      Nélida Plaza. Our agreement with Elizabeth Plaza initially provided that Ms.
      Plaza will serve as our president and chief executive officer for a period
      of 18
      months, for which she will receive a salary at the annual rate of $250,000.
      For
      18 months thereafter, Ms. Plaza will serve as a consultant for which she will
      receive compensation at the annual rate of $75,000. In January 2007, this
      agreement was amended to extend the employment agreement to December 31, 2007.
      As a result of the amendment, the consulting term will commence immediately
      following the employment term and will end on January 31, 2009. During the
      term
      of her employment, we will also provide Ms. Plaza with an automobile allowance
      at the annual rate of $24,828, discretionary bonuses and stock options or other
      equity-based incentives as shall be determined by our compensation committee,
      except that her bonus shall not be less than 4% nor more than 50% of her salary.
      If we terminate Ms. Plaza’s employment other than for cause or as a result of
      her death or disability, we are required to pay Ms. Plaza the balance of her
      compensation for her employment terms and her consulting term and other
      benefits, including a pro rata portion of the bonus that would have been paid
      to
      her, and her obligations under her non-competition provision terminate. Since
      the bonus is discretionary, with a minimum bonus of 4% of Ms. Plaza’s salary,
      unless the compensation committee shall have provided for a greater bonus prior
      to the termination of Ms. Plaza’s employment without cause, Ms. Plaza would not
      be entitled to a bonus greater than $10,000, which is 4% of $250,000, the amount
      of the bonus to be based on the remaining employment term.




Our
      agreement with Nélida Plaza provides that Ms. Plaza will serve as vice president
      for a term of three years for which she will receive annual compensation at
      the
      annual rate of $150,000. She is also entitled to bonus compensation as is
      determined by the compensation committee, not to exceed 50% of her salary.
      We
      also agreed to make the lease payments on the automobile she currently leases.
      Such payments are at the annual rate of approximately $11,600. If we terminate
      Ms. Plaza’s employment other than for cause or as a result of her death or
      disability, we are required to pay Ms. Plaza her compensation for the balance
      of
      the term and other benefits, including a pro rata portion of the bonus that
      would have been paid to her, and her obligations under her non-competition
      provision terminate. Since Ms. Plaza’s employment contract provides for a
      discretionary bonus, unless the compensation committee shall have provided
      for a
      bonus to Ms. Plaza prior to the termination of her employment without cause,
      Ms.
      Plaza would not be entitled to any bonus payment.




-46-




The
      employment agreements with both Elizabeth Plaza and Nélida Plaza provide that
      during the term of the agreement and for two years thereafter, the executive
      will not, directly or indirectly engage in a competing business or solicit
      any
      customer or seek to persuade any customer to reduce the amount of business
      it
      does with us or seek to persuade any employee to leave our employ.




We
      entered into an employment agreement with Mr. Morera pursuant to which we pay
      Mr. Morera an annual salary of $80,000. The agreement has a one-year term,
      which
      we may extend for up to two years. We granted Mr. Morera stock options to
      purchase 90,000 shares of common stock at $0.7344, which was the fair market
      value on the date of grant. Mr. Morera’s employment agreement has a
      non-competition provision pursuant to which he agrees that during the term
      of
      the agreement and for one year thereafter, Mr. Morera will not, directly or
      indirectly engage in a competing business or solicit any customer or seek to
      persuade any customer to reduce the amount of business it does with us or seek
      to persuade any employee to leave our employ.




**Consulting
      Agreement**




On
      January 26, 2006, we entered into a one-year consulting agreement with Dov
      Perlysky, pursuant to which we agreed to pay Mr. Perlysky a 5% commission on
      business generated by Mr. Perlysky’s efforts. This agreement terminated on
      January 26, 2007. No commission was paid to Mr. Perlysky pursuant to this
      agreement.




**ITEM
                11****SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDERS MATTERS**





The
      following table provides information as to shares of common stock beneficially
      owned as of December 31, 2006 by:




·
            each
                director;·
            each
                officer named in the summary compensation
                table;





·
            each
                person owning of record or known by us, based on information provided
                to
                us by the persons named below, to own beneficially at least 5% of
                our
                common stock; and·
            all
                directors and executive officers as a group.





Name
            
            Shares
                of Common Stock Beneficially Owned
            
            PercentageElizabeth
                Plaza
              Sardinera
                Beach Building, Suite 2 Marginal Costa de Oro
              Dorado,
                Puerto Rico 00646
            
            
            1,150,000
            
            
            6.3
            %Dov
                Perlysky
              445
                Central Avenue, Suite 305
              Cedarhurst,
                New York 11516
            
            
            1,164,554
            
            
            6.4
            %Kirk
                Michel
            
            
            523,406
            
            
            2.8
            %Howard
                Spindel
            
            
            12,500
            
            
            *Irving
                Wiesen
            
            
            12,500
            
            
            *All
                officers and directors as a group (five individuals owning
                stock)
            
            
            2,898,406
            
            
            14.9
            %Venturetek
                LP
              370
                Lexington Avenue
              New
                York, NY 10017
            
            
            4,697,990
            
            
            23.6
            %San
                Juan Holdings, Inc.
              MCS
                Plaza, Suite #305
              255
                Ponce de León Ave.
              Hato
                Rey, PR  00917
            
            
            4,908,443
            
            
            22.7
            %Barron
                Partners LP
              730
                Fifth Avenue
              New
                York, NY 10019
            
            
            3,987,251
            
            
            20.3
            %Pentland
                USA, Inc.
              3333
                New Hyde Park Road
              New
                Hyde Park, NY 11042
            
            
            1,532,719
            
            
            8.1
            %Fame
                Associates
              111
                Broadway
              New
                York, NY 10006
            
            
            1,532,719
            
            
            8.1
            %LDP
                Family Partnership, LP
              2
                Lakeside Drive West
              Lawrence,
                NY 11559
            
            
            1,158,839
            
            
            6.2
            %







*
            Less
                than 1%.




Except
      as
      otherwise indicated each person has the sole power to vote and dispose of all
      shares of common stock listed opposite his name. Each person is deemed to own
      beneficially shares of common stock which are issuable upon exercise or
      conversion of currently convertible securities which are exercisable or
      convertible within 60 days of December 31, 2006. The beneficial ownership of
      each person named is determined in accordance with the rules of the Securities
      and Exchange Commission under the Securities Exchange Act of 1934. Under these
      rules, a person is deemed to beneficially own the total number of shares of
      common stock which he or she owns plus the number of shares of common stock
      which are issuable upon exercise of currently exercisable securities. The
      percentage ownership of each person is the percentage that the number of shares
      beneficially owned by that person bears to the sum of (a) the outstanding common
      stock plus (b) the shares of common stock issuable upon exercise or conversion
      of those currently convertible securities that are owned by that stockholder.




The
      shares owned by San Juan Holdings, Inc. include (a) 3,010,600 shares of common
      stock issuable upon exercise of warrants and (b) 275,724 shares of common stock
      issuable upon exercise of a warrant held by RD Capital Group, Inc., a
      broker-dealer and an affiliate of San Juan Holdings.




The
      shares of common stock beneficially owned by Mr. Michel consist of 12,500 shares
      of common stock issuable upon exercise of options, 340,706 shares of common
      stock owned by KEMA Advisors, of which Mr. Michel is managing director, and
      163,000 shares issuable upon exercise of warrants held by KEMA Advisors. KEMA
      Advisors is a selling stockholder.




-47-




The
      shares of common stock beneficially owned by Mr. Perlysky represent 1,164,554
      shares of common stock owned by Krovim, LLC. Mr. Perlysky is the manager of
      Nesher, LLC, which is the manager of Krovim. Mr. Perlysky disclaims beneficial
      interest in the shares owned by Krovim. Shares owned by Mr. Perlysky do not
      include 772,971 shares owned by LDP Family Partnership or warrants to purchase
      386,048 shares of common stock held by LDP Family Partnership. Mr. Perlysky’s
      wife is general partner of LDP Family Partnership and Mr. Perlysky disclaims
      beneficial ownership in the securities owned by it.




The
      shares of common stock owned by each of Mr. Spindel and Mr. Wiesen represent
      shares issuable upon exercise of options.





**ITEM
                12****CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS**





On
      January 25, 2006, we acquired Plaza from Elizabeth Plaza, as the sole
      stockholder of Plaza. At the closing, we paid Ms. Plaza $10,000,000 and issued
      to Ms. Plaza 1,150,000 shares of common stock. In addition, we will pay Ms.
      Plaza three payments, each in the amount of $2,750,000, on January 25, 2007,
      2008 and 2009. With Ms. Plaza’s consent, we are making the $2.75 million payment
      in two installments, one in January 2007 and the second in February 2007. As
      a
      condition to closing, Plaza was required to have a net tangible book value
      of
      not less than $5,500,000, of which at least $2,000,000 was to be in cash, as
      of
      November 30, 2005, with the excess to be paid to Ms. Plaza. The amount due
      to
      Ms. Plaza under this provision was $88,161 and was paid on June 15, 2006.
      Pursuant to the merger agreement, we were required to reimburse Ms. Plaza for
      income tax which she paid on our income from December 1, 2005 until January
      24,
      2006. This amounted to $125,227 and was paid on June 15, 2006.




San
      Juan
      Holdings represented Plaza and Elizabeth Plaza in connection with the reverse
      acquisition. For such services, we issued 600,000 shares of common stock and
      warrants to purchase 2,500,000 shares of common stock, with an exercise price
      of
      $0.06 per share, to San Juan Holdings. In our private placement of series A
      preferred stock and warrants, San Juan Holdings purchased three units. The
      purchase price for the three units was $750,000. The broker, which is an
      affiliate of San Juan Holdings, waived the commission and the non-accountable
      expense allowance with respect to such sales, and as a result, San Juan Holdings
      purchased the three units for a net payment of $652,500. The three units were
      comprised of 75,000 shares of series A preferred stock and warrants to purchase
      510,600 shares of common stock. The shares of series A preferred stock became
      converted into 1,021,200 shares of common stock. We also issued 919 shares
      of
      common stock to San Juan Holdings as a result of our failure to filing the
      registration statement of which this prospectus is a part in a timely manner.
      We
      also paid an affiliate of San Juan Holdings a broker’s commission and
      non-accountable expense allowance of $195,000 for sales made to other purchasers
      in the private placement, and we issued to the affiliate three-year warrants
      to
      purchase an aggregate of 275,724 shares of common stock at an exercise price
      of
      $0.7344 per share.




KEMA
      Advisors, Inc., of which Kirk Michel, a director, is managing director,
      purchased one unit, consisting of 25,000 shares of series A preferred stock
      and
      warrants to purchase an aggregate of 170,200 shares of common stock for
      $250,000. The shares of series A preferred stock became converted into 340,400
      shares of common stock. We also issued 306 shares of common stock to KEMA
      Advisors for our failure to file the registration statement in a timely manner.
      KEMA Advisors is a selling stockholder.




In
      January 2006, we acquired certain assets of a United States based company that
      performs consulting services for the pharmaceutical and biotech industries
      from
      Mark Fazio for $300,000. The acquired assets include a client list and a
      validation compliance service business. The purchase price was paid in three
      installments, each in the amount of $100,000. At the time of the purchase we
      had
      no relationship with Mr. Fazio, and he was subsequently elected as executive
      vice president and chief operating officer. He served in those capacities until
      March 31, 2006.




-48-




**ITEM
                13****EXHIBITS**





Exhibit
                Number
            
            Exhibit
                Description3.1
            
            Restated
                Certificate of Incorporation13.2
            
            By-laws24.1
            
            Form
                of warrant issued to Investors in January 2006 private placement34.2
            
            Form
                of warrant held by initial warrant holders34.3
            
            Form
                of warrant held by San Juan Holdings34.4
            
            Form
                of warrants issued to broker-dealers in January 2006 private placement310.1
            
            Form
                of subscription agreement for January 2006 private placement310.2
            
            Registration
                rights provisions for the subscription agreement relating to January
                2006
                private placement310.3
            
            Registration
                rights provisions for Elizabeth Plaza and San Juan Holdings, Inc.310.4
            
            Employment
                agreement dated January 25, 2006, between the Registrant and Elizabeth
                Plaza310.5
            
            Amendment
                dated January 29, 2007 to employment agreement with Elizabeth
                Plaza610.6
            
            Employment
                agreement dated January 25, 2006, between the Registrant and Nélida Plaza310.7
            
            2005
                Long-term incentive plan310.8
            
            Registration
                rights provisions for the subscription agreement310.9
            
            Lease
                dated March 16, 2004 between Plaza Professional Center, Inc. and
                the
                Registrant410.10
            
            Lease
                dated November 1, 2004 between Plaza Professional Center, Inc. and
                the
                Registrant410.11
            
            Employment
                Agreement dated March 24, 2006, between the Registrant.610.12
            
            Vendor
                Agreement dated May 4, 2006 between the Registrant and Manuel O.
                Morera510.13
            
            Agreement
                dated May 4, 2006 between Lilly del Caribe, Inc. and Plaza Consulting
                Group, Inc.410.14
            
            Agreement
                dated January 17, 2006 between Lilly del Caribe, Inc. and Plaza Consulting
                Group, Inc.410.15
            
            Agreement
                effective as of November 1, 2005 between SB Pharmco Puerto Rico Inc.
                d/b/a
                GlaxoSmithKline414.1
            
            Code
                of business conduct and ethics for senior management621.1
            
            List
                of Subsidiaries4





1
            Filed
                as an exhibit to the Company’s current report on Form 8-K, which was filed
                with the Commission on May 1, 2006 and incorporated herein by
                reference.2
            Filed
                as an exhibit to the Company’s registration statement of Form 10-SB and
                incorporated herein by reference.3
            Filed
                as an exhibit to the Company’s current report on Form 8-K which was filed
                with the Commission on January 31, 2006 and incorporated herein by
                reference.4
            Filed
                as an exhibit to the Company’s registration statement on Form SB-2, File
                No. 333-132847, which was declared effective bythe
                Commission on November 8, 2006 and incorporated herein by reference.5
            Filed
                as an exhibit to the Company’s current report on Form 8-K which was filed
                with the Commission on April 10, 2006, and incorporated herein by
                reference.6
            Filed
                herewith




-49-




**ITEM
                14****PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**




Our
      financial services for the fiscal year ended October 31, 2005 were certified
      by
      Kevane Soto Pasarell Grant Thornton LLP (“Kevane”). Kevane also reviewed our
      unaudited financial statements for the three quarters of the fiscal year ended
      July 31, 2006.




We
      were
      billed by Kevane during 2006 and 2005 as follows:




Description
                of services
            
            2006
            
            2005Audit
                fees
            
            $
            22,427
            
            $
            21,500Audit
                related fees
            
            
            18,971
            
            
            —Tax
                fees
            
            
            830
            
            
            15,941All
                other fees
            
            
            40,144
            
            
            —$
            82,372
            
            $
            37,441




Our
      total
      fees to Raich Ende were $25,323, which covered the audit for our fiscal year
      ended June 30, 2005 and the period from inception (January 14, 2004) to June
      30,
      2004 and review of our quarterly financial statements.




On
      September 25, 2006, we engaged Horwath Vélez & Co., PSC. (“Horwath”) as our
      registered independent accounting firm. As of October 31, 2006, there were
      no
      accrued accounting fees due to Horwath.


-50-




**SIGNATURES**




Pursuant
      to the requirements of the Securities Act of 1933, as amended, the Registrant
      certifies that it has reasonable grounds to believe that it meets all the
      requirements for filing on Form 10-KSB and has duly caused this annual report
      on
      Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly
      authorized, in the City of Dorado, Commonwealth of Puerto Rico on
      this 2 nd day of
      February, 2007.




**PHARMA-BIO
                SERV, INC.**By:
            /s/
              ELIZABETH
              PLAZAName:   Elizabeth Plaza
              Title:    
                  President and CEO




Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      report has been signed by the following persons on behalf of the registrant
      and
      in the capacities and on the dates indicated. Each person whose signature
      appears below hereby authorizes Elizabeth Plaza and Manuel O. Morera or either
      of them acting in the absence of the other as his true and lawful
      attorney-in-fact and agent, with full power of substitution and resubstitution
      for him and in his name, place and stead, in any and all capacities to sign
      any
      and all amendments to this report, and to file the same, with all exhibits
      thereto and other documents in connection therewith, with the Securities and
      Exchange Commission.





Signature
            
            Title
            
            Date/s/
                Elizabeth Plaza
            
            President,
                Chief Executive Officer and Director
            
            February
                2, 2007Elizabeth
                Plaza
            
            (Principal
                Executive Officer)/s/
                Manuel O. Morera
            
            Chief
                Financial Officer
            
            February
                2, 2007Manuel
                O. Morera
            
            Principal
                Financial and Accounting Officer)/s/
                Kirk Michel
            
            Director
            
            February
                2, 2007Kirk
                Michel/s/
                Howard Spindel
            
            Director
            
            February
                2, 2007Howard
                Spindel




-51-