**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**





(Mark
      One)




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




For
      the
      quarterly period ended April 30, 2008





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      transition period from ____________ to ____________





Commission
      File No. 000-50956





PHARMA-BIO
      SERV, INC.


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





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





Pharma-Bio
      Serv Building, Industrial Zone Lot 14, Barrio Higuillar, 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 o No





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


o Yes x No


The
      number of shares outstanding of the registrant's Common Stock as of June 13,
      2008 was 19,615,539.








**PHARMA-BIO
      SERV, INC.**





**FORM
      10-QSB**





**FOR
      THE QUARTER ENDED APRIL 30, 2008**




**TABLE
      OF CONTENTS**




PagePART
                I FINANCIAL INFORMATIONItem
                1 – Financial StatementsCondensed
                Consolidated Balance Sheet as of April 30,2008
                (unaudited)
            
            
            3Condensed
                Consolidated Statements of Income for the three-month periods and
                six-month periods ended April 30, 2008 and 2007
                (unaudited)
            
            
            4Condensed
                Consolidated Statements of Cash Flows for the three-month periods
                and
                six-month periods ended April 30, 2008 and 2007 (unaudited)
            
            
            5Condensed
                Consolidated Statement of Changes in Stockholders’ Equity for the
                six-month period ended April 30, 2008 (unaudited)
            
            
            6Notes
                to Condensed Consolidated Financial Statements (unaudited)
            
            
            7Item
                2 - Management's Discussion and Analysis
            
            
            17Item
                3 - Controls and Procedures
            
            
            21PART
                II OTHER INFORMATIONItem
                6 – Exhibits
            
            
            22SIGNATURES
            
            
            23




-2-





**PHARMA-BIO
      SERV, INC.**


**Condensed
      Consolidated Balance Sheet (Unaudited)**


**April
      30, 2008**





**ASSETS**:Current
                assetsCash
                and cash equivalents
            
            $
            2,359,668Accounts
                receivable
            
            
            3,234,395Other
            
            
            173,564Total
                current assets
            
            
            5,767,627Property
                and equipment
            
            
            1,550,670Other
                assets, mainly intangible assets
            
            
            96,586Total
                assets
            
            $
            7,414,883**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**:Current
                liabilitiesCurrent
                portion-obligations under capital leases
            
            $
            49,377Accounts
                payable and accrued expenses
            
            
            1,220,811Due
                to affiliate
            
            
            2,616,930Income
                taxes payable
            
            
            566,580Total
                current liabilities
            
            
            4,453,698Long-term
                liabilities
            
            
            103,984Total
                liabilities
            
            
            4,557,682Stockholders'
                equity: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 19,615,539 shares
            
            
            1,961Additional
                paid-in capital
            
            
            190,422Retained
                earnings
            
            
            2,674,171Accumulated
                other comprehensive loss
            
            
            (9,353
            )Total
                stockholders' equity
            
            
            2,857,201Total
                liabilities and stockholders' equity
            
            $
            7,414,883




See
      notes
      to condensed consolidated financial statements.


-3-





**PHARMA-BIO
      SERV, INC.**


**Condensed
      Consolidated Statements of Income (Unaudited)**


**For
      the Three-Month and the Six-Month Periods Ended April 30, 2008 and
      2007**





**Three months ended April 30,**
            
            **Six months ended April 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**REVENUES
            
            $
            3,697,793
            
            $
            4,158,764
            
            $
            7,302,096
            
            $
            7,755,138COST
                OF SERVICES
            
            
            2,339,994
            
            
            2,397,629
            
            
            4,581,876
            
            
            4,595,451GROSS
                PROFIT
            
            
            1,357,799
            
            
            1,761,135
            
            
            2,720,220
            
            
            3,159,687SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            686,014
            
            
            788,521
            
            
            1,501,924
            
            
            1,474,550INCOME
                FROM OPERATIONS
            
            
            671,785
            
            
            972,614
            
            
            1,218,296
            
            
            1,685,137OTHER
                INCOME (EXPENSES):Interest
                expense
            
            
            (45,208
            )
            
            (84,556
            )
            
            (133,318
            )
            
            (213,802
            )Interest
                income
            
            
            14,457
            
            
            21,797
            
            
            57,872
            
            
            43,754Loss
                on disposition of property and equipment
            
            
            -
            
            
            (5,798
            )
            
            -
            
            
            (25,661
            )(30,751
            )
            
            (68,557
            )
            
            (75,446
            )
            
            (195,709
            )INCOME
                BEFORE TAXES
            
            
            641,034
            
            
            904,057
            
            
            1,142,850
            
            
            1,489,428INCOME
                TAXES
            
            
            295,850
            
            
            385,745
            
            
            514,943
            
            
            641,700NET
                INCOME
            
            $
            345,184
            
            $
            518,312
            
            $
            627,907
            
            $
            847,728BASIC
                EARNINGS PER COMMON SHARE
            
            $
            0.02
            
            $
            0.03
            
            $
            0.03
            
            $
            0.04DILUTED
                EARNINGS PER COMMON SHARE
            
            $
            0.02
            
            $
            0.02
            
            $
            0.03
            
            $
            0.04WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC
            
            
            19,615,539
            
            
            19,615,539
            
            
            19,615,539
            
            
            19,162,866WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING –
                  DILUTED
            
            
            22,075,707
            
            
            22,120,730
            
            
            22,114,006
            
            
            21,897,862




See
      notes
      to condensed consolidated financial statements.


-4-





**PHARMA-BIO
      SERV, INC.**


**Condensed
      Consolidated Statements of Cash Flows (Unaudited)**


**For
      the Three-Month and the Six-Month Periods Ended April 30, 2008 and
      2007**




**Three months ended April 30,**
                
                **Six months ended April 30,****2008**
                
                **2007**
                
                **2008**
                
                **2007**CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                345,184
                
                $
                518,312
                
                $
                627,907
                
                $
                847,728Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Loss
                    on disposition of property and equipment
                
                
                -
                
                
                5,798
                
                
                -
                
                
                25,661Stock-based
                    compensation
                
                
                41,705
                
                
                26,352
                
                
                75,018
                
                
                65,374Depreciation
                    and amortization
                
                
                53,272
                
                
                53,160
                
                
                103,699
                
                
                107,657Imputed
                    interest expense
                
                
                42,911
                
                
                82,118
                
                
                129,166
                
                
                208,729(Increase)
                    decrease in accounts receivable
                
                
                (73,914
                )
                
                23,370
                
                
                326,314
                
                
                1,784,616Decrease
                    in other assets
                
                
                42,576
                
                
                200,876
                
                
                96,784
                
                
                249,536Increase
                    (decrease) in liabilities
                
                
                (502,674
                )
                
                243,834
                
                
                (395,346
                )
                
                532,323NETNET
                    CASH PROVIDED BY OPERATING ACTIVITIES
                
                
                (50,941
                )
                
                1,153,820
                
                
                963,541
                
                
                3,821,624CASH
                    FLOWS FROM INVESTING ACTIVITIES:Acquisition
                    of property and equipment
                
                
                (180,215
                )
                
                (7,859
                )
                
                (624,257
                )
                
                (18,080
                )NET
                    CASH USED IN INVESTING ACTIVITIES
                
                
                (180,215
                )
                
                (7,859
                )
                
                (624,257
                )
                
                (18,080
                )CASH
                    FLOW FROM FINANCING ACTIVITIES:Payments
                    on obligations under capital lease
                
                
                (11,777
                )
                
                (9,622
                )
                
                (21,982
                )
                
                (19,048
                )Payments
                    to affiliate
                
                
                (2,750,000
                )
                
                (250,000
                )
                
                (2,750,000
                )
                
                (2,750,000
                )NET
                    CASH USED IN FINANCING ACTIVITIES
                
                
                (2,761,777
                )
                
                (259,622
                )
                
                (2,771,982
                )
                
                (2,769,048
                )NET
                    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (2,992,933
                )
                
                886,339
                
                
                (2,432,698
                )
                
                1,034,496CASH
                    AND CASH EQUIVALENTS - BEGINNING OF PERIOD
                
                
                5,352,601
                
                
                2,423,192
                
                
                4,792,366
                
                
                2,275,035CASH
                    AND CASH EQUIVALENTS – END OF PERIOD
                
                $
                2,359,668
                
                $
                3,309,531
                
                $
                2,359,668
                
                $
                3,309,531SUPPLEMENTAL
                    DISCLOURES OFCASH
                    FLOW INFORMATION:Cash
                    paid during the period for:Income
                    taxes
                
                $
                372,067
                
                $
                150,000
                
                $
                372,067
                
                $
                150,000Interest
                
                $
                347,431
                
                $
                5,073
                
                $
                349,285
                
                $
                508,781SUPPLEMENTARY
                    SCHEDULES OF NON-CASHINVESTING
                    AND FINANCING ACTIVITIES:Accounts
                    payable incurred in projects in process
                
                $
                72,212
                
                $
                
                
                $
                161,518
                
                $Income
                    tax withheld by clients to be used as a credit in the Company’s income tax
                    return
                
                $
                
                
                $
                45,212
                
                $
                
                
                $
                53,573Obligations
                    under capital lease incurred for theacquisition
                    of a vehicle
                
                $
                
                
                $
                
                
                $
                33,695
                
                $Conversion
                    of cashless exercises warrants to shares of common stock
                
                $
                
                
                $
                
                
                $
                
                
                $
                130





See
      notes
      to condensed consolidated financial statements.





-5-




**PHARMA-BIO
      SERV, INC.**


**Condensed
      Consolidated Statement of Changes in Stockholders' Equity
      (Unaudited)**


**For
      the Six-Month Period Ended April 30, 2008**





**Additional**
            
            
            
            **Accumulated Other****Common
                Stock**
            
            **Preferred Stock**
            
            **Paid-in**
            
            **Retained**
            
            **Comprehensive****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Earnings**
            
            **Income
                (Loss)**
            
            **Total**BALANCE
                AT OCTOBER 31, 2007
            
            
            19,615,539
            
            $
            1,961
            
            
            -
            
            $
            -
            
            $
            115,404
            
            $
            2,046,264
            
            $
            3,554
            
            $
            2,167,183STOCK-BASED
                COMPENSATION
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            75,018
            
            
            -
            
            
            -
            
            
            75,018COMPREHENSIVE
                INCOME:NET
                INCOME
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            627,907
            
            
            -
            
            
            627,907OTHER
                COMPREHENSIVE LOSS:F
                FOREIGN CURRENCY TRANSLATION ADJUSTMENT
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,907
            )
            
            (12,907
            )OTHER
                COMPREHENSIVE LOSS
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (12,911
            )COMPREHENSIVE
                INCOME
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            615,000BALANCE
                AT APRIL 30, 2008
            
            
            19,615,539
            
            $
            1,961
            
            
            -
            
            $
            -
            
            $
            190,422
            
            $
            2,674,171
            
            $
            (9,353
            )
            $
            2,857,201




See
      notes
      to condensed consolidated financial statements.




-6-





**PHARMA-BIO
      SERV, INC.**


**Notes
      To Condensed Consolidated Financial Statements (Unaudited)**


**For
      the Three-Month and Six-Month Periods Ended April 30, 2008 and
      2007**





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





**ORGANIZATION**





Pharma-Bio
      Serv, Inc. (“Pharma-Bio”) is a Delaware corporation organized on January 14,
      2004. Pharma-Bio is the parent company of Pharma-Bio Serv PR, Inc.
      (“Pharma-PR”), a Puerto Rico corporation, and Pharma-Bio Serv Validation &
Compliance Limited (“Pharma-IR”), a majority owned Irish corporation.
      Pharma-Bio, Pharma-PR and Pharma-IR are collectively referred to as the
“Company.” The Company operates in Puerto Rico, the United States and in Ireland
      under the name of Pharma-Bio Serv and is engaged in providing technical
      compliance consulting services primarily to the pharmaceutical, chemical,
      medical device and biotechnology industries.





**SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





The
      unaudited condensed consolidated financial statements for the three-month and
      six-month periods ended on April 30, 2008 and 2007 presented herein have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America 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.





**Consolidation**





The
      accompanying condensed consolidated financial statements include the accounts
      of
      the Company and all of its wholly owned and majority-owned subsidiaries. All
      intercompany transactions and balances have been eliminated in
      consolidation.





**Use
      of Estimates**




The
      preparation of condensed consolidated 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 consolidated financial statements and the
      reported amounts of revenues and expenses during the reporting periods. Actual
      results may 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 to affiliate): cash and cash equivalents,
      accounts receivable, accounts payable and accrued liabilities, are considered
      reasonable estimates of fair value due to their short-term nature. Management
      believes, based on current rates, that the fair value of its obligations under
      capital leases and amounts due to affiliate approximates the carrying
      amount.


-7-





**Revenue
      Recognition**




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




**Cash
      Equivalents**




For
      purposes of the condensed consolidated statements of cash flows, cash
      equivalents include investments in a money market obligations trust that is
      registered under the U.S. Investment Company Act of 1940 and liquid investments
      with original maturities of three months or less.





**Accounts
      Receivable**




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





**Income
      Taxes**




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





**Property
      and equipment**




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




Depreciation
      and amortization of owned assets are provided for, when placed in service,
      in
      amount sufficient to relate the cost of depreciable assets to operations over
      their estimated service lives, using straight-line basis. Assets under capital
      leases and leasehold improvements are amortized, over the shorter of the
      estimated useful lives of the assets or lease term. Major renewals and
      betterments that extend the life of the assets are capitalized, while
      expenditures for repairs and maintenance are expensed when
      incurred.




The
      Company evaluates for impairment its long-lived assets to be held and used,
      and
      long-lived assets to be disposed of, whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be
      recoverable. **** Based
      on
      management estimates, no impairment of the operating properties was
      present.





**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.


-8-





**Stock-based
      Compensation**




Effective
      November 1, 2006, the Company adopted the provisions of SFAS No. 123R,
“Share-Based Payment” (“SFAS 123R”), and Staff Accounting Bulletin No. 107
      (“SAB 107”) using the modified prospective method, which results in the
      provisions of SFAS 123R being applied to the consolidated financial statements
      on a prospective basis. Under the modified prospective recognition method,
      restatement of consolidated income from prior periods is not required, and
      accordingly, the Company has not provided such restatements. Under the modified
      prospective provisions of SFAS 123R, compensation expense is recorded for the
      unvested portion of previously granted awards that were outstanding on
      November 1, 2006 and all subsequent awards. SFAS 123R requires that all
      stock-based compensation expense be recognized in the consolidated financial
      statements based on the fair value of the awards. Stock-based compensation
      cost
      is measured at the grant date based on the fair value of the award and is
      recognized as expense over the requisite service period, which generally
      represents the vesting period, and includes an estimate of awards that will
      be
      forfeited. The Company calculates the fair value of stock options using the
      Black-Scholes option-pricing model at grant date. SFAS 123R also amends SFAS
      No. 95, “Statement of Cash Flows”, to require that excess tax benefits
      related to stock-based compensation be reflected as cash flows from financing
      activities rather than cash flows from operating activities. The Company does
      not recognize such cash flow from financing activities since there has been
      no
      tax benefit related to the stock-based compensation.





**Income
      Per Share of Common Stock**




Basic
      income per share of common stock is calculated 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.




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





**Foreign
      Operations**





The
      functional currency of the Company’s foreign subsidiary is its local currency.
      The assets and liabilities of the Company’s foreign subsidiary are translated
      into U.S. dollars at exchange rates in effect at the balance sheet date. Income
      and expense items are translated at the average exchange rates prevailing during
      the period. The cumulative translation effect for subsidiaries using a
      functional currency other than the U.S. dollar is included as a cumulative
      translation adjustment in stockholders’ equity and as a component of
      comprehensive income.





The
      Company’s intercompany accounts are typically denominated in the functional
      currency of the foreign subsidiary. Gains and losses resulting from the
      remeasurement of intercompany receivables that the Company considers to be
      of a
      long-term investment nature are recorded as a cumulative translation adjustment
      in stockholders’ equity and as a component of comprehensive income, while gains
      and losses resulting from the remeasurement of intercompany receivables from
      those international subsidiaries for which the Company anticipates settlement
      in
      the foreseeable future are recorded in the consolidated statements of
      operations. The net gains and losses recorded in the condensed consolidated
      statements of income were not significant for the periods presented.





**Reclassifications**





Certain
      reclassifications have been made to the April 30, 2007 interim condensed
      consolidated financial statements to conform them to the April 30, 2008 interim
      condensed consolidated financial statements presentation. Such reclassifications
      do not have a material effect on net income as previously reported.




-9-





**NOTE
      B - RECENT ACCOUNTING PRONOUNCEMENTS**





1.
      In
      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No. 141R, *Business
      Combinations (* “SFAS
      141R”). SFAS 141R requires: the assets acquired and liabilities assumed to be
      measured at fair value as of the acquisition date; liabilities related to
      contingent consideration to be remeasured at fair value at each subsequent
      reporting period; and acquisition-related costs to be expensed as these are
      incurred. SFAS 141R also requires additional disclosures of information
      surrounding a business combination. The provisions of SFAS 141R are effective
      for fiscal years beginning on or after December 15, 2008 and apply to
      business combinations that are completed on or after the date of adoption.
      The
      Company has not yet adopted this pronouncement, but expects that the nature
      and
      magnitude of the specific effects will depend upon the nature, terms and size
      of
      the acquisitions the Company completes after the effective date, if
      any.





2.
      In
      December 2007, the FASB issued Statement No. 160 “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of ARB No. 51”. This Statement
      applies to all entities that prepare consolidated financial statements, but
      will
      affect only those entities that have an outstanding noncontrolling interest
      in
      one or more subsidiaries or that deconsolidate a subsidiary. This statement
      is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. Earlier adoption is
      prohibited.





Management
      does not expect that the application of this standard will have any significant
      effect on the Company's consolidated financial statements.





3.
      In
      February 2007, the FASB issued Statement No. 159 “The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an Amendment of FASB
      Statement No. 115”. This Statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. The objective
      is to
      improve financial reporting by providing entities with the opportunity to
      mitigate volatility in reported earnings caused by measuring related assets
      and
      liabilities differently without having to apply complex hedge accounting
      provisions. This Statement is expected to expand the use of fair value
      measurement, which is consistent with the FASB’s long-term measurement
      objectives for accounting for financial instruments. This Statement is effective
      as of the beginning of an entity’s first fiscal year that begins after November
      15, 2007. Early adoption is permitted as of the beginning of a fiscal year
      that
      begins on or before November 15, 2007, provided the entity also elects to apply
      the provisions of FASB Statement No. 157, “Fair Value
      Measurements”.




Management
      does not expect that the application of this standard will have any significant
      effect on the Company's consolidated financial statements.





4.
      In
      September 2006, the FASB issued Statement No. 157 “Fair Value Measurement”. This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the FASB having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. The changes to current practice
      resulting from the application of this Statement relate to the definition of
      fair value, the methods used to measure fair value, and the expanded disclosures
      about fair value measurements. This Statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. Earlier application is encouraged,
      provided that the reporting entity has not yet issued financial statements
      for
      that fiscal year, including financial statements for an interim period within
      that fiscal year. The provisions of this Statement should be applied
      prospectively as of the beginning of the fiscal year in which this Statement
      is
      initially applied, except for certain exceptions stated in the
      Statement.




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


-10-






5.
      In
      June 2006, the FASB issued Interpretation No. 48 “Accounting for Uncertainty in
      Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). This
      Interpretation clarifies the accounting for uncertainty in income taxes
      recognized in an enterprise’s financial statements in accordance with FASB
      Statement No. 109, “Accounting for Income Taxes” *.* FIN 48
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides guidance on
      derecognizing, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This Interpretation is effective for fiscal
      years beginning after December 15, 2006. The application of this standard had
      no
      significant effect on the Company's results of operations or its financial
      condition.





6.
      Other
      recently issued FASB Statements or Interpretations, SEC Staff Accounting
      Bulletins, and AICPA Emerging Issue Task Force Consensuses have either been
      implemented or are not applicable to the Company.




**NOTE
      C - PROPERTY AND EQUIPMENT**




The
      balance of property and equipment at April 30, 2008 consists of the
      following:





Useful life
              (years)
            
            AmountVehicles under capital leases
            
            
            5
            
            $
            255,129Leasehold
                improvements
            
            
            5
            
            
            19,279Computers
            
            
            3
            
            
            212,862Equipment
            
            
            3-5
            
            
            124,402Furniture
                and fixtures
            
            
            10
            
            
            68,509Projects
                in progress
            
            
            -
            
            
            1,262,121Total
            
            
            
            
            
            1,942,302Less:
                Accumulated depreciation and amortization
            
            
            
            
            
            (391,632
            )Property
                and equipment, net
            
            
            
            
            $
            1,550,670




**NOTE
      D - OTHER ASSETS**




At
      April
      30, 2008, non-current other assets include the following:




Intangible
                assets:Covenant
                not to compete, net of accumulated amortization of $48,333
            
            $
            51,667Customer-related
                intangibles, net of accumulated amortization of $116,667
            
            
            33,333Other
                assets
            
            
            11,586$
            96,586





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




Customer-related
      intangible assets consist mainly of a customer list which Pharma-PR acquired
      along with 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 three years.





Intangible
      assets amortization expense for each of the three-month periods ended on April
      30, 2008 and 2007 amounted to $17,500, and for each of the six-month periods
      ended April 30, 2008 and 2007 amounted to $35,000.




-11-




**NOTE
      E - LINE-OF-CREDIT**





The
      Company has available an unsecured line-of-credit with a financial institution,
      which provides for borrowings up to $250,000. This line of credit may be used
      as
      working capital whenever the Company’s bank account cannot meet its daily cash
      requirements. Interest on advances obtained from this line-of-credit will be
      paid at 2% over the bank’s prevailing prime rate. During the six-months period
      ended April 30, 2008 the line-of-credit was not used.





**NOTE
      F - INCOME TAXES**




As
      substantially all operations are being carried on by the Puerto Rico subsidiary,
      the Company's taxable income is subject to the Puerto Rico income tax at a
      maximum tax rate of 39% as provided by the 1994 Puerto Rico Internal Revenue
      Code, as amended. However, for the year ended October 31, 2007, the Company
      was
      subject to an additional 2.5% special tax as imposed to corporations and
      partnerships by Puerto Rico Act No. 41of August 2005, as amended by Act No.
      244
      of November 2006.




The
      operations carried out in the United States by the Company’s subsidiary are
      taxed in the United States. With certain limitations, the Company receives
      a
      credit on its Puerto Rico tax for the federal income tax paid. Also, upon
      distribution of earnings by the Puerto Rican subsidiary to its parent those
      dividends are taxed at the federal level, however, the parent is able to receive
      a credit for the taxes paid by the subsidiary on its operations in Puerto Rico,
      to the extent of the federal taxes that result from those earnings (determined
      at rates which are normally lower than in Puerto Rico). As a result, the income
      tax expense of the Company, under its present corporate structure, would
      normally be the Puerto Rico taxes on operations in Puerto Rico, plus 10%
      withholding in Puerto Rico from dividends paid to the Puerto Rican subsidiary’s
      parent, plus federal taxes on operations in the United States.





Deferred
      income tax assets and liabilities are computed for differences between the
      consolidated 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.





As
      of
      April 30, 2008, the Company has not recognized deferred income taxes on
      $2,849,444 of undistributed earnings of its Puerto Rican subsidiary, since
      such
      earnings are considered to be reinvested indefinitely. If the earnings were
      distributed in the form of dividends, the Company would be subject to a $284,944
      tollgate tax.





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:





**Three months**
              **ended April 30,**
            
            **Six months**
              **ended April 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Theoretical
                income tax expense by application of statutory rates to the book
                pre-tax
                income
            
            $
            277,499
            
            $
            375,184
            
            $
            493,278
            
            $
            618,113Permanent
                differences, net
            
            
            18,351
            
            
            10,561
            
            
            21,665
            
            
            23,587Income
                tax expense
            
            $
            295,850
            
            $
            385,745
            
            $
            514,943
            
            $
            641,700




-12-




**NOTE
      G - DUE TO AFFILIATE**





Pursuant
      to a plan and agreement of merger dated January 25, 2006, the Company agreed
      to
      pay its then sole stockholder of Pharma-PR three installments of $2,750,000
      on
      January 25, 2007, 2008 and 2009, including imputed interest determined in
      accordance with Section 1274 of the Internal Revenue Code. As of April 30,
      2008
      two installments were paid.





Outstanding
      installments as of April 30, 2008:





Installment
                due January 25, 2009
            
            $
            2,750,000Less:
                imputed interest
            
            
            (133,070
            )Present
                value of minimum payment, due within one year
            
            $
            2,616,930




**NOTE
      H - LEASE COMMITMENTS**




**Capitalized
      lease obligations** - As of
      April 30, 2008, the Company leases vehicles under non-cancelable capital leases
      with a cost of $255,129 (accumulated depreciation of $134,976). Amortization
      expense for these assets amounted to $12,757 and $11,072 in the three-month
      periods ended April 30, 2008 and 2007, respectively, and $23,828 and $22,144
      in
      the six-month periods ended April 30, 2008 and 2007, 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, 2008:




**Twelve months ending April 30,**
            
            **Amount**2009
            
            $
            56,2942010
            
            
            78,0282011
            
            
            17,4392012
            
            
            8,0542013
            
            
            6,042Total
                future minimum lease payments
            
            
            165,857Less:
                Amount of imputed interest
            
            
            (
                12,496
            )Present
                value of future minimum lease payments
            
            
            153,361Current
                portion of obligation under capital leases
            
            
            (49,377
            )Long-term
                portion
            
            $
            103,984





**Operating
      facilities** - The
      Company conducts its administrative operations in office facilities which are
      leased under three different rental agreements.





In
      February 2007, the Company entered into a lease agreement with an affiliate
      of
      the chief executive officer for the new headquarters and laboratory testing
      facilities in Dorado, Puerto Rico. The lease agreement is for a term of five
      years with monthly rental payments of $18,750, $19,687, $20,672, $21,705 and
      $22,791 for each of the years under the lease. The lease agreement ends in
      January 2012 and provides a five year-renewal option. The agreement also
      requires the payment of utilities, property taxes, insurance and a portion
      of
      expenses incurred by the affiliate in connection with the maintenance of common
      areas. Through January 2007, a different smaller facility was leased from the
      same entity.




In
      August
      2007, the Company renewed its lease agreement for office facilities in Limerick,
      Pennsylvania. The lease agreement was renewed for a term of three years with
      monthly rental payments of $1,050, $1,100, and $1,150; for each of the years
      under the lease which ends in July 2010.




-13-




The
      Company maintains office facilities in Cork, Ireland. The facilities are under
      a
      month-to-month lease with monthly payments of approximately $750.





The
      Company leases certain apartments as dwellings for employees. The leases are
      under short-term lease agreements and usually are cancelable upon 30-day
      notification.





Minimum
      future rental payments under non-cancelable operating leases having remaining
      terms in excess of one year as of April 30, 2008 are:




**Amount**2009
            
            $
            252,2532010
            
            
            264,8132011
            
            
            267,1712012
            
            
            205,117Total
                minimum lease payments
            
            $
            989,354





Rent
      expense during the three-month periods ended April 30, 2008 and 2007 was
      $102,900 and $70,913, respectively, and $189,249 and $89,063 for the six-month
      periods ended April 30, 208 and 2007, respectively.





**NOTE
      I - STOCK OPTIONS AND STOCK BASED COMPENSATION**




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.
      Options intended to be incentive stock options must be granted at an exercise
      price per share which is not less than the fair market value of the common
      stock
      on the date of grant and may have a term which is not longer than ten years.
      If
      the option holder holds at least 10% of the Company’s 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.





Effective
      November 1, 2006, the Company adopted the provisions of SFAS No.123R,
“Share-Based Payment” (“SFAS 123R”), and Staff Accounting Bulletin No. 107 (“SAB
      107”). The Company recognizes stock-based compensation based on the fair value
      of the awards. Stock-based compensation cost is measured at the grant date
      based
      on the fair value of the award and is recognized as expense over the requisite
      service period, which generally represents the vesting period, and includes
      an
      estimate of awards that will be forfeited.





The
      following table presents the stock-based compensation included in the Company’s
      consolidated statement of income and the effect on earnings per share:





**Three months**
              **ended April 30,**
            
            **Six months**
              **ended April 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Stock-based
                compensation expense:Cost
                of services
            
            $
            15,062
            
            $
            10,184
            
            $
            30,588
            
            $
            42,090Selling,
                general and administrative
            
            
            26,643
            
            
            16,168
            
            
            44,430
            
            
            23,284Stock-based
                compensation before tax
            
            
            41,705
            
            
            26,352
            
            
            75,018
            
            
            65,374Income
                tax benefit
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                stock-based compensation expense
            
            $
            41,705
            
            $
            26,352
            
            $
            75,018
            
            $
            65,374





During
      the six-month period ended in April 30 2008, in accordance with the 2005
      Long-Term Incentive Plan, the Company awarded stock options to certain
      employees, executives and directors to purchase an aggregate of 700,000 shares
      of common stock.




-14-




**NOTE
      J – WARRANTS**




At
      April
      30, 2008 the Company had outstanding warrants to purchase 12,188,892 shares
      of
      the Company’s common stock at prices ranging from $0.06 to $1.65 per share. The
      warrants became exercisable at various dates commencing in 2004 and expire
      at
      various dates through 2014.




**NOTE
      K – EARNINGS PER SHARE**





The
      following data show the amounts used in the calculations of basic and diluted
      earnings per share for the three-month periods and six-month periods ended
      in
      April 30, 2008 and 2007.




**Three
                months**
              **ended
                April 30,**
            
            **Six
                months**
              **ended
                April 30****,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Net
                income available to common equity holders - used to compute basic
                and
                diluted earning per share
            
            $
            345,184
            
            $
            518,312
            
            $
            627,907
            
            $
            847,728Weighted
                  average number of common shares - used to compute basic earning
                  per share
            
            
            19,615,539
            
            
            19,615,539
            
            
            19,615,539
            
            
            19,162,866Effect
                of warrants to purchase common stock
            
            
            2,460,168
            
            
            2,505,191
            
            
            2,497,167
            
            
            2,734,996Effect
                of options to purchase common stock
            
            
            -
            
            
            -
            
            
            1,300
            
            
            -Weighted
                average number of shares - used to compute dilute earning per
                share
            
            
            22,075,707
            
            
            22,120,730
            
            
            22,114,006
            
            
            21,897,862




Warrants
      for 9,439,292 for the purchase of shares of common stock for the three-month
      and
      six-month periods ended in April 30, 2008 and 2007, were not included in
      computing diluted earning per share because, their effects were antidilutive.
      In
      addition, options for the purchase of common stock in the amount of 1,506,772
      and 1,413,090 for the three-month periods ended in April 30, 2008 and 2007,
      respectively and 1,266,772 and 1,143,090 for the six-month periods ended April
      30, 2008 and 2007, respectively, were not included in computing diluted earning
      per share because their effects were antidilutive.




**NOTE
      L - CONCENTRATION OF RISKS**




**Cash
      and cash equivalents**





The
      Company maintains cash deposits in a FDIC insured bank and in a money market
      obligations trust, registered under the US Investment Company Act of 1940,
      as
      amended. The bank deposit balances frequently exceed federally insured limits.
      The money market fund is not insured. No losses have been experienced on these
      accounts.




-15-




**Accounts
      receivable and revenues**





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




The
      Company's revenues, and the related receivables, are concentrated in the
      pharmaceutical industry in Puerto Rico and the United States of America.
      Although few customers represent a significant source of revenue, our functions
      are not a continuous process, accordingly, the client base for which our
      services are typically rendered, on a project-by-project basis, changes
      regularly.





The
      Company provides a substantial portion of its services to four customers, which
      account 10% or more of our revenues in either the three-month and six month
      periods ended April 30, 2008 or 2007. During the three-month period ended April
      30, 2008 revenues from these customers were 30%, 26%, 8% and 0%, or a total
      of
      64%, as compared to the same period last year for 6%, 28%, 6% and 28%, or a
      total of 68%, respectively. For the six-month period ended April 30, 2008
      revenues from these customers were 28%, 26%, 11% and 0%, or a total of 65%,
      as
      compared to the same period last year for 3%, 25%, 6% and 31%, or a total of
      65%, respectively. At April 30, 2008 amounts due from these customers represent
      51% of total accounts receivable balance.




**NOTE
      M - RETIREMENT PLAN**




Pharma-PR
      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-month periods ended April 30, 2008 and 2007 were $14,789 and $14,953,
      respectively ;
      $30,630
      and $28,554, for the six-month period ended April 30, 2008 and 2007,
      respectively.




-16-




**Item
      2. Management's Discussion and Analysis**





The
      following discussion of our results of operations and financial condition should
      be read in conjunction with the financial statements and the related notes
      included under Part I Item 1. In addition, reference should be made to our
      audited Consolidated Financial Statements and notes thereto and related
      Management’s Discussion and Analysis appearing in our Annual Report on Form
      10-KSB for the year ended October 31, 2007. 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” below.





**Overview**





We
      are a
      validation and compliance consulting service firm based in Puerto Rico,
      servicing the Puerto Rico, the United States and other markets. The validation
      and compliance consulting service market in Puerto Rico and the United States
      consists of local validation and compliance consulting firms, United States
      dedicated validation and compliance consulting firms and large publicly traded
      and private domestic and foreign engineering and consulting firms. We provide
      a
      broad range of compliance and validation consulting services. We market our
      services to pharmaceutical, chemical, biotechnology and medical devices, and
      allied products companies in Puerto Rico, the United States and Europe. Our
      staff includes more than 145 experienced engineering and life science
      professionals, and includes former quality assurance managers or directors,
      and
      experienced and trained professionals with bachelors, masters and doctorate
      degrees in health sciences and engineering.





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





We
      believe the most significant factors to achieving future business growth are
      our
      ability to (a) continue to provide quality value-added validation and compliance
      services to our clients; (b) recruit and retain highly educated and experienced
      validation and compliance professionals; (c) further expand our products and
      services to address the expanding compliance needs of the clients; and (d)
      expand our market presence, into the United States, Europe and possibly other
      emerging pharmaceutical markets, in order to respond to the international
      validation and compliance demands of our clients. Since our business is
      conducted mainly in Puerto Rico, our business may be affected to the extent
      that
      the Puerto Rico’s current economic problems affect the decision of our customers
      and potential customers to locate in Puerto Rico or to continue or expand their
      existing operations.




Recently,
      some of our clients, mostly triggered by worldwide operations consolidation,
      have reduced or discontinued some or all of their Puerto Rico operations. Our
      strategy to penetrate the United States market has been successful in gaining
      new customers and revenues, and has also partially offset the Puerto Rico market
      decline in revenues in the six months ended April 30, 2008 by approximately
      $1.5million, for a total net revenue decrease in that period of approximately
      $0.4 million. In order to maintain volume in the Puerto Rico market we are
      constantly ensuring that we are price competitive and have adjusted our pricing
      and gross margin structure accordingly. This strategy has affected our net
      gross
      margin by decreasing it by approximately 3.4 percentage points over the six
      month ended in April 30, 2008 when compared to the same period last year. In
      order to mitigate our gross margin decline we have started to implement cost
      containment measures within the quarter ended April 30, 2008.





We
      have
      plans during our third quarter of 2008 to refocus our Puerto Rico operations
      strategy and reduce its overhead costs accordingly. In addition, we will
      continue pursuing new markets as part of our growth strategy.





We
      have a
      well-established and consistent relationship with the major pharmaceutical,
      biotechnology, medical device and chemical manufacturing companies in Puerto
      Rico and United States which provides us access to affiliated companies in
      other
      markets. We see opportunities in markets that could yield profitable margins
      using our professional consulting force and also provide new services such
      as
      those performed by our new microbiological testing laboratory
      facility.




-17-




As
      part
      of our growth strategy and our plans to enter new markets, we have invested
      in
      our infrastructure to support our expansion plans. This investment includes
      facilities, systems and, the strengthening of our executive staff to support
      our
      new laboratory facility, our market expansions in the United States, and most
      recently, Europe. In addition, we will invest a total of approximately $1.4
      million in equipment and improvements for a new microbiological testing lab
      which is scheduled to open during our fiscal year 2008. As of April 30, 2008,
      we
      have invested approximately $1.2 million and have budgeted the balance for
      the
      remaining of our fiscal year 2008. Our new microbiological testing facility
      will
      incorporate the latest technology and test methodologies meeting pharmacopoeia
      industry standards and regulations. We will offer microbiological testing and
      related services to our core industries already serviced as well as the cosmetic
      and food industries.





Although
      few customers represent a significant source of revenue, our functions are
      not a
      continuous process, accordingly, the client base for which our services are
      typically rendered, on a project-by-project basis, changes regularly. For the
      six-month periods ended April 30, 2008 and 2007, four customers accounted for
      approximately 65% of revenue, in both periods. The loss of or significant
      reduction in the scope of work performed for any major customer could impair
      our
      ability to operate profitably.





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





The
      principal components of our costs of revenue are employee compensation
      (salaries, wages, taxes and benefits) and expenses relating to the performance
      of the services. In order to maintain our pricing competitive and minimize
      the
      impact in our margins, we deal with increasing labor costs by (i) selecting
      resources according to our cost for specific projects, (ii) negotiate, where
      applicable, rates with the resource, (iii) subcontract labor and, (iv) negotiate
      and pass rate increases to our customers, as applicable. Although this strategy
      has been successful in the past, we cannot give any assurance that we will
      continue to be able to do so.





The
      following table sets forth information as to our revenue for the three-month
      and
      six-month periods ended April 30, 2008, by geographic regions (dollars in
      thousands).





**Three months**
              **ended April 30, 2008**
            
            **Six months**
              **ended April 30, 2008****Revenues**
            
            **Percent**
            
            **Revenues**
            
            **Percent****Revenues by Region********Puerto
                Rico**
            
            $
            2,561
            
            
            69.3
            %
            $
            5,285
            
            
            72.4
            %**United
                States**
            
            
            1,111
            
            
            30.0
            %
            
            1,991
            
            
            27.2
            %**Ireland**
            
            
            26
            
            
            0.7
            %
            
            26
            
            
            0.4
            %$
            3,698
            
            
            
            
            $
            7,302




On
      August
      2007, Pharma-PR filed in Puerto Rico an application for tax exemption under
      Act
      135 of December 2, 1997. The exemption, if granted, may provide relief on
      various Puerto Rico taxes, including income tax, mostly for our new
      microbiological testing facility. The application obtained the favorable
      endorsement from the Puerto Rico Industrial Development Company, but still
      needs
      final approval from the Puerto Rico Department of Treasury and the Puerto Rico
      Department of State. In May 2008 a new tax incentive law (“Act 73”) was enacted.
      The Company plans to convert the application for tax exemption or grant under
      the old Act 135 to the new Act 73. If granted, the Company will enjoy exemption
      of various taxes, including income tax, in additional operating activities.




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**Critical
      Accounting Policies and Estimates**





There
      were no material changes during the six months ended April 30, 2008 to the
      critical accounting policies reported in our Annual report on Form 10-KSB for
      the fiscal year ended October 31, 2007.




**Results
      of Operations**




The
      following table sets forth our statements of operations for the three-month
      and
      six-month periods ended April 30, 2008 and 2007, (dollars in thousands) and
      as a
      percentage of revenue:




**Three months ended**
              **April 30,**
            
            **Six months ended**
              **April 30,****2008******
            
            **2007**
            
            **2008**
            
            **2007**Revenues
            
            $
            3,698
            
            
            100.0
            %
            $
            4,159
            
            
            100.0
            %
            $
            7,302
            
            
            100.0
            %
            $
            7,755
            
            
            100.0
            %Cost
                of services
            
            
            2,340
            
            
            63.3
            %
            
            2,398
            
            
            57.7
            %
            
            4,582
            
            
            62.7
            %
            
            4,595
            
            
            59.3
            %Gross
                profit
            
            
            1,358
            
            
            36.7
            %
            
            1,761
            
            
            42.3
            %
            
            2,720
            
            
            37.3
            %
            
            3,160
            
            
            40.7
            %Selling,
                general and administrative costs
            
            
            686
            
            
            18.6
            %
            
            788
            
            
            18.8
            %
            
            1,502
            
            
            20.6
            %
            
            1,475
            
            
            19.0
            %Interest
                expense
            
            
            45
            
            
            1.2
            %
            
            85
            
            
            2.0
            %
            
            133
            
            
            1.8
            %
            
            214
            
            
            2.8
            %Interest
                income
            
            
            14
            
            
            -0.4
            %
            
            22
            
            
            -0.5
            %
            
            58
            
            
            -0.8
            %
            
            44
            
            
            -.06
            %Loss
                on disposition of property
            
            
            -
            
            
            0.0
            %
            
            6
            
            
            0.1
            %
            
            -
            
            
            0.0
            %
            
            26
            
            
            .03
            %Income
                before income taxes
            
            
            641
            
            
            17.3
            %
            
            904
            
            
            21.8
            %
            
            1,143
            
            
            15.7
            %
            
            1,489
            
            
            19.2
            %Income
                tax expense
            
            
            296
            
            
            8.0
            %
            
            386
            
            
            9.3
            %
            
            515
            
            
            7.1
            %
            
            642
            
            
            8.3
            %Net
                income
            
            
            345
            
            
            9.3
            %
            
            518
            
            
            12.5
            %
            
            628
            
            
            8.6
            %
            
            847
            
            
            10.9
            %




Revenues .
      Revenues for the quarter ended April 30, 2008 were $3.7 million, a net decrease
      of approximately $0.4 million or 11.1%, when compared to the same quarter last
      year. The reduction is mainly attributable to the decrease of approximately
      $1.2
      million in the Puerto Rico market service revenue, partially offset by gains
      in
      the United States market of approximately $0.8 million.





For
      the
      six-month period ended April 30, 2008 service revenues were $7.3 million, a
      net
      decrease of approximately $0.4 million or 5.8% from the comparable six-month
      period last year. The decrease in Puerto Rico market service revenues by
      approximately $1.9 million was partially offset by gains in the United States
      market of approximately $1.5 million.





Service
      revenue gains in the United States market are attributable to the company’s
      strategy to enter in new markets. This strategy has partially offset the service
      revenue loss sustained in the Puerto Rico market. Decreases in the Puerto Rico
      market service revenue are mostly due to closing and decrease in operations
      of
      some pharmaceutical plants located in Puerto Rico, triggered by operations
      consolidation.





Cost
      of revenues; gross margin .
      The
      gross margin decreased by 5.6 and 3.4 percent points in the three-month and
      six-month periods ending April 30,2008, respectively, when compared to the
      same
      periods last year. The net gross margin reduction is mainly attributable to
      our
      strategy to maintain volume in the Puerto Rico market by keeping its pricing
      competitiveness.





Selling,
      General and Administrative Expenses .
      Selling, general and Administrative expenses were approximately $686,000 and
      $1,502,000 for the three-month and six-month periods ended in April 30, 2008,
      respectively. These expenses represent a decrease of approximately $102,000
      and
      an increase of $27,000 for the three-month and six-month periods ended in April
      30, 2008, respectively, to the same period last year. Expense containment
      measures implemented in the quarter ended April 30, 2008, geared to offset
      the
      Puerto Rico market revenue decline, have favorably affected the quarter ended
      April 30, 2008 and the trend for the six-month period ended April 30,
      2008.




-19-




Interest
      Expense .
      We have
      been recognizing imputed interest expense incurred in connection with the
      long-term obligations originated pursuant to a plan and agreement of merger
      dated January 25, 2006 for the acquisition of Pharma-PR. This expense decreases
      as annual payments are made. The last installment under the plan and agreement
      of merger is due January 25, 2009.




Income
      Taxes Expense .
      For the
      current fiscal year we are no longer subject to a 2.5% additional special tax
      imposed by the Puerto Rico Act No. 41 of August 1, 2005. Therefore, for fiscal
      year 2008 our statutory tax rate in Puerto Rico has decreased to 39% from 41.5%
      last year. The decrease on income taxes expense is attributable to this factor
      and the decrease of income before income tax.




Net
      Income. Our net
      income for the three-month and six-month periods ended in April 30, 2008 were
      approximately $345,000 and $628,000, respectively, a decline to last year
      comparable periods for approximately $173,000 and $219,000, or 33% and 26%,
      respectively.





For
      the
      three-month and six-month periods ended in April 30, 2008 earnings per common
      share (basic and diluted) were $0.02 and $0.03, respectively, while last year
      comparable three-month period was $0.03 per share (basic) and $0.02 per share
      (diluted), and in the six-month period was $0.04 (basic and
      diluted).





Our
      net
      income was affected by the decrease in gross margin, cost containment measures
      in selling, general and administrative expenses, partially offset by the
      favorable variances in interest expense, interest income and statutory tax
      rate.





**Liquidity
      and Capital Resources**





Liquidity
      is a measure of our ability to meet potential cash requirements, including
      planned capital expenditures. For the six months ended April 30, 2008 we have
      generated cash flow from operations of approximately $1 million and working
      capital of approximately $1.3 million, notwithstanding within the same period
      we
      have invested in a laboratory facility approximately $ 1 million, and have
      made
      a payment of $2.75 million pursuant the 2006 Pharma-PR acquisition agreement.
      Under the agreement, a final payment of $2.75 million is due on January 25,
      2009.





We
      are
      pursuing possible opportunities of expanding our operations beyond Puerto Rico,
      and in furtherance of this plan, we have set up facilities in Ireland to offer
      our services to companies in the pharmaceutical and related industries in
      Ireland. To the extent that we are able to expand our operations, either by
      acquisition or by the establishment of operations in a new locale, we will
      incur
      additional overhead, and there may be a delay between the period we commence
      operations and our generation of cash flow from operations. Present cash outlays
      for our Ireland operation have not been significant.





Our
      primary cash needs consist of payment of compensation to our professional staff,
      overhead expenses, statutory taxes, and payments pursuant to the Agreement
      terms
      for the acquisition of Pharma-PR.





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





While
      uncertainties relating to competition, the industries and geographical regions
      served by us and other regulatory matters exist within the consulting services
      industry, management is not aware of any trends or events likely to have a
      material adverse effect on liquidity or its financial statements.




-20-





**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.
      Further, our business will be affected to the extent that pharmaceutical
      companies reduce the scope of, or terminate their operations in Puerto Rico.
      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 our Form 10-KSB for the year ended October 31, 2007 and in
      "Management's Discussion and Analysis of Financial Condition and Results of
      Operations" in this Form 10-QSB and in our other filings with the SEC. We assume
      no responsibility to update any forward-looking statements as a result of new
      information, future events, or otherwise.





**Item
      3. Controls and Procedures**





As
      of the
      end of the period covered by this report, our chief executive officer and chief
      financial officer evaluated the effectiveness of our disclosure controls and
      procedures. Based on their evaluation, the chief executive officer and chief
      financial officer concluded that our disclosure controls and procedures, as
      defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e), were effective as
      of
      the end of the period covered by this quarterly report.





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.




-21-




**PART
      II. OTHER INFORMATION**




**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 pursuant to Section 906 of the
                Sarbanes-Oxley Act of 200232.2
            Certification
                of the chief financial officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





-22-




**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 PlazaElizabeth
                Plaza
              Chief
                Executive Officer
              (Principal
                Executive Officer)/s/
                Pedro J. LasantaPedro
                J. Lasanta
              Chief
                Financial Officer
              (Principal
                Financial Officer and Principal Accounting Officer)Dated:
                June 16, 2008




-23-