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


                                Amendment No. 1

                                  FORM 10-QSB/A
                                   (Mark One)


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

      For the quarterly period ended April 30, 2006

|_|   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. Employer
                                                    Identification No.)

              373 Mendez Vigo, Suite 110, Dorado, Puerto Rico 00646
                    (Address of principal executive offices)

                                  787-278-2709
                           (Issuer's telephone number)

      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
|_| no

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). |_| yes |X| no

      The number of shares outstanding of the registrant's Common Stock as of
June 14, 2006 was 18,315,001.

<PAGE>


EXPLANATORY NOTE

This quarterly report on Form 10-QSB/A ("Form 10-QSB/A") is being filed to amend
our quarterly report on Form 10-QSB for the quarter ended April 30, 2006 (the
"Original Form 10-QSB") which was filed with the Securities and Exchange
Commission ("SEC") on June 15, 2006 to reflect changes in the financial
statements consistent with changes in the financial statements for the six
months ended April 30, 2006 that were made in amendment no. 3 to the
Registrant's registration statement on Form SB-2. Pursuant to Rule 12b-15 under
the Securities Exchange Act of 1934, as amended, the Form 10-QSB/A contains
current dated certifications from the Principal Executive Officer and the
Principal Financial Officer.

We have not updated the information contained herein for events occurring
subsequent to June15, 2006, the filing date of the Original Form 10-QSB.


<PAGE>

                              PHARMA-BIO SERV, INC.

                                   FORM 10-QSB

                      FOR THE QUARTER ENDED APRIL 30, 2006


                                TABLE OF CONTENTS

                                                                           Page
PART I FINANCIAL INFORMATION

Item 1 - Financial Statements

      Consolidated Balance Sheet as of April 30, 2006
      (unaudited)                                                             4

      Consolidated Statements of Income for the three month
      period and the six month period ended April 30, 2006, and
      Plaza-Only Statements of Income for the three month
      period and the six month period ended April 30, 2005
      (unaudited)                                                             5

      Consolidated Statements of Cash Flows for the three month
      period and the six month period ended April 30, 2006, and
      Plaza-Only Statements of Cash Flows for the three month
      period and the six month period ended April 30, 2005
      (unaudited)                                                             6

      Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
      for the three-month periods ended January 31, 2006 and April 30, 2006
      (unaudited), and Plaza-Only Statement of Changes in Stockholder's
      Equity for the year ended October 31, 2005 (audited)                    7

      Notes to Financial Statements                                           8

Item 2 - Management's Discussion and Analysis of Financial
         Condition and Results of Operation                                  21

Item 3 - Controls and Procedures                                             30

PART II OTHER INFORMATION

Item 4 - Submission of Matters to a Vote of Security Holders                 30

Item 6 - Exhibits                                                            30


                                        3
<PAGE>

                              PHARMA-BIO SERV, INC.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
                                AT APRIL 30, 2006


Assets:
Current Assets
  Cash                                                              $ 2,249,944
  Accounts receivable, including unbilled revenues of $295,440        4,942,851
  Other                                                                 322,077
                                                                    -----------
Total Current Assets                                                  7,514,872

Property and equipment                                                  413,866

Other assets, mainly intangible assets                                  238,017
                                                                    -----------

Total Assets                                                        $ 8,166,755
                                                                    ===========

Liabilities and Stockholders' Equity Deficiency:
Current Liabilities:
  Current portion-obligations under capital leases                  $    37,316
  Accounts payable and accrued expenses                               1,165,702
  Due to affiliate - current                                          2,501,914
  Income taxes payable                                                   56,115
                                                                    -----------
Total Current Liabilities                                             3,761,047

Due to affiliate                                                      5,063,690

Other Long-Term Liabilities                                             161,473
                                                                    -----------
Total Liabilities                                                     8,986,210
                                                                    -----------

Stockholders' Equity Deficiency:

Preferred Stock, $0.0001 par value; authorized
10,000,000 shares; none outstanding                                          --

Common Stock,$0.0001 par value; authorized 50,000,000 shares;
issued and outstanding 18,315,001 shares                                  1,831

Accumulated deficit                                                    (821,286)
                                                                    -----------
Total Stockholders' Equity Deficiency                                  (819,455)
                                                                    -----------

Total Liabilities and Stockholders' Equity Deficiency               $ 8,166,755
                                                                    ===========

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>

                              PHARMA-BIO SERV, INC.
                        STATEMENTS OF INCOME (UNAUDITED)
                       FOR THE THREE-MONTH PERIODS AND THE
                SIX-MONTH PERIODS ENDED APRIL 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED APRIL 30,          SIX MONTHS ENDED APRIL 30,
                                         ------------------------------        ------------------------------
                                         CONSOLIDATED        PLAZA-ONLY        CONSOLIDATED        PLAZA-ONLY
                                             2006               2005               2006               2005
                                         -----------        -----------        -----------        -----------
<S>                                      <C>                <C>                <C>                <C>
REVENUES                                 $ 3,804,703        $ 5,067,084        $ 7,208,885        $ 9,760,083

COST OF REVENUES                           2,233,166          2,456,983          4,266,505          5,114,830
                                         -----------        -----------        -----------        -----------

GROSS PROFIT                               1,571,537          2,610,101          2,942,380          4,645,253

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                      639,181            470,935          1,064,435            919,586

DEPRECIATION AND AMORTIZATION                 58,796             15,772             88,940             35,513
                                         -----------        -----------        -----------        -----------

INCOME BEFORE INCOME TAX                     873,560          2,123,394          1,789,005          3,690,154

INCOME TAX                                   398,305                 --            420,178                 --
                                         -----------        -----------        -----------        -----------

NET INCOME                               $   475,255        $ 2,123,394        $ 1,368,827        $ 3,690,154
                                         ===========        ===========        ===========        ===========


BASIC EARNINGS PER COMMON SHARE          $      0.14        $      1.21        $      0.53        $      2.11

DILUTED EARNINGS PER COMMON SHARE        $      0.02        $      1.21        $      0.10        $       .91

WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING - BASIC                        3,381,342          1,750,000          2,573,492          1,750,000

WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING - DILUTED                     22,066,604          1,750,000         13,610,896          4,045,752
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>

                              PHARMA-BIO SERV, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
                       FOR THE THREE-MONTH PERIODS AND THE
                SIX-MONTH PERIODS ENDED APRIL 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                 Three months ended April 30,    Six months ended April 30,
                                                                 ----------------------------    ----------------------------
                                                                 Consolidated     Plaza-Only     Consolidated     Plaza-Only
                                                                     2006            2005            2006            2005
                                                                 ------------    ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income for the period                                        $    475,255    $  2,123,394    $  1,368,827    $  3,690,154
Loss (gain) on disposition of property and equipment                       --              --           3,664              --
Depreciation and amortization                                          58,796          15,772          88,940          35,513
Bad debts expense                                                          --          32,200              --          32,200
Imputed interest expense                                              127,216              --         127,216              --
Decrease (increase) in accounts receivable                         (1,493,829)       (943,957)        (12,037)       (990,309)
Decrease (increase) in other assets                                  (135,728)           (154)       (286,033)         (4,317)
Increase (decrease) in liabilities                                    146,218         199,603          (3,704)       (123,820)
                                                                 ------------    ------------    ------------    ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                  (822,072)      1,426,858       1,286,873       2,639,421
                                                                 ------------    ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                     (3,656)        (40,620)        (90,684)        (92,340)
Cash acquired as part of the acquisition of Plaza                          --              --          28,943              --
                                                                 ------------    ------------    ------------    ------------
NET CASH USED IN INVESTING ACTIVITIES                                  (3,656)        (40,620)        (61,741)        (92,340)
                                                                 ------------    ------------    ------------    ------------

CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from the sale of preferred stock                              --              --      10,000,000              --
Payment for purchase of stock in Plaza                                     --              --      (9,900,000)             --
Payment for non-compete covenant                                           --              --        (100,000)             --
Payments on capital lease obligations                                  (8,542)        (11,421)        (17,191)        (21,239)
Distributions                                                              --      (3,815,647)       (749,554)     (4,544,520)
                                                                 ------------    ------------    ------------    ------------
NET CASH USED IN FINANCING ACTIVITIES                                  (8,542)     (3,827,068)       (766,745)     (4,565,759)
                                                                 ------------    ------------    ------------    ------------

NET INCREASE (DECREASE) IN CASH                                      (834,270)     (2,440,830)        458,387      (2,018,678)

CASH - BEGINNING OF PERIOD                                          3,084,214       3,458,877       1,791,557       3,036,725
                                                                 ------------    ------------    ------------    ------------

CASH - END OF PERIOD                                             $  2,249,944    $  1,018,047    $  2,249,944    $  1,018,047
                                                                 ============    ============    ============    ============


PAYMENTS OF:
Income tax                                                       $    364,063    $         --    $    364,063    $         --
                                                                 ============    ============    ============    ============
Interest                                                         $      3,518    $      2,829    $      6,930    $      5,587
                                                                 ============    ============    ============    ============

NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred stock to common stock                    $      1,483    $         --    $      1,483    $         --
                                                                 ============    ============    ============    ============
Vehicle acquired under a capital lease                           $         --    $         --    $         --    $     33,030
                                                                 ============    ============    ============    ============
Income tax withheld by clients but used as a credit in the
income tax return of a stockholder (noncash distribution)        $         --    $    138,964    $     84,561    $    300,220
                                                                 ============    ============    ============    ============
Debt incurred in the acquisition of certain assets from a
validation company                                               $         --    $         --    $    200,000    $         --
                                                                 ============    ============    ============    ============
Debt payable to officer originated in the acquisition of
Plaza, net of $1,025,000 imputed interest                        $         --    $         --    $  7,225,000    $         --
                                                                 ============    ============    ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6
<PAGE>

                              PHARMA-BIO SERV, INC.
     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
                     FOR THE YEAR ENDED OCTOBER 31, 2005 AND
        THE THREE-MONTH PERIODS ENDED JANUARY 31, 2006 AND APRIL 30, 2006

<TABLE>
<CAPTION>
                                                                                                        RETAINED
                                           COMMON STOCK            PREFERRED STOCK       ADDITIONAL     EARNINGS
                                       --------------------       -----------------        PAID-IN    (ACCUMULATED
                                       SHARES        AMOUNT       SHARES     AMOUNT        CAPITAL       DEFICIT)         TOTAL
                                   ----------       ----------  ----------  ----------     ----------    ---------      ---------
<S>                                    <C>          <C>          <C>        <C>          <C>            <C>            <C>
BALANCE AT OCTOBER 31, 2004
(PLAZA-ONLY) - AUDITED                 50,000       $  1,000           --   $     --       $     --     $7,548,735     $7,549,735

NET INCOME                                 --             --           --         --             --      6,390,152      6,390,152

DISTRIBUTIONS                              --             --           --         --             --     (7,959,318)    (7,959,318)
                                   ----------       ----------  ----------  ----------     ----------    ---------      ---------
BALANCE AT OCTOBER 31, 2005
(PLAZA-ONLY) - AUDITED                 50,000          1,000           --         --             --      5,979,569      5,980,569


RECLASSIFICATION OF $0.02
COMMON STOCK                          (50,000)        (1,000)          --         --          1,000             --             --

ISSUANCE OF $0.0001 COMMON
STOCK  IN CONNECTION
WITH RECLASSIFICATION OF
EQUITY                                275,900             28           --         --         20,947             --         20,975

TO REFLECT 2:1 STOCK DISTRIBUTION     275,900             28           --         --            (28)            --             --

ISSUANCE OF $0.0001 COMMON
STOCK                               1,750,000            174           --         --        844,385             --        844,559

ISSUANCE OF $0.0001 PREFERRED
STOCK                                      --             --    1,175,000        118     10,171,383             --     10,171,501

ISSUANCE OF STOCK WARRANTS TO
PURCHASE  2,500,000
SHARES OF COMMON STOCK AT $0.06            --             --           --         --      1,686,000     (1,686,000)            --

ISSUANCE OF STOCK WARRANTS TO
PURCHASE 1,600,000
SHARES OF COMMON STOCK AT $0.06            --             --           --         --            800           (800)            --

CAPITAL PAYMENT                            --             --           --         --    (12,724,487)    (5,559,123)   (18,283,610)

NET INCOME                                 --             --           --         --             --        893,572        893,572

DISTRIBUTIONS                              --             --           --         --             --       (922,276)      (922,276)
                                   ----------       ----------  ----------  ----------     ----------    ---------      ---------
BALANCE AT JANUARY 31, 2006
(CONSOLIDATED) - UNAUDITED          2,301,800            230    1,175,000        118             --     (1,295,058)    (1,294,710)

CONVERSION OF PREFERRED STOCK
TO COMMON STOCK                    15,998,800          1,600   (1,175,000)      (118)            --         (1,482)            --

ADDITIONAL SHARES FROM
CONVERSION OF PREFERRED
STOCK TO COMMON STOCK                  14,401              1                                                    (1)            --

NET INCOME                                                                                                 475,255        475,255
                                   ----------       ----------  ----------  ----------     ----------    ---------      ---------
BALANCE AT APRIL 30, 2006
(CONSOLIDATED) -  UNAUDITED        18,315,001       $  1,831           --   $     --       $     --      $(821,286)     $(819,455)
                                   ==========       ==========  ==========  ==========     ==========    ==========     ==========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        7
<PAGE>

                              PHARMA-BIO SERV, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           APRIL 30, 2006 (UNAUDITED)


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 under the name of Pharma
Serv and is engaged in providing technical compliance consulting services
primarily to the pharmaceutical, chemical 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.

The unaudited interim financial statements for the quarters and the six months
ended April 30, 2006 and 2005 presented herein have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial statements and with the instructions to Form 10-QSB and Regulation S-B
pertaining to interim financial statements and reflect all adjustments,
consisting of normal recurring adjustments and accruals which, in the opinion of
management, are considered necessary for a fair presentation of the Company's
financial position, results of operations and cash flows. Results of operations
for interim periods are not necessarily indicative of the results that may be
expected for the full year.


SHARE DISTRIBUTION

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.

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, Ms. Plaza will receive three payments, each in the amount of
$2,750,000, payable on January 25, 2007, 2008 and 2009.

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.

                                        8
<PAGE>

Pursuant to the Plaza Agreement, at the closing, 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 $.06 per share to San Juan Holdings, Inc., the
investment banker for Plaza and Ms. Plaza. Pharma-Bio provided certain demand
and piggyback registration rights to Ms. Plaza and San Juan Holdings covering
the shares of common stock issued to them at the closing and the shares issuable
upon exercise of the warrants issued to San Juan Holdings.

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 will be paid during the
third quarter of 2006.

The Plaza Agreement 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 is taxed to Ms. Plaza. The income tax payable by Ms. Plaza for
Plaza's taxable income for said period amounts to $125,227. Plaza will reimburse
Ms. Plaza the $125,227 during the third quarter 2006.

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.
Comparative financial statements for earlier periods are those of Plaza-Only.

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 period to maturity.

                                        9
<PAGE>

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

The Company recognizes revenues in the month when services are rendered to
customers. Revenue is primarily 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, from fixed-fee contracts or from "not to exceed"
contracts (approximately 10% of total revenues). 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.

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. 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.

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, Plaza will reimburse
Ms. Plaza the income taxes applicable to said taxable income. The reimbursement
will amount to $125,227.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is provided using the
straight-line basis over the estimated useful lives of the assets. Major
renewals and betterments that extend the life of the assets are capitalized,
while expenditures for repairs and maintenance are expensed when incurred

                                        10
<PAGE>

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.

STOCK-BASED COMPENSATION

Through the three month and the six month periods ended April 30, 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 fair market
value and 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:

<TABLE>
<CAPTION>
                                             Three Months Ended April 30,   Six Months Ended April 30,
                                             ----------------------------  ---------------------------
                                                 2006           2005           2006            2005
                                             -----------    -----------    -----------    -------------
<S>                                          <C>            <C>            <C>            <C>
Net income                                   $   475,255    $ 2,123,394    $ 1,368,827    $   3,690,154
Less:  Stock-based employee
compensation under fair value
method, net of tax effect                          8,705             --        526,430               --
                                             -----------    -----------    -----------    -------------
Pro forma net income (loss)
attributable to common
stockholders                                 $   466,550    $ 2,123,394    $   842,397    $   3,690,154
                                             ===========    ===========    ===========    =============
Basic earnings per share of common stock:
     As reported                             $      0.14    $      1.21    $      0.53    $        2.11
     Pro forma                               $      0.14    $      1.21    $      0.33    $        2.11

Diluted earnings per share of
common stock
     As reported                             $      0.02    $      1.21    $      0.11    $        2.11
     Pro forma                               $      0.02    $      1.21    $      0.07    $        2.11

Weighted average number of
common shares outstanding - basic              3,381,342      1,750,000      2,573,492        1,750,000

Weighted average number of
common shares outstanding -
diluted                                       22,066,604      1,750,000     12,532,780        1,750,000
</TABLE>

For the fiscal year ended October 31, 2004 Plaza granted stock options to
purchase 4,125 shares of its common stock. Pursuant to the reverse acquisition,
these Plaza option shares are equivalent to options to purchase 776,186 shares
of Pharma-Bio common stock. Accordingly, the value of these options are
estimated on the same basis as Pharma-Bio options.

The 4,125 of Plaza options are equivalent to 776,186 Pharma-Bio stock options
based on the following:

                                       11
<PAGE>

Plaza options                                                             4,125
Exercise price at market                                            x  $ 138.19
                                                                       --------
Value of Options                                                       $ 570,031
Pharma-Bio exercise price                                           /  $ 0.7344
                                                                       --------
Equivalent Pharma-Bio options                                           776,186
                                                                       ========

There were no additional Plaza options issued subsequent to October 31, 2004.
None of the Plaza options were exercised prior to the reverse acquisition
transaction.

INCOME PER SHARE OF COMMON STOCK

Basic income per common share 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 convertible preferred stock and the stock warrants were deemed
to be outstanding from the date of issuance to the end of the reporting period.

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

NOTE B - RECENT ACCOUNTING PRONOUNCEMENTS

1. In March 2005, the FASB issued Interpretation No. 47 "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47 clarifies that the
term conditional asset retirement obligation as used in FASB Statement No. 143
"Accounting for Asset Retirement Obligations," refers to a legal obligation to
perform an asset retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not be within the
control of the entity. The obligation to perform the asset retirement activity
is unconditional even though uncertainty exists about the timing and (or) method
of settlement. Thus, the timing and (or) method of settlement may be conditional
on a future event. Accordingly, an entity is required to recognize a liability
for the fair value of a conditional asset retirement obligation if the fair
value of the liability can be reasonably estimated. The fair value of a
liability for the conditional asset retirement obligation should be recognized
when incurred, generally upon acquisition, construction or development and (or)
through the normal operation of the asset. Uncertainty about the timing and (or)
method of settlement of a conditional asset retirement obligation should be
factored into the measurement of the liability when sufficient information
exists. FASB Statement 143 acknowledges that in some cases, sufficient
information may not be available to a reasonably estimate the fair value of an
asset obligation. This interpretation also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of an asset
retirement obligation. The provisions of this interpretation are effective no
later than the end of fiscal years ending after December 15, 2005 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.

                                       12
<PAGE>

2. In December 2004, the FASB issued Statement No. 153 "Exchanges of
Non-Monetary Transactions - an amendment of APB Opinion No. 29." The guidance in
APB Opinion No. 29, "Accounting for Non-monetary Transactions," is based on the
principle that exchanges of non-monetary assets should be measured based on the
fair value of the assets exchanged. The guidance in that Opinion, however
included certain exceptions to that principle. This Statement amends Opinion 29
to eliminate the exception for non-monetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of non-monetary
assets that do not have commercial substance. A non-monetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The provisions of this
Statement are effective for non-monetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. Earlier application is permitted for
non-monetary asset exchanges occurring in fiscal periods beginning after
December 16, 2004. The provisions of this Statement should be applied
prospectively. The Company does not expect that the adoption of FASB Statement
No. 153 will have a material impact on its results of operations and financial
position.

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 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. In May 2005, the FASB issued Statement No. 154 "Accounting for Changes and
Errors Corrections." This Statement replaces APB Opinion No. 20 "Accounting
Changes" and FASB Statement No. 3 "Reporting Accounting Changes in Interim
Financial Statements," and changes the requirements for the accounting for and
reporting of a change in accounting principle.

This Statement requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. When its is impracticable to determine the period specific effects of an
accounting change on one or more individual prior periods presented, this
Statement requires that the new accounting principle be applied to the balances
of assets and liabilities as of the beginning of the earliest period for which
retroactive application is practicable and that a corresponding adjustment be
made to the opening balance of retained earnings (or other appropriate
components of equity or net assets in statement of financial position) for that
period rather than being reported in an income statement. When it is
impracticable to determine the cumulative effect of applying a change in
accounting principle to all prior periods, this Statement requires that the new
accounting principle be applied as if it were adopted prospectively from the
earliest date practicable. This Statement shall be effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005. The Company does not expect that the adoption of FASB Statement No.
154 will have a material impact on its consolidated financial statements.

                                       13
<PAGE>

NOTE C - CAPITAL TRANSACTIONS

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 $.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 upon the filing of a certificate of amendment to the
Company's 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. Pharma-Bio amended and restated its certificate of incorporation on April
25, 2006.

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 (20) consecutive
trading days.

NOTE D - PROPERTY & EQUIPMENT

The balance of property and equipment, as of April 30, 2006 consists of:

                                                   Useful
                                                    life
                                                   (years)              2006
                                                   -------           ---------
       Vehicles                                       5              $ 221,434
       Leasehold improvements                         5                 64,895
       Computers                                      3                120,813
       Equipment                                      5                121,450
       Furniture and fixtures                        10                 67,907
                                                                     ---------

       Total                                                           596,499
       Less: Accumulated depreciation
             and amortization                                         (182,633)
                                                                     ---------

       Property and equipment, net                                   $ 413,866
                                                                     =========

                                       14
<PAGE>

NOTE E - OTHER ASSETS

At April 30, 2006, non-current other assets include the following:

          Intangible assets:
             Covenant not to compete, net of accumulated
                 amortization of $8,333                        $  91,667
             Customer-related intangibles, net of
                 accumulated amortization of $16,667             133,333
          Other                                                   13,017
                                                               ---------

                                                               $ 238,017
                                                               =========

Covenant not to compete represents the portion of the payment made 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.

The intangibles assets were originated at the end of the three-month period
ended January 31, 2006, therefore, the only accompanying statements of
operations which include an amortization expense for intangible assets are the
statements of operations for the three-month period and the six-month period
ended on April 30, 2006. The amortization expense for both periods amounted to
$25,000.

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 is effective for taxable years commencing
after December 31, 2004 and ending on or before December 31, 2006, therefore,
the Company's maximum effective tax rate will be 41.5% for its fiscal year
ending on October 31, 2006. The maximum effective tax rate for all other years
will be 39%.

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.

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:

                                       15
<PAGE>

<TABLE>
<CAPTION>
                                       Three months ended                  Six months ended
                                            April 30,                           April 30,
                                 -----------------------------       -----------------------------
                                     2006              2005              2006              2005
                                 -----------       -----------       -----------       -----------
<S>                              <C>               <C>               <C>               <C>
Theoretical income tax
expense by application of
statutory rates to the book
pre-tax                          $   362,527       $   828,124       $   742,437       $ 1,439,160

Effect of income subject to
taxation under Subchapter N
(taxable income taxed to
stockholders)                                         (828,124)         (358,037)       (1,439,160)

Permanent difference                  35,778                --            35,778                --
                                 -----------       -----------       -----------       -----------
Income tax expense               $   398,305               -0-       $   420,178               -0-
                                 ===========       ===========       ===========       ===========
</TABLE>

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
will 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                                $ 2,750,000
                2008                                  2,750,000
                2009                                  2,750,000
                                                    -----------
                Total payments                        8,250,000
                Less: imputed interest                 (897,784)
                                                    -----------
                Present value of minimum
                  payments                            7,352,216
                Current portion                      (2,288,526)
                                                    -----------

                Long-term portion                   $ 5,063,690
                                                    ===========

The current portion of the due to affiliate as reflected in the balance sheet
also includes $88,161 due to her for the excess of the net tangible book value
determined as provided in the Plaza agreement and a reimbursement for $125,227
of income taxes explained in Note A.

           Current portion of deferred purchase price            $2,288,526
           Payment for excess net tangible book value,
           as finally determined                                     88,161
           Reimbursement of income taxes                            125,227
                                                                 ----------
           Due to affiliate - current portion                    $2,501,914
                                                                 ==========

                                       16
<PAGE>

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 $.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 $.7344 per share.

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 the Company's
stockholder since Ms. Plaza was the one 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 noncash distribution.

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 provides
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.

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.

                                       17
<PAGE>

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.

In April 2006, the Company entered into an agreement with an executive, pursuant
to which he resigned as vice president and chief operating officer. The Company
is not committed to make any payment as a result of this resignation.

2. Lease commitments

Capitalized lease obligations -As of April 30, 2006, the Company owned vehicles
acquired under non-cancelable capital leases with a cost of $221,434
(accumulated depreciation of $44,717). Depreciation expense for these assets
amounted to $11,072 and $22,144 in the three-month periods ended April 30, 2006
and 2005, and $7,066 and $14,132 in the six-month period ended April 30, 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 April 30, 2006:


                                   2007                              $  48,240
                                   2008                                 48,240
                                   2009                                 48,240
                                   2010                                 69,974
                                   2011                                  9,385
                                                                     ---------
                       Total minimum lease payments                    224,079
                       Less:  Amount of imputed interest               (25,290)
                                                                     ---------

                       Present value of minimum lease
                          payments                                     198,789
                       Current portion of obligation under
                          capital leases                               (37,316)
                                                                     ---------

                       Long-term portion                             $ 161,473
                                                                     =========

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

                                   Monthly
             Description             Rent             Commitment Term
      --------------------------   -------       -------------------------------
      Main resources facilities    $ 3,200       Ending in October 2007
      Human resources facilities   $ 1,850       Ending in June 2006
      Land                         $ 1,000       Ending in June 2006
      Housing for employees        $ 1,850       Ending in November 2006
      Hilltown office space        $ 2,750       Monthly beginning February 2006

The first three leases listed in the table are with affiliates of the chief
executive officer.

                                       18
<PAGE>

Rent expense during the three-month period ended April 30, 2006 and 2005 was
$26,400 and $27,125, respectively, and $52,700 and 60,584 for the six-month
period ended April 30, 2006 and 2005, 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 of discretionary options.
However, each newly elected independent director receives a 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 $.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 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.

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 high quality bank checking
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 are concentrated in the pharmaceutical industry in the
island of Puerto Rico, and a small number of customers have accounted for a
significant percentage of its revenue. Three customers accounted for 10% or more
of revenues during the three-month and the six-month periods ended April 30,
2006, two of which also accounted for more than 10% of revenues during the
three-month and the six-month periods ended April 30, 2005. The following table
sets forth information as to revenues and percentage of revenues for these
periods (dollars in thousands) for the Company's principal clients, all of which
are pharmaceutical companies:

                                       19
<PAGE>

<TABLE>
<CAPTION>
                    Three Months Ended      Three Months Ended        Six Months Ended        Six Months Ended
                    ------------------      ------------------        ----------------        ----------------
Customer                April 30, 2006          April 30, 2005          April 30, 2006          April 30, 2005
--------                --------------          --------------          --------------          --------------
<S>                        <C>                    <C>                     <C>                     <C>
Client A                    $789 (21%)            $2,119 (42%)            $2,097 (29%)            $4,259 (44%)
Client B                   1,166 (31%)                0 (0.0%)             1,796 (25%)                7 (0.1%)
Client C                     399 (11%)             1,023 (21%)               783 (11%)             1,862 (19%)
</TABLE>

Client A, B and C had an outstanding balance at April 30, 2006 representing 24%,
29% and 18%, 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. See
NOTE L.

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
three months ended April 30, 2006 and 2005 were $11,540 and $12,447,
respectively. Contributions for the six months ended April 30, 2006 and 2005
were $21,805 and $15,880, respectively.

NOTE L - SUBSEQUENT EVENT

In May 2006, one of the Company's major customers announced the closing of one
of its two facilities in Puerto Rico. The accompanying statements of operations
include revenues from the closed facility as follows:

         PERIOD                                                   REVENUES

         Three months ended April 30, 2006                        $551,832

         Three months ended April 30, 2005                        $1,593,972

         Six months ended April 30, 2006                          $1,462,923

         Six months ended April 30, 2005                          $3,217,764

The receivables at April 30, 2006 from the closed facility amounted to
approximately $552,000. The Company does not anticipate any problem in
connection with the collection of said outstanding balance.

                                       20
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      The following discussion of the Company's results of operations and
financial condition should be read in conjunction with the financial statements
of the Company and the related notes. 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."

Overview

      The Company is 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, U.S.
dedicated validation and compliance consulting firms and large publicly traded
and private U.S. and foreign engineering and consulting firms. The Company
provides a broad range of compliance and validation consulting services. The
Company has been successful in utilizing its favorable market reputation to
secure contracts with many major drug manufacturers throughout Puerto Rico. The
Company markets its services to pharmaceutical, chemical, biotechnology and
medical devices and allied products companies in Puerto Rico, the U.S. and
Europe through their Puerto Rico operations. The Company's staff includes more
than 140 experienced engineering and life science professionals, and includes
former FDA investigators, former quality assurance managers or directors, and
experienced and well-trained professionals with masters and doctorates in health
sciences and engineering.

      The Company's 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 in which the value of the contract
to the Company cannot exceed a stated amount. For time and materials contracts,
the Company's revenue is principally a function of the number of its compliance
and validation professional employees and the volume of hours billed per
professional. To the extent that the Company's revenue is based on fixed-fee or
"not to exceed" contracts, which mostly are short-term contracts, its ability to
operate profitably is dependent upon its ability to estimate accurately the
costs that it will incur on a project. If the Company underestimates its costs
on any contract, it would sustain a loss on the contract.

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

      As a result of the reserve acquisition transaction that closed on January
25, 2006, the discussion of the financial condition and results of operation
discussed herein compares the consolidated figures of the Company for the
periods ending in 2006 with the unconsolidated figures of Plaza Consulting
Group, Inc. on a standalone basis for the periods ending in 2005.

                                       21
<PAGE>

      The Company's business has been dependent upon a small number of clients.
During the three months ended April 30, 2006 and 2005, and the six months ended
April 30, 2006 and 2005, a very small number of clients accounted for a
disproportionately large percentage of the Company's revenues. For the
three-month and six-month periods ended April 30, 2006, three customers
accounted for approximately 63% of revenues. For the three-month and six-month
periods ended April 30, 2005, two of these three customers accounted for
approximately 62% of revenues. The loss of or significant reduction in the scope
of work performed for any major customer could impair the Company's ability to
operate profitably. In particular, the Company had a contract with one of these
major customers which expired on December 31, 2005. Although this contract was
divided in various smaller contracts and extended with termination dates varying
through December 2006, the level of business has significantly declined from the
prior year. In May 2006, this customer announced the closing of one of its two
facilities located in Puerto Rico. The revenues from this major customer were as
follows:

                                           OPERATING      CLOSED
     PERIOD                                 FACILITY      FACILITY      TOTAL
     Three-month period April 30, 2006       $236,692      $551,832    $788,524
     Three-month period April 30, 2005       $525,013    $1,593,972  $2,118,985
     Six-month period April 30, 2006         $634,221    $1,462,923  $2,097,144
     Six-month period April 30, 2005       $1,041,219    $3,217,764  $4,258,983

      On January 9, 2006, Plaza acquired, for $300,000, certain assets of a
United States based company that performs consulting services for the
pharmaceutical and biotech industries. These assets include a client list and a
validation compliance service business. One-third of the purchase price was paid
in January 2006, another one-third was paid in March 2006 and one-third is
payable on June 30, 2006. Plaza also hired eleven former employees of the
business. This acquisition was made pursuant to Plaza's strategy to expand its
operations beyond Puerto Rico and Puerto Rico businesses with a view to
lessening Plaza's dependence upon a small number of Puerto Rico pharmaceutical
companies. Revenues from these operations for the quarter ended April 30, 2006
amounted to approximately $265,000, and revenues for the quarter ended January
31, 2006 amounted to approximately $93,000. The Company cannot give assurance
that any significant revenues will be derived from these operations.

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

      On January 25, 2006, Pharma-Bio acquired Plaza in a transaction which is
accounted for as a reverse acquisition, with Plaza being deemed the accounting
acquirer. Pursuant to the acquisition agreement, Pharma-Bio paid Ms. Elizabeth
Plaza, the sole stockholder of Plaza, $10,000,000 plus 1,150,000 shares of the
Pharma-Bio's common stock. In addition, Ms. Plaza will 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 April 30,
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 April
30, 2006, as discussed under "Liquidity and Capital Resources."

      During the three months ended January 31, 2006, the Company incurred
approximately $211,000 of non-recurring financial advisory, legal and accounting
transaction expenses directly related to the acquisition of Plaza.

                                       22
<PAGE>

      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, with the excess to be paid to Ms. Plaza, the selling
stockholder. The amount due to Ms. Plaza under this provision was $88,161 and
will be paid during the quarter ending July 31, 2006.

      The Plaza Agreement 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 is taxed to Ms. Plaza. The income tax payable by Ms.
Plaza for Plaza's taxable income for said period amounts to $125,227, and we are
reimbursing Ms. Plaza for the amount of such taxes. The $88,161 payable
described in the preceding paragraph and the $125,227 tax reimbursement are
treated as additional payments on account of the purchase price of Ms. Plaza's
stock.


Critical Accounting Policies and Estimates

      The discussion and analysis of the Company's financial condition and
results of operations are based upon the Company's 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 - The Company recognizes revenues in the month when services
are rendered to customers for time and materials contracts. In the case of
fixed-fee or "not to exceed"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.

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 -- Property and equipment is stated at cost. Depreciation
is provided using the straight-line basis over the estimated useful lives of the
assets. Major renewals and betterments that extend the life of the assets are
capitalized, while expenditures for repairs and maintenance are expensed when
incurred.

Income Taxes -- Plaza elected from its inception until January 25, 2006, when
Pharma-Bio acquired Plaza, 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 the
company pays no income taxes since the taxable income is taxed to the company's
stockholders. Under the provisions of the Puerto Rico Code, Plaza paid the
Puerto Rico Secretary of Treasury, on behalf of its stockholder, an amount equal
to 33% of its taxable income. These payments, and any income tax withheld, were
included in the amount of distributions to stockholder in Plaza's financial
statements.

                                       23
<PAGE>

Commencing with the acquisition of Plaza on January 25, 2006, the Company will
be taxed based on its taxable income under the applicable provisions of the
Puerto Rico Code and the Internal Revenue Code. The financial statements for the
three-month and the six-month periods ended April 30, 2006, reflect an income
tax expense based on the applicable provisions of the Puerto Rico Code, since
the income was earned in Puerto Rico.

Concentration of credit risk -- Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash
deposits and trade accounts receivable. The Company maintains its bank account
in a high quality financial institution. While the Company attempts to limit any
financial exposure, its deposit balances frequently exceed federally insured
limits; however, no losses have been experienced on this account.

The Company's revenues are concentrated in the pharmaceutical industry in the
island of Puerto Rico. Approximately $2.3 million, or 63%, of the revenues in
the April 30, 2006 quarter were generated by three customers. Two of these
customers accounted for revenue of approximately $3.1 million, or 62%, of
revenue for the April 30, 2005 quarter. The three customers had an outstanding
balance at April 30, 2006 representing 72% 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.

Retirement Plan -- Plaza adopted a qualified profit sharing plan in January 2002
(amended on November 30, 2003) 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, amounting to 11,540 for the
April 30, 2006 quarter and $12,447 for the April 30, 2005 quarter.

Stock Option Plan --During the year ended October 31, 2004, Plaza granted stock
options with an exercise price equal to the book value of the common stock as of
October 31, 2003, which Plaza deemed to be the fair value of its common stock.
The options expired ten years from the date of grant and generally vested over a
three-year period. In connection with the acquisition of Plaza, these options
were cancelled and Pharma-Bio granted the option holders options to purchase an
aggregate of 776,186 shares of common stock in respect of the cancelled options
and issued options to purchase an additional 623,814 shares of common stock In
addition, options to purchase 75,000 shares of common stock were granted to our
independent 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. All options granted by the Company have an exercise
price of $.7344, a term of five years and are exercisable in installments. The
grants by the Company were subject to stockholders approval of the plan, which
has been obtained.

Fair value of financial instruments - The carrying value of the Company's
financial instruments (excluding obligations under capital leases): cash,
accounts receivable, accounts payable and accrued liabilities, are considered
reasonable estimates of fair value due to short period to maturity. The Company
believes, 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.

                                       24
<PAGE>

New Accounting Pronouncements

      In March 2005, the FASB issued FASB Interpretation No. 47 "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47 clarifies that the
term "conditional asset retirement obligation" as used in FASB Statement No. 143
"Accounting for Asset Retirement Obligations," refers to a legal obligation to
perform an asset retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not be within the
control of the entity. The obligation to perform the asset retirement activity
is unconditional even though uncertainty exists about the timing and (or) method
of settlement. Thus, the timing and (or) method of settlement may be conditional
on a future event. Accordingly, an entity is required to recognize a liability
for the fair value of a conditional asset retirement obligation if the fair
value of the liability can be reasonably estimated. The fair value of a
liability for the conditional asset retirement obligation should be recognized
when incurred, generally upon acquisition, construction or development and (or)
through the normal operation of the asset. Uncertainty about the timing and (or)
method of settlement of a conditional asset retirement obligation should be
factored into the measurement of the liability when sufficient information
exists. FASB Statement 143 acknowledges that in some cases, sufficient
information may not be available to reasonably estimate the fair value of an
asset obligation. This interpretation also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of an asset
retirement obligation. Management does not expect that the application of this
standard will have any effect on the Company's results of operations or
financial condition.

      In December 2004, the FASB issued FASB Statement No. 153 "Exchanges of
Non-Monetary Transactions - an amendment of APB Opinion No. 29." The guidance in
APB Opinion No. 29, "Accounting for Non-monetary Transactions," is based on the
principle that exchanges of non-monetary assets should be measured based on the
fair value of the assets exchanged. The guidance in that Opinion, however
included certain exceptions to that principle. This Statement amends Opinion 29
to eliminate the exception for non-monetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of non-monetary
assets that do not have commercial substance. A non-monetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The Company does not expect
that the adoption of FASB Statement No. 153 will have a material impact on its
results of operations and financial position.

      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. This Statement 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. 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 the Company's selling, general and
administrative expenses.

                                       25
<PAGE>

      In May 2005, the FASB issued FASB Statement No. 154 "Accounting for
Changes and Errors Corrections." This Statement replaces APB Opinion No. 20
"Accounting Changes" and FASB Statement No. 3 "Reporting Accounting Changes in
Interim Financial Statements," and changes the requirements for the accounting
for and reporting of a change in accounting principle. This Statement requires
retrospective application to prior periods' financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. When it is
impracticable to determine the period specific effects of an accounting change
on one or more individual prior periods presented, this Statement requires that
the new accounting principle be applied to the balances of assets and
liabilities as of the beginning of the earliest period for which retroactive
application is practicable and that a corresponding adjustment be made to the
opening balance of retained earnings (or other appropriate components of equity
or net assets in statement of financial position) for that period rather than
being reported in an income statement. When it is impracticable to determine the
cumulative effect of applying a change in accounting principle to all prior
periods, this Statement requires that the new accounting principle be applied as
if it were adopted prospectively from the earliest date practicable. The Company
does not expect that the adoption of FASB Statement No. 154 will have a material
impact on its results of operations and financial position.

Results of Operations

      The following tables set forth our statements of operations for the
three-month and the six-month periods ended April 30, 2006 and 2005, in dollars
(dollars in thousands) and as a percentage of revenue:

                                        For the Three Months Ended April 30,
                                       --------------------------------------
                                              2006                 2005
                                       -----------------    -----------------
                                          Consolidated          Plaza-Only
                                       -----------------    -----------------
                                       Amount        %      Amount        %
                                       ------       ----    ------       ----
Revenues                               $3,805       100%    $5,067       100%
Cost of revenues                        2,233        59%     2,457        48%
                                       ------               -----
Gross profit                            1,572        41%     2,610        52%
Selling, general and administrative       639        17%       471         9%
Depreciation and amortization              59         2%        16         0%
                                       ------               -----
Income before income tax                  874        23%     2,123        42%
Income tax                                399        10%        --         0%
                                       ------               -----
Net income                             $  475        12%    $2,123        42%
                                       ======               ======


                                        For the Six Months Ended April 30,
                                       --------------------------------------
                                              2006                 2005
                                       -----------------    -----------------
                                          Consolidated          Plaza-Only
                                       -----------------    -----------------
                                       Amount        %      Amount        %
                                       ------       ----    ------       ----
Revenues                               $7,209       100%    $9,760       100%
Cost of revenues                        4,266        59%     5,115        52%
                                       ------               ------
Gross profit                            2,943        41%     4,645        48%
Selling, general and administrative     1,065        15%       919         9%
Depreciation and amortization              89         1%        36         0%
                                       ------               ------
Income before income tax                1,789        25%     3,690        38%
Income tax                                420         6%        --         0%
                                       ------               ------
Net income                             $1,369        19%    $3,690        38%
                                       ======               ======

                                       26
<PAGE>

Revenues. Revenues for the quarter ended April 30, 2006 were $3.8 million, a
decrease of approximately $1.2 million, or 25%, compared to the revenues for the
quarter ended April 30, 2005. This decline reflected a decrease in revenue of
approximately $2.0 million in the quarter ended April 30, 2006 from the
comparable quarter of the prior year from two companies of our largest customers
in both quarters. This decline in revenue from the Company's largest customers
reflected an overall decline in revenue for the quarter, which was partially
offset by revenues of approximately $1.2 from a customer that did not generate
any revenue in the April 30, 2005 quarter.

There was a decrease in revenue of $2.6 million, or 26%, in the six month period
ended April 30, 2006 from the comparable six month period of the prior year. The
decrease reflected a decline in revenue of $3.2 million from the two largest
customers referred to in the preceding paragraph, which was offset by an
increase of $1.7 from a customer that generated revenue of $7,000 in the six
month period ended April 30, 2005 (the same customer that did not generate
revenue in the April 30, 2005 quarter).

The decrease in revenue of $2.6 million in the six month period ended April 30,
2006 from the comparable period of the prior year also resulted from the loss of
a customer. Said customer generated approximately $656,000 in revenue during the
six month period ended April 30, 2005 and no revenues during the comparable
period of 2006. This former customer alleged that our service rates were high;
however, it presently has requested new proposals for our services. We expect
that the proposals will be granted to us.

Cost of Revenues; Gross Margin. The Company's gross margin decreased from 52% to
41% during the quarter ended April 30, 2006 as compared to the quarter ended
April 30, 2005, and from 48% to 41% during the six months ended April 30, 2006
as compared to the six months ended April 30, 2005. The reduction of gross
margin was attributable to increased labor costs, which is the only 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 increases our
charges to customers.

Total Expenses. Total expenses were approximately $639,000 during the quarter
ended April 30, 2006, an increase of approximately $168,000, or 36%, from the
comparable quarter of the prior year. A similar increase resulted in the six
month period ended April 30, 2006 from the comparable period of the prior year.
The increase in total expenses for the quarter and the six month period was the
result of approximately $121,000 of non-recurring transaction expenses
associated with legal and related expenses associated with SEC filings, and
approximately $127,000 of imputed interest expense recognized in connection with
the long-term obligations to Ms. Plaza which originated as a result of the
acquisition of Plaza. The increase that resulted from the non-recurring
transaction expenses and the imputed interest was partially offset by economy in
certain expenses, such as travel, and repairs and maintenance.

Provision for Income Taxes. The increase in the provision for income tax results
from a change in its tax status. The Company became a regular corporation
taxpayer effective January 25, 2006. Prior to that, the Company 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.

Net Income. As a result of the Company's decline in revenues, combined with a
lower gross margin resulting from the increase in labor costs, the increase in
selling, general and administrative expenses, and the change of its tax status,
the Company's:

                                       27
<PAGE>

      o     net income for the April 30, 2006 quarter decreased to approximately
            $0.5 million, or $0.14 per share (basic) and $0.02 per share
            (diluted), a decline of approximately $1.6 million, or 78%, from
            $2.1 million net income, or $1.21 per share (basic and diluted), for
            the April 30, 2005 quarter, and

      o     net income for the six-month period ended on April 30, 2006
            decreased to approximately $1.4 million, or $0.53 per share (basic)
            and $0.11 per share (diluted), a decline of approximately $2.6
            million, or 63%, from $3.7 million net income, or $2.11 per share
            (basic and diluted), for the six-month period ended April 30, 2005.

Liquidity and Capital Resources

      Liquidity is a measure of our ability to meet potential cash requirements,
including planned capital expenditures. At April 30, 2006, the Company had
working capital of approximately $3.7 million, a decrease of $2.1 million from
the working capital at October 31, 2005 of $5.8 million. Although we generated
approximately $1.3 million from operations during the six months ended April 30,
2006, this increase was offset by the current obligation of approximately $2.8
million payable to Elizabeth Plaza in connection with the acquisition of Plaza.
We also have long-term obligations to Ms. Plaza for the payments of $2.75
million due in each of 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 Elizabeth Plaza the
cash portion of the purchase price of the Plaza stock and most of the balance to
pay offering expenses and closing expenses.

      For the six months ended April 30, 2006 and the year ended October 31,
2005, we made cash distributions of approximately $777,000 and $8.0 million,
respectively, to or on behalf of Elizabeth Plaza.

      The Company's primary cash needs consist of payment of compensation to its
professional employees, overhead expenses and payment to the Puerto Rico
Secretary of the Treasury for income taxes. The Company has a line of credit of
$250,000 secured by the personal guarantee of the Company's chief executive
officer who, at the time the credit line was established, was Plaza's sole
stockholder. This line of credit bears interest at 2.00% over the prime rate and
was unused at April 30, 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 in January 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 the Company 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.

                                       28
<PAGE>

Forward Looking Statements

      This Report on Form 10-QSB 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; the Company may be unable to retain existing key management personnel;
and there may be other material adverse changes in the Company's 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 the Company to alter its marketing,
or other budgets, which may in turn affect the Company's financial position and
results of operations. The reader is therefore cautioned not to place undue
reliance on forward-looking statements contained herein, which speak solely as
of the date of this Form 10-QSB, 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 the Company's Form 8-K which was filed on
January 31, 2006 and the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in this Form 10-QSB. The Company
assumes no responsibility to update any forward-looking statements as a result
of new information, future events, or otherwise.




                                       29
<PAGE>

Item 3. Controls and Procedures

      The Company's chief executive officer and chief financial officer
evaluated the Company's disclosure controls and procedures as of the end of the
period covered by this quarterly report. Based upon the evaluation, the
Company's chief executive officer and chief financial officer concluded that the
Company's disclosure controls and procedures are effective.

      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.

PART II. OTHER INFORMATION

Item 4 - Submission of Matters to a Vote of Security Holders

      On April 25, 2006, by action of the holders of 1,750,000 shares of common
stock held by Elizabeth Plaza and San Juan Holdings, Inc., constituting more
than 76% of the outstanding shares of common stock on the record date, the
stockholders approved, pursuant to an information statement, the following
actions.

      1.    The election of the following individuals to serve for a term of one
            year and until their successors shall be elected and qualified:

                  Elizabeth Plaza
                  Kirk Michel
                  Dov Perlysky
                  Howard Spindel
                  Irving Wiesen

      2.    The approval of the restated certificate of incorporation.

      3.    The approval of the 1005 Long-Term Incentive Plan

      4.    The approval of the selection of Kevane Soto Pasarell Grant
            Thornton, LLC as our independent certified public accountant for the
            year ending October 31, 2006.

Item 6. Exhibits

(a) Exhibits:

      31.1  Certification of chief executive officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002

      31.2  Certification of chief financial officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002

      32.1  Certification of the chief executive officer and chief financial
            officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                       30
<PAGE>

                                   SIGNATURES

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

                         PHARMA-BIO SERV, INC.


                         /s/ Elizabeth Plaza
                         -------------------
                             Elizabeth Plaza
                             Chief Executive Officer

                         /s/ Manuel O. Morera
                         --------------------
                             Manuel O. Morera
                             Chief Financial Officer






                                       31